Homo Islamicus
Self-Interest, Homo Islamicus and
Some Behavioral Assumptions in Islamic Economics and Finance
Mohammad Omar Farooq
Associate Professor of Economics and Finance
Upper Iowa University
September 2006
[Draft in progress: Feedback welcome]
I. Introduction
Homo economicus, the Economic Man, represents a rational human being formalized in certain social science models, especially in economics, who acts in self-interest to achieve in a goal-oriented manner. As John Kay puts it, "He is self interested, materialistic, and obsessed with calculating his worth."1 In the world of economics textbooks, "... he is the mainstay of economic life."2 The edifice of modern economics is built on the foundation of Homo economicus, where the behavior of this creature is assumed to be ascertained in the positivist tradition of social science.3
Islamic economics, and its offshoot Islamic finance, are built on the foundation of Homo islamicus, the Islamic Man, which is claimed to be distinctive from Homo economicus. However, the Islamic financial institutions emerged as part of the Islamic banking movement, where interest (traditionally equated with riba) is regarded as prohibited and the underlying behavior of the constituent members, Homo islamicus, is assumed as part of an idealized society, imbued with Islamic values and commitment. Indeed, the accumulating experience of Islamic financial institutions is pointing to the reality that the idealized Homo islamicus seems to be behaving more like Homo economicus.
The distinction between the two constructs is important because often it is used to make the case that Islamic economics is fundamentally different from conventional economics. This claim of distinctiveness is made without considering (a) whether the positive economics (reflecting “what is”) is essentially different from Islamic economics; and (b) whether Islamic economics also acknowledges understanding economics at two levels: positive (what is) and normative (what
Some Behavioral Assumptions in Islamic Economics and Finance
Mohammad Omar Farooq
Associate Professor of Economics and Finance
Upper Iowa University
September 2006
[Draft in progress: Feedback welcome]
I. Introduction
Homo economicus, the Economic Man, represents a rational human being formalized in certain social science models, especially in economics, who acts in self-interest to achieve in a goal-oriented manner. As John Kay puts it, "He is self interested, materialistic, and obsessed with calculating his worth."1 In the world of economics textbooks, "... he is the mainstay of economic life."2 The edifice of modern economics is built on the foundation of Homo economicus, where the behavior of this creature is assumed to be ascertained in the positivist tradition of social science.3
Islamic economics, and its offshoot Islamic finance, are built on the foundation of Homo islamicus, the Islamic Man, which is claimed to be distinctive from Homo economicus. However, the Islamic financial institutions emerged as part of the Islamic banking movement, where interest (traditionally equated with riba) is regarded as prohibited and the underlying behavior of the constituent members, Homo islamicus, is assumed as part of an idealized society, imbued with Islamic values and commitment. Indeed, the accumulating experience of Islamic financial institutions is pointing to the reality that the idealized Homo islamicus seems to be behaving more like Homo economicus.
The distinction between the two constructs is important because often it is used to make the case that Islamic economics is fundamentally different from conventional economics. This claim of distinctiveness is made without considering (a) whether the positive economics (reflecting “what is”) is essentially different from Islamic economics; and (b) whether Islamic economics also acknowledges understanding economics at two levels: positive (what is) and normative (what
Bibliography: Mohammad Omar FAROOQ, Islamic Fiqh (Law) and the Neglected Empirical Foundation [unpublished essay, 2006] Sudin HARON and Norafifah Ahmad Hamid HOSSEINI. "From Homo economicus to Homo islamicus: The Universality of Economic Science Reconsidered," in Bina, Cyrus and Zanganeh, Hamid. (eds.) Modern Capitalism and Islamic Ideology in Iran (New York: St. Martin 's Press, 1992). Monzer KAHF. The Islamic Economy: Analytical Study of the Functioning of the Islamic Economic System [Plainfield, Indiana: The Muslim Students ' Association of the United States and Canada, 1978] John KAY Timur KURAN. “Islamic Economics and the Islamic Subeconomy,” Journal of Economic Perspectives, IX (1995), 155-173. _______ Owen MATTHEWS. "How the West Came To Run Islamic Banks," Newsweek [October 31, 2005] Paul MILLS and John Presley Syed Nawab Haider NAQVI. Ethics and Economics: An Islamic Synthesis [U.K.: The Islamic Foundation, 1981] Syed Nawab Haider NAQVI _________ SIDDIQI, Riba, Bank Interest, and The Rationale of Its Prohibition [Islamic Development Bank, Visiting Scholars Research Series, 2004] Frank VOGEL and Samuel Hayes, III Ibrahim WARDE. Islamic Finance in the Global Economy [Edinburgh University Press, 2000] Tarik YOUSEF