Contemporary Islamic Finance: Innovations, Applications and Best Practices

CHAPTER 5

Islamic Science and the Critique of Neoclassical Economic Theory

WALEED EL-ANSARY

University Chair of Islamic Studies, Xavier University

Neoclassical economists often make two claims that preclude the possibility of “Islamic” economic theory. The first is that neoclassical economics accommodates any instrumentally rational, or internally consistent, set of values or tastes, making the theory of choice spiritually neutral (Robbins 1962; Heap et al. 1994). The second is that market exchange is compatible with a variety of ultimate ends, whether egoist or altruist, making industrial capitalism and the neoclassical theory of exchange spiritually neutral (Heyne 2000). According to such arguments, Islamic (or “Christian” or “Buddhist” or any other) economics is a “special case” of neoclassical economics at best (assuming that Islamic and other religious values are internally consistent).

Of course, economists admit that certain eighteenth- and nineteenth-century classical economic figures espoused “commerce without virtue” based on narrow self-interest.¹ But other economists during this period opposed that view, arguing that even enlightened self-interest was insufficient to provide the moral and legal constraints necessary for markets to exist in the first place.² Although this did not exclude greed as a potential motivation within industrial capitalism, it did not presuppose greed, either. Many neoclassical economists now insist that egoistic assumptions are neither necessary ...