In Islam there is no conflict between matter and soul, as there is no separation between economy and religion. Although Islamic economics is young in comparison with conventional economics, its characteristics, value and essence are appreciated by Muslims and the non-Muslims. The over-arching values of Islamic economics lie in the principle that it is an economic strategy that can achieve unity and harmony between the material and the spiritual life of the people.
To ensure the true well-being of all individuals, irrespective of their sex, age, race, religion and wealth, Islamic economics does not seek to abolish private property, a practice done by communism, nor does it prevent individuals from serving their self-interest. It recognizes the role of the market forces in the efficient allocation of resources. It seeks to promote brotherhood, socio-economic justice and well-being of all through an integrated role of moral values, market mechanism and good governance. The differences between conventional and Islamic economics are as listed below.
1. The Role of Moral Values
While conventional economics generally considers the behavior, tastes and preferences of individuals as given, Islamic economics does not do so. It places great emphasis on individual and social reforms through moral uplift. This is purportedly to be the purpose for which God's messengers have come to this world. Moral uplift aims at changing the behavior, tastes and preferences of the individuals, and thereby, it complements the price mechanism in promoting general well-being. Before even entering into the market place and being exposed to the price filter, consumers are expected to pass their claims on resources through the moral filter first, where conspicuous consumption and wasteful and unnecessary claims will be filtered out. The price mechanism can then takes over and reduce the claims on resources even further to lead to market equilibrium. The two filters enable the optimal use of resources, which is necessary to satisfy the material as well as the spiritual needs of all human beings. They also reduce the concentration of wealth in the hands of a few, and raise savings which are needed to promote greater investment and employment. Figure 1.1 highlights economic distribution in any system. What makes the Islamic economic system different is that there is a greater support for the economically-inactive sector, which becomes the main focus of the government sector.
2. The Importance of the Hereafter
The Hereafter is a concept which is completely ignored by conventional economics, but it is one which is greatly emphasized by Islam and other major religions. Because of their innate goodness, human beings do not always try to serve their self interest. They are altruistic, and willing to sacrifice for the wellbeing of others. This behavior is rewarded in the Hereafter. Whilst conventional economics also seeks optimal allocation of resources, the fact that it is unable to offer rewards for benevolent acts means that the humane side of the economy is neglected.
3. Rational Economic Man
While there is hardly anyone who is opposed to the need for rationality in human behavior, there are differences in opinion when defining rationality (Sen., 1987). However, once rationality is defined in terms of the overall individual as well as social wellbeing, then rational behavior can help us to realize this particular goal. Conventional economics, however, does not define rationality in this way. It equates rationality with the serving of self-interest through wealth maximization. The drive for self-interest is considered to be the "moral equivalent of the force of gravity in nature" (Myers, 1983, p. 4). Within this framework, society is conceptualized as a mere collection of individuals united through ties of self-interest. Conceptualized as a mere collection of individuals united...