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A Comparative Study of Views and Role of Labor in Marxian, Mainstream and Islamic Economics

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  • Shaikh, Salman Ahmed

Abstract

In this paper, we comparatively analyze the views and role of labor in Marxian, mainstream and Islamic economics. We argue that Marxian view of labor undermines the role of entrepreneur. Indeed, the slave trade, industrialization and Colonialism resulted in exploitation of the labor. But, to correct matters, undermining the role of entrepreneur to the extent of abandoning private property rights is not the right solution either as it was also proved in the later part of the twentieth century. Nevertheless, mainstream economics too is unable to create an equitable balance between the capitalists and the labor class, especially in the presence of extractive institutions like interest based earnings on accumulated wealth and incapacitated wealth redistribution mechanisms. These extractive institutions perpetuate the dominance of wealthy capitalists by making their accumulated wealth immune to entrepreneurial risks. This also results in concentration of wealth, increase in income inequality and low levels of capital formation. Indeed, the recent evidence of jobless growth, high youth unemployment despite high per capita income and high income inequality supports this view. In Islamic economic framework, prohibition of interest encourages productive enterprise and capital formation. These factors boost the labor demanded by the firms. In the microeconomic decisions in consumption-leisure choice framework, Islamic institutions positively boost the labor supply. In an Islamic economy, wealth redistribution through Zakat and inheritance laws ensures circulation of wealth. Prohibition of interest closes the door for riskless non-labor income on money capital. This increases the cost of leisure and encourages the person to supply more labor and/or invest money capital in productive enterprise. Finally, we discuss the impact of Islamic work ethics on dealing with the problems of moral hazard, labor shirking and rigidity in the labor market due to efficiency wages and insider-outsider relationships.

Suggested Citation

  • Shaikh, Salman Ahmed, 2015. "A Comparative Study of Views and Role of Labor in Marxian, Mainstream and Islamic Economics," MPRA Paper 68750, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:68750
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    References listed on IDEAS

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    1. Mortensen, Dale & Pissarides, Christopher, 2011. "Job Creation and Job Destruction in the Theory of Unemployment," Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 1, pages 1-19.
    2. Arnold, N. Scott, 1987. "Marx And Disequilibrium in Market Socialist Relations of Production," Economics and Philosophy, Cambridge University Press, vol. 3(1), pages 23-47, April.
    3. Bowles, Samuel & Gintis, Herbert, 1975. "The Problem with Human Capital Theory-A Marxian Critique," American Economic Review, American Economic Association, vol. 65(2), pages 74-82, May.
    4. Peter A. Diamond, 1982. "Wage Determination and Efficiency in Search Equilibrium," Review of Economic Studies, Oxford University Press, vol. 49(2), pages 217-227.
    5. Folbre, Nancy, 1982. "Exploitation Comes Home: A Critique of the Marxian Theory of Family Labour," Cambridge Journal of Economics, Oxford University Press, vol. 6(4), pages 317-329, December.
    6. Hasan, Zubair, 2007. "Labor as a source of value and capital formation:Ibn Khaldun, Ricardo and Marx – A Comparison," MPRA Paper 5989, University Library of Munich, Germany.
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    More about this item

    Keywords

    Labor Economics; Labor Market; Labor Value; Marxian Economics; Islamic Economics; Wage Inequality;

    JEL classification:

    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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