Introduction to Islamic economics : theory and application

Introduction to Islamic Economics: Theory and Application provides an overview of the organizing principles and fundamentals of an Islamic economy. With deep discussion of the characteristics, rationale, key institutions, objectives, and instruments at work, the book addresses the core economic principles underlying a system based on the foundational teachings of Islam, and examines the implications for economic policies. Social welfare, economic justice, market functionality, efficiency, and equity are explored from an Islamic perspective, and the role and instruments of fiscal and monetary policy in Islamic systems are used to illustrate contemporary applications.

Universities around the globe are offering courses on Islamic economics and finance, but despite the industry's rapid growth, most research has been focused on the financial principles rather than underlying economic principles. The first book of its kind, Introduction to Islamic Economics brings all the key concepts together into one reference volume. By outlining the ways in which Islamic finance and Islamic economics interrelate, this book can help readers to:

Develop an understanding of the Islamic economic system and its institutional scaffolding Differentiate between the major characteristics of the dominant conventional economy and one based on the fundamental sources of Islam Understand the conditions that must be met for a just, well-balanced, stable, and growing economy Clarify the role of State, public policy, and risk-sharing in the Islamic financial system

The Islamic financial system is expanding quickly, and those looking to increase their relevance in a changing economic landscape must get up to speed. Introduction to Islamic Economics provides a comprehensive overview of underlying economic system offering a deeper understanding of the feature of the system. This book is an excellent complement to Introduction to Islamic Finance, 2E by Iqbal and Mirakhor.

Author Notes

Hossein Askari is the Iran Professor of International Business and International Affairs at the George Washington University. Before coming to GW, he was a professor of Business and Middle Studies at the University of Texas at Austin and assistant professor of Economics at Tufts University. He has also served on the executive board of the International Monetary Fund and as consultant to a number of governments, institutions, and multinational corporations. He received all his university education at the Massachusetts Institute of Technology, where he earned a BS in civil engineering and a PhD in economics.

Zamir Iqbal is a lead specialist at Finance and Markets (F&M) Global Practice of the World Bank. He heads the World Bank Global Center for Islamic Finance Development in Istanbul. He has more than 20 years of experience in risk management, capital markets, and asset management at the World Bank Treasury. Islamic finance is his research focus, and he has coauthored several books on Islamic finance topics such as banking risk, financial stability, and risk sharing. His most recent coedited book, Economic Development and Islamic Finance , was published by the World Bank in 2013. He earned his PhD in international finance from the George Washington University and serves on the professional faculty at the Carey Business School of Johns Hopkins University.

Abbas Mirakhor is currently the first holder of the chair of Islamic Finance at the International Center for Education in Islamic Finance (INCEIF). He served as the dean of the executive board of the International Monetary Fund from 1997 to 2008 and as the executive director representing Afghanistan, Algeria, Ghana, Iran, Morocco, Pakistan, and Tunisia from 1990 to 2008. He has authored numerous publications and research papers on Islamic finance; among them are Introduction to Islamic Finance (Wiley 2011), Risk Sharing in Islamic Finance (Wiley 2011), and The Stability of Islamic Finance (Wiley 2010).

Acknowledgments	p. xi
About the Authors	p. xiii
Chapter 1 Economic Systems	p. 1
What Is an Economic System?	p. 2
Current State of the Global Economic System	p. 9
Islamic Economics Paradigm	p. 19
Short History of Economic Thought in Islam	p. 20
Summary	p. 26
Key Terms	p. 27
Questions	p. 27
Chapter 2 Foundation of the Islamic Economic Paradigm	p. 29
Meta-Framework and Archetype of Economic Rules	p. 31
Implications of the Agent-Trustee Relationship	p. 33
Significance of Rule Compliance	p. 34
Impact of Scarcity	p. 35
Rationality and Freedom of Choice	p. 38
Individual Obligations, Rights, and Self-interest	p. 39
Central Notion of Justice	p. 41
Sbariab: The Law	p. 44
Summary	p. 47
Key Terms	p. 47
Questions	p. 48
Chapter 3 Institutional Framework and Key Institutions	p. 49
Key Institutions	p. 53
Summary	p. 72
Key Terms	p. 72
Questions	p. 73
Chapter 4 The Islamic Economic System	p. 75
Social and Economic Justice	p. 76
Prohibition of Interest (Al-Riba)	p. 81
Risk-Sharing Economic System	p. 84
Role of the State	p. 91
Summary	p. 93
Key Terms	p. 94
Questions	p. 94
Chapter 5 Kay Microeconomic Concepts	p. 95
Defining Microeconomics	p. 97
Issue of Needs versus Wants	p. 100
Consumer Behavior	p. 102
Theory of the Firm	p. 105
Dynamics of Demand and Supply	p. 112
Efficiency versus Equity	p. 116
Marker Models	p. 117
Role of the State	p. 121
Summary	p. 123
Key Terms	p. 124
Questions	p. 124
Chapter 6 Key Macroeconoimcs Concepts	p. 125
Principal Economic Agents	p. 126
National Income	p. 127
Consumption, Savings, Investment, and National Income Determination	p. 135
National Income and Output Determination	p. 143
Inflation	p. 148
Unemployment	p. 152
Open Economy: Trade in Goods and Services with Other Countries	p. 154
Why International Trade Is So Central to Islam	p. 156
Summary	p. 162
Key Terms	p. 163
Questions	p. 164
Chapter 7 Macraeconomic Equilibrium: Characteristics of an Islamic Economy	p. 165
Models of an Interest-Free Economy	p. 166
Summary	p. 184
Key Terms	p. 185
Questions	p. 185
Chapter 8 The Financial System	p. 187
Notion of Risk Sharing	p. 190
Building Block? of the Islamic Financial System	p. 191
Takaful (Islamic Insurance)	p. 210
Summary	p. 216
Key Terms	p. 217
Questions	p. 217
Chapter 9 Rate of the State and Pubic Policy	p. 219
Basic Roles of the State in All Economic Systems	p. 220
Role of the State in the Islamic Economic System	p. 224
Policy Instruments of the State in Islam	p. 228
Economic Justice and Public Policy	p. 230
Role of Public Policy	p. 232
Summary	p. 243
Key Terms	p. 244
Questions	p. 244
Chapter 10 Fiscal Policy	p. 247
Role of Fiscal Policy	p. 250
Fiscal Policy in an Islamic Economy	p. 254
Public Finance	p. 259
Summary	p. 267
Key Terms	p. 268
Questions	p. 268
Chapter 11 Monetary Policy	p. 271
Role of Monetary Policy	p. 272
Monetary Policy in an Islamic Economy	p. 277
Summary	p. 303
Key Terms	p. 304
Questions	p. 305
Chapter 12 Economic Development and Growth	p. 307
Evolution of Western Economic Thought: From Smith to North and Sen	p. 307
Foundation and Framework of Development and Growth in Islam	p. 312
Islamic Perspective on Financial Inclusion	p. 322
Summary	p. 330
Key Terms	p. 331
Questions	p. 331
Chapter 13 Economic and Social Welfare	p. 333
Social Safety Net Provisions	p. 335
Concept of Safety Net and Welfare	p. 337
Empirical Evidence on Social Welfare from Select Muslim Countries	p. 339
Summary	p. 359
Key Terms	p. 360
Questions	p. 360
Chapter 14 Economic State of Affairs in OIC Countries	p. 361
Public Policy in the Islamic Economic System	p. 362
Dimensions of Economic and Social Achievements in Muslim Countries	p. 364
Summary	p. 372
Key Terms	p. 373
Questions	p. 373
Glossary of Arabic Terms	p. 375
Bibliography	p. 381
Index	p. 393

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