Examines the historical development of Islamic economics, especially the prohibition on the payment of interest (riba) and the mandatory tax on assets (zakat) that aided the poor.
This paper demonstrates that Islamic economics, like alternative economic systems, reflects a unique historical experience, and is dependent upon that historical experience for its success. Islamic economics, in particular, the paper argues, has historically produced successful outcomes, but those successful outcomes are dependent upon the historical Islamic context. The shift away from this Islamic context inherent in modernization, however, nullifies the historical conditions that an effective Islamic economic system requires. The paper’s main points include but are not limited to: the historical origin of the Islamic economic system is rooted in the caravan trade routes, the mercantile wealth that began to define the culture, and that Islamic economics replaces the free-market imperative of maximization of individual utility with a social justice imperative of cooperation and equality.
Disputes among various schools about whether nominal interest that accounts for the time value of money is prohibited are not important to the question of interest in the economy, because real interest is prohibited as riba in any case, and it is the real interest rate that determines key macroeconomic variables in classical economic models, such as the level of investment and supply of loanable funds.
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Islamic Economics. (2015, Apr 23). Retrieved May 29, 2020, from https://newyorkessays.com/essay-islamic-economics-2/