The Micro-Economics Foundations of Islamic Economics A Study In Social Economics

Abstract

I. Objective of this Paper
The main objective of this paper is to show the relevance of ethical or normative
elements in economic theory. The paper builds on the exchange
mechanism of economics as the ethical basis of the social order and shows
that an ethical economic system must be capable of infdtely reproducing
this exchange mechanism in the rational working of the total social system
through higher and higher levels of social preferences.
In building up this analytical framework of ethical economics, we study
the field of social economics in general and of Islamic economics in particular
as a field of social economics. Through this we introduce a reconceptualization
of ethical economics in terms of the fundamental microeconomic buildmg
blocks. The premise of the argument therefore is that since the exchange
mechanism is the instrument of transmitting ethical preferences, it is the
microeconomic foundation that is capable in the first place of buildmg up
the ethical economic order as a whole. The ethical macroeconomic system
depends upon aggregations at the microeconomic level.
II. Introduction
As Boulding mentions, economics first started off as a moral science.
Adam Smith, who was ”both the Adam and the Smith of systematic economics,”
was professor of moral philosophy. Even long after that, economics continued
to be taught as a part of the moral sciences tripos at Cambridge University ...