Toward a New Framework of Islamic

Economic Analysis (2020)*

AKHMAD AKBAR SUSAMTO

Abstract
Despite a profusion of literature, efforts to develop Islamic eco-
nomics as a discipline have not brought about anticipated results.
This paper argues that it is the absence of clarity on what would
make economics “Islamic” which impedes the development of
Islamic economics. To fill that absence, this paper proposes three
conditions under which an economics can be considered “Islamic”,
and then defines the scope of Islamic economics and its methods.

Akhmad Akbar Susamto holds a Master’s degree in Economics (Monash Uni-

versity, 2009) and a PhD (The Australian National University, 2014) in the same
field. Currently, he is a lecturer at the Department of Economics, Universitas
Gadjah Mada, Indonesia with research interests including Islamic economics,
Islamic finance, and Islam and economic development.
This biography appeared in the article when it was first published.
*This article was first published in the American Journal of Islam and Society 37, no. 1-2 (2020):
103-122
Susamto, Akhmad Akbar. 2024. “Toward a New Framework of Islamic Economic Analysis (2020).”
American Journal of Islam and Society 41, no. 1: 66–89 • doi: 10.35632/ajis.v41i1.3418
Copyright © 2024 International Institute of Islamic Thought

36
 SUS AMTO: TOWARD A NE W FR AME WORK OF ISL AMIC ECONOMIC ANALYSIS  37

Finally, this paper suggests three implications which, taken

together, entail that developing Islamic economics and building
its body of knowledge is less complicated than was feared.

Introduction
For more than half a century, Muslim scholars have been preoccupied with
reviewing contemporary economic practices and policies from an Islamic
perspective.1 Insisting on the difference between the Islamic worldview
and the worldview of Western capitalism, they have further attempted to
establish Islamic economics as an alternative discipline, which is distinct
from conventional economics.2 Yet, despite the thousands of conference
papers, journal articles, book chapters, and monographs circulated or
published so far, efforts to develop Islamic economics do not seem to
have brought about the expected results. This is true, at least, from the
point of view of several leading figures in the Islamic economic literature.
Zaman, for instance, writes that in spite of some partial successes, “It
would be fair to assess the overall outcome [of the efforts] as a failure.”3
Islamic economics, for Haneef, does “not seem to be moving forward”;4
its current status, according to Kahf, is still “a mission unaccomplished”.5
In the words of MA Khan, Islamic economists were “unable to break any
ground” and regardless of their claims, “the end product is not signifi-
cantly different from mainstream economics.”6 Expressing his assessment
of Islamic economics, Choudhury laments, “Present-day Islamic econom-
ics is in a dire state. It is not original; it is failing to be derived from the
teachings of the Quran, Sunnah or Islamic scholastic thought.”7 He earlier
commented that “Islamic economics has become a total slave of main-
stream economic theories”8 and that as a field of study Islamic economics
“is no different from the neoclassical approach to ethical behavior.” Less
forcefully, Chapra admits that, “The practical wisdom of Islamic eco-
nomics … has not been able to come to grips with the task of explaining
the rise and fall of Muslim economies.”9 Likewise, he admits that “the
theoretical core of Islamic economics” has been “unable to get out of the
straitjacket of conventional economics.” Citing Nasr,10 Chapra accepts that
the discipline of Islamic economics has “failed to escape the centripetal
38  A M ER I C AN JO U RN AL OF ISL AM AN D SO CIE T Y 41:1

pull of Western economic thought and has, in many regards, been caught
in the intellectual web of the very system it set out to replace.”11
Regardless whether one agrees or disagrees with each of these state-
ments, the bottom line remains that (whether for technical issues12 or
substantive-methodological ones13) efforts to develop Islamic economics
have not brought about the expected results. Thus, rather than taking
the current situation for granted, those championing the development of
Islamic economics need to adopt an open mindset and reflect critically
upon what has happened. This paper attempts to make a fresh diagnosis
of why efforts to develop Islamic economics have not brought about the
expected results, and to suggest some solutions.
The key point to be made is that it is an absence of clarity on what
would make economics “Islamic” which impedes the development of
Islamic economics. This clarity is essential, for it is the end state Muslim
scholars are trying to achieve that should eventually guide them in the
development of Islamic economics. To fill the absence of such clarity,
three conditions under which an economics can be considered Islamic
are proposed. Further, based on these conditions, the scope and methods
of Islamic economics are defined.
The significance of this paper lies in its potential to re-energize the
development of Islamic economics. Digging deeper into one of the most
fundamental (but neglected) issues in Islamic economics, this paper
comes back to the surface not only with a solid basis for a genuine and
robust discipline of Islamic economics, but also a simple, more opera-
tional framework of Islamic economic analysis. This paper makes no
claim that existing works in Islamic economic literature have been futile
or gone off track. Rather, what this paper proposes is a methodological
basis on which valuable but scattered contributions in the current Islamic
economic literature can be rearranged and unified to develop the field
and to further build its body of knowledge.

Justification to Develop Islamic Economics

The development of Islamic economics has been justified with the argu-
ment that there are “distinct Islamic responses” to economic problems,14
 SUS AMTO: TOWARD A NE W FR AME WORK OF ISL AMIC ECONOMIC ANALYSIS  39

on the presumption that particular economic approaches are “the logical

outcome of the prevailing worldviews.”15 Such “worldviews” encom-
pass beliefs about the origin of the universe, the nature of human life,
the meaning of righteousness, virtue, and worth, human relations, and
the norms of resource ownership and use—in short, a worldview is “an
organized set of beliefs concerning how the world works.”16 Different
worldviews afford different economic perspectives, leading to different
economic sciences.
The idea that different worldviews lead to different sciences is not
unique to Muslim scholars. Even Thomas Kuhn, a famous historian and
philosopher of science, held that the course of a particular science is
conditional upon the adoption of specific “paradigms”. For Kuhn, sci-
ence is not the result of a steady, evolutionary process of knowledge
accumulation. It is instead the product of a “series of peaceful interludes
punctuated by intellectually violent revolutions” in which “one concep-
tual worldview is replaced by another.”17 Changes in worldview “cause
scientists to see the world of their research engagements differently,”
leading to changes in the types of questions that scientists ask and the
ways they tackle problems. Within the circle of economists, Heilbroner
believes that the economy represents “the social totality,”18 that is, a
system of complex, mutually related elements that are composed of
various subsystems. He also believes that behind the veil of econom-
ics lie power and ideology, the “thought and belief by which dominant
classes explain to themselves how their social system operates and what
principles it exemplifies.”19 Thus he argues against such a thing as uni-
versal economic laws. Similarly, Spengler believes that “the content of
economic thought was not initially independent of the socio-physical
parameters of the society within which it developed, nor did it ever
become completely independent even in modern times.”20 These schol-
ars agree that (conventional) economics reflects the social totality of
Western (capitalist) society, within which a worldview based purely on
human reasoning stands out and vindicates the pursuit of self-interest
as well as the accumulation of wealth. To combine their ideas, (conven-
tional) economics is essentially “a product of European civilization,”21
whose purpose is to help economists better understand “the capitalist
40  A M ER I C AN JO U RN AL OF ISL AM AN D SO CIE T Y 41:1

setting in which we will most likely have to shape our collective destiny
for the foreseeable future.”22
The Islamic worldview differs from that of Western capitalism.
According to the former, the universe does not exist by itself. As with
every one of its creatures, it was created and is sustained by God. Human
beings are no exception. Yet unique among creation, human beings have
been entrusted with a certain degree of sovereignty. They lead the uni-
verse with the mission to worship Allah and to improve the world for
and on behalf of Him. To discharge this trust, human beings are equipped
with faculties, including reason, and endowed with divine revelations
(in our contemporary dispensation, in the form of the Qur’an and the
Sunnah), from which they can derive detailed teachings, rules, and judg-
ments. Thus, norms of resource ownership and use are not based purely
on human reasoning but on rationality in dialogue with revelation. After
all, humans are left with the freedom to live how they choose: whether
to adhere or not to the divine revelations. Ultimately, humans are held
responsible and accountable for their choices on the Day of Judgment.
In this Islamic perspective, the pursuit of individual self-interest
and the accumulation of wealth are not seen as the key to achieving
the greatest happiness. Moreover, it is not hedonistic “happiness” in
Bentham’s utilitarian sense that is to be achieved.23 Rather, the ultimate
objective is called felicity (falāḥ): true welfare in this worldly life and
in the hereafter. It is on this basis, that is, to the extent that Islamic eco-
nomics is directed toward achieving falāḥ, that it provides an alternative
to conventional economics.

What Has Happened?

To explain why efforts to develop Islamic economics have not brought
about the expected results, several authors dwell on a lack of research
funding.24 For Siddiqi, the amount of public funds devoted to research
in Islamic economics is insufficient.25 Others emphasize the relative his-
torical youth of the discipline of modern Islamic economics, which—in
contrast to the centuries of development of conventional economics—was
only formalized a few decades ago.26 The discipline is still in its infancy.
 SUS AMTO: TOWARD A NE W FR AME WORK OF ISL AMIC ECONOMIC ANALYSIS  41

It is true that research funding and maturity matter. Nevertheless,

the slow development of Islamic economics has more to do with sub-
stantive-methodological issues than technical ones. In fact, despite the
touted lack of research funding, the scholarly literature mentioning the
English terms “Islamic” and “economics” has increased from 6,670 in
1976-1985 to 205,000 texts in 2006-2015—and from 547 texts mentioning
the phrase “Islamic economics” in the earlier period to 13,000 in the latter
one (Google Scholar, May 2018). This increase in textual mentions clearly
indicates a substantive growth in research.
Before this paper continues with fresh accounts for why efforts to
develop Islamic economics have not brought about the expected results,
three substantive-methodological reasons offered thus far deserve a
comment. The first is that there remain ambiguities about the extent
to which Islamic economics overlaps with fiqh, narrowing the scope of
Islamic economics to legal and juridical matters.27 Studies of “Islamic
economics” in this vein often present the jurisprudence (fiqh) of the
early periods of Islam, without reconceiving their relevance to modern
society.28 The second reason is that Islamic economists fail to maintain
a proper distance from conventional economics. For Mahomedy, efforts
to develop Islamic economics have brought little success because the
epistemological roots of Islamic economics remain firmly within the
neoclassical framework.29 In similar terms, Zaman argues that the accep-
tance of mainstream economic assumptions in Islamic economics leads to
irresolvable contradictions.30 For him, it is impossible to integrate main-
stream economic assumptions (derived from the worldview of Western
capitalism) with Islamic economic thinking (derived from the Islamic
worldview). The third reason is that Islamic economists have been too
focused on Islamic finance,31 thus incurring opportunity costs32 and
diverting Islamic economists away from (what Siddiqi calls) “the grand
Islamic agenda”.33 To quote Kahf, Islamic finance has been “a beautiful
illusion for which [Islamic economists] neglected the main concerns of
[Muslim] societies as well as the core of Islamic economics.”34
These three reasons are valid but are not root causes in themselves.
They are affected by a more fundamental issue at the heart of the dis-
cipline. For instance, ambiguities regarding to what extent Islamic
42  A M ER I C AN JO U RN AL OF ISL AM AN D SO CIE T Y 41:1

economics overlaps with fiqh are due to the fact that there is no clarity
on what economics can be considered Islamic. To resolve this issue,
simply demarcating “economics” from “law” will be insufficient. Rather,
scholars and advocates must note that the discipline of Islamic economics
emerged with the spirit of realizing Islamic teachings and injunctions.
In the absence of clarity on what economics can be considered “Islamic”,
Muslim scholars are in a struggle to describe exactly what discipline they
are trying to develop. Many fall into confusion, including some who
believe that Islamic economics is part of fiqh. One author even writes
that, “After the economic rules have been derived from the books of
Shariah and put for discussion in independent research studies, then we
would have what is called Islamic Economics.”35
The same reason accounts for Islamic economists’ failure to main-
tain a proper distance from conventional economics. As a discipline,
Islamic economics emerged at a time when conventional economics had
dominated economic discourse and theory around the globe. Islamic
economists are in a struggle to set alternative standards of what to do and
how to do it, thus falling into a “comparison trap”. This yields a tendency
either to locate much of its discourse against the backdrop of conven-
tional economics or to overstate the distinction of Islamic economics. For
example, some authors argue that the key concept of scarcity is simply
absent in Islamic economics,36 for God has created sufficient resources
for His creatures. Scarcity then is not essential in economics, for it results
from human laziness and neglect,37 or misuse of resources, or imbalanced
distributions.38 Other authors exaggerate the nature of homo islamicus
(Islamic man), the altruistic and right-minded economic agent who is the
proper subject of Islamic economics, who is always committed to Islamic
values and concerned with social justice and welfare.39
Finally, an overemphasis and concentration of works on Islamic
finance is also due to the absence of clarity on what economics can be
considered Islamic. For when no one can delimit what is properly Islamic
economic research, Islamic finance is far easier to seize hold of—it is the
“most saleable literature.”40 In short, MF Khan astutely commented, “If
we have not reached anywhere near where we want to be, then one of
the most important reasons could be that we did not choose the right
 SUS AMTO: TOWARD A NE W FR AME WORK OF ISL AMIC ECONOMIC ANALYSIS  43

starting point.”41 If Islamic economists have not succeeded in developing

Islamic economics, the reason may be that they forgot to first discuss
the conditions under which an economics can be considered Islamic.

Islamic Economics Redefined

What economics can be considered Islamic? There is hardly an unequiv-
ocal answer to this question in the current literature. Rather than setting
out the conditions under which an economics can be considered Islamic,
Muslim scholars have been more interested in offering formal definitions
of what Islamic economics is.42 For example, Hasanuzzaman writes that
“Islamic economics is the knowledge and applications of the injunctions
and rules of the Shariah that prevent injustice in the acquisition and
disposal of material resources in order to provide satisfaction to human
beings and enable them to perform their obligations to Allah and the
society.”43 His focus is on the injunctions and rules of the Shariah. By
contrast, Naqvi focuses on the actual behavior of Muslims and defines
Islamic economics as “the representative Muslim’s behavior in a typical
Muslim society.”44 Mannan defines it as “a social science which studies
the economic problems of a people imbued with the values of Islam,”45
while Siddiqi defines it as “Muslim thinkers’ response to the economic
challenges of their times.”46 These definitions, albeit important, do not
offer much help in answering the fundamental question at hand. The
section above noted that Islamic economics is founded on the argument
that the Islamic worldview differs from the worldview of Western cap-
italism. It is on the basis of that worldview, then, that the conditions
under which an economics can be considered Islamic may be articulated.
In Islam, as observed above, it is God who creates and sustains the
universe. Every single creature belongs to Him, with human beings no
exception. Yet, they are granted the vicegerency of earth and a divine mission
to worship God and improve the world. To allocate resources or to manage
the economy for human welfare is a divine duty, which is as sacred and spir-
itual in purpose as the offering of prayers. Therefore, to qualify as “Islamic”
an economics cannot ontologically neglect the relationship between human
beings and God. In other words, that economics must not divorce scientific
44  A M ER I C AN JO U RN AL OF ISL AM AN D SO CIE T Y 41:1

inquiry from its divine basis47—let alone conceive economic behavior merely
hedonistically, as “a lightning calculator of pleasures and pains.”48
Furthermore, in the Islamic worldview God is omniscient; the divine
knowledge is infinite, encompassing both generalities and particularities
of the universe across time. God gives knowledge to whom He pleases,
and it is only by His will that any human acquires or derives knowledge.
Therefore, in order to qualify as “Islamic” an economics cannot episte-
mologically limit the sources of knowledge to the empirical senses and
reason. It must instead recognize that revelations in the forms of the
Qur’an and the Sunnah are authoritative sources of knowledge, including
on such practical matters as economic problems. In other words, such
an economics must uphold the fundamental unity of God, evident in the
working and guidance of the universe.49
Moreover, axiologically, knowledge is not for its own sake in the Islamic
worldview. Knowledge is acquired or derived to an end benefit, as in the
prophetic report, “Ask God for beneficial knowledge and seek refuge with
God from knowledge that is of no benefit.”50 Therefore, in order to qualify
as “Islamic” an economics cannot be barren. It must instead be beneficial,
to help guide societies to transform their economy toward the realization of
welfare. Chapra rightly reminds us that the mission of all prophets, includ-
ing Muhammad (peace and blessings be upon him), was “to bring about
individual and social change without which it would be difficult to improve
the human condition.”51 To be considered Islamic, an economics must there-
fore be “transformational”: inspiring societies to aspire to change, providing
a base and guidance for this aspiration, and facilitating this change toward
the realization of welfare, as the Islamic worldview dictates.
The broad discrepancy between contemporary realities and ideals
begs for such a transformational economics. Siddiqi thus writes that
Islamic economics “must be caring about change, change from the cur-
rent behavior and institutional structures to those in accordance with
Islamic norms.”52 Choudhury too variously propounds the transforma-
tional character of Islamic economics and Islamic political economy,
referring to cases of moral and ethical transformation,53 moral-social
transformation54 and ummah transformation.55 For him, Islamic econom-
ics not only recognizes the “as is” and the “as it ought to be” states of the
 SUS AMTO: TOWARD A NE W FR AME WORK OF ISL AMIC ECONOMIC ANALYSIS  45

world-system, but also reconstructs them along the discursive process

by which “being” and “becoming” form a sustained unity.
To sum up, an economics can be considered Islamic provided that
it relies upon ontological and epistemological foundations which are
consistent with the Islamic worldview, and so long as it is able to help
guide societies to transform their economy toward the realization of
welfare as the Islamic worldview dictates.

The Scope of Islamic Economics

To help guide societies to transform their economy toward the realiza-

tion of welfare, Islamic economics must directly relate to the ideals of
Islam. Siddiqi correctly emphasizes that “Islamic economics begins with
an understanding of the divinely-ordained ends and values and cannot be
conceived without them.”56 By the same token, Islamic economics must
maintain a relationship to current realities. MA Khan reminds Islamic
economists that, “To be relevant to the contemporary world, Islamic
economics should undertake in-depth study of the economies and pro-
pose Islamic solutions to their problems. Brushing aside this potential
area of study makes Islamic economics irrelevant.”57 Along the same line,
Zarka asserts that one of the objectives of Islamic economics is “to study
reality to repair it, improve it, or reform it, in order to make it closer to
Shariah.” As he rhetorically asks, “[H]ow can we reform a reality which
we do not understand and we do not know?”58
In Chapra’s words, Islamic economics has to perform four different
tasks, namely (in slightly modified order): first, to indicate the kind of behav-
ior of economic actors (individuals, firms, markets, governments) that would
realize welfare; second, to study the actual behavior of economic actors;
third, to explain why economic actors behave the way they do (and not the
way they ought to); and, finally, to suggest a workable strategy that would
bridge the discrepancy between economic realities and ideals.59 The scope
of Islamic economics thus comprises four distinct fields: first, proposing
the ideal behavior of economic actors (that is, the behavior which con-
forms to the principles and rules of Islam that are derived from the Qur’an
and Sunnah and which is conducive for realizing welfare) and its possible
46  A M ER I C AN JO U RN AL OF ISL AM AN D SO CIE T Y 41:1

impacts on the economy and society; second, evaluating the actual behavior
of economic actors (that is, the behavior which presently occurs, given eco-
nomic realities and including that of both Muslims and non-Muslims, both
that conforming and non-conforming to the Shariah) and its impacts; third,
comparing ideal and actual behaviors of economic actors and explaining any
discrepancy between them; and, finally, formulating strategies that could
bring actual behavior of economic actors as close as possible to the ideal.
The first field of work, namely proposing ideal behavior of economic
actors and its impacts on economy and society, has both normative and
positive elements. It consists of such tasks as: (1) observing legal and
nonlegal texts in the Qur’an and the Sunnah, in order to outline and
derive general principles and rules that are applicable to the study of an
economy from an Islamic perspective; (2) establishing normative state-
ments of what economic actors ought to do, or how one situation ought
to be seen relative to another, based on the Qur’an and the Sunnah—
where the point is to provide standard guidelines of the behavior which
conforms to the principles and rules of Islam and which is conducive for
welfare realization; and (3) predicting what will happen in the economy,
assuming that economic actors do what they ought.
The second field of work, namely evaluating actual economic behav-
ior and its impacts, has only positive analytic content. Starting with
secondary or primary data collection, it consists of such tasks as: (1)
observing economic facts; (2) establishing positive statements about
what economic actors do, and how one economic situation as a matter
of fact relates to another; and (3) predicting what will happen in the
economy given that economic actors act as they in fact do.
The third field of work, namely comparing actual and ideal economic
behaviors and explaining any discrepancy between them, also has only
positive analytic content. It consists of such tasks as: (1) identifying key
points of comparison and recognizing gaps between the actual and the ideal
behaviors of economic actors; and (2) examining the factors that determine
such gaps, and the mechanisms through which the gaps are determined. It
should be emphasized that the third field of work of Islamic economics is
not at all about the perennial debates between revelation and reason. Nor
is it hypothesis-testing of the validity of Islamic injunctions using empirical
 SUS AMTO: TOWARD A NE W FR AME WORK OF ISL AMIC ECONOMIC ANALYSIS  47

facts, let alone an effort of reconciling Islamic principles with real life.
This field of work simply considers whether actual economic behavior is
consistent with actors’ ideal behavior and why there are inconsistencies (if
any) between them. As Chapra puts it, the ultimate task to be performed
in this field of work is simply “to explain why individuals, firms, markets
and governments behave in the way they do, and not in the way they
ought to.”60 By way of simplified example, it is clear that seizing another’s
property without right or permission is prohibited in Islam. Thus, ideally,
there should be no theft in Muslim societies. However, evaluation of actual
behavior may indicate high rates of theft. This third field of Islamic econom-
ics would offer explanations of the root causes of such theft, not empirically
invalidate or debate those Islamic principles of property.
The fourth field of work (namely, formulating strategies that could
help bring actual behavior as close as possible to the ideal) is a continuation
of the third field. It contains both normative and positive elements and
comprises such tasks as: (1) identifying strategies that need to be taken to
bring the actual behavior of individuals, firms, markets, and governments
as close as possible to the ideal; and (2) determining pitfalls in bringing the
actual behavior of these economic actors as close as possible to the ideal.
The sequence of these fields of work need not be rigid. Evaluations of
the actual behavior of economic actors can be completed irrespective of
whether there have been propositions of their ideal behavior. Similarly,
proposing their ideal behavior can be performed irrespective of whether
evaluations of their actual behavior have taken place. However, compari-
sons of actual and ideal economic behavior can only be meaningful once
Islamic economists have clearly understood each of them. Formulations
of economic strategies also can only be meaningful once Islamic econ-
omists have clearly accounted for the discrepancies between actual and
ideal behavior. Finally, this sequence will necessarily be iterative, inter-
active, and evolutionary. It is a cyclical process of knowledge formation.

The Methods of Islamic Economics

Given the proposed scope of Islamic economics, it is hard to imagine

that any single method will best fit all the fields of work. Indeed, Chapra
48  A M ER I C AN JO U RN AL OF ISL AM AN D SO CIE T Y 41:1

duly observed that “it is perhaps futile to look for a single method for
accepting or rejecting propositions in Islamic economics.”61 It is therefore
proposed that the methods used in Islamic economics vary depending
on the end sought within each field of work.
For example, to establish normative statements of what individuals,
firms, markets and governments ought to do, the standard methods of
uṣūl al-fiqh (designed to discern the legal status of a certain act, whether
obligatory, recommended, permissible, disapproved, or prohibited) can
be used. These methods include analogical deduction (qiyās), juristic
preference (istiḥsān), presumption of continuity (istisḥāb), and the rules
of interpretation and deduction.62 These methods can also be used to
establish normative statements about how any particular economic sit-
uation in the economy ought to be seen relative to another, based on the
texts in the Qur’an and the Sunnah.
To predict what will happen in the economy, assuming that eco-
nomic actors do what they ought, theoretical modeling methods are
appropriate. These methods usually involve one or more mathematical
techniques, such as geometry, calculus, matrix algebra, and computa-
tional mathematics. Mathematical techniques are neutral by nature. To
the extent that they are not abused, mathematical techniques could be
advantageous in Islamic economic analyses.63 This is particularly true
because mathematical techniques allow Islamic economists to formu-
late specific, testable propositions about the impacts of ideal behavior.
However, such mathematical techniques are not a requisite, and plain
language modeling can offer an alternative.
To observe facts about the economy and to establish positive state-
ments about the behavior of economic actors, empirical studies using
quantitative and qualitative methods are appropriate. Empirical studies
are also appropriate for establishing positive statements of how one sit-
uation actually relates to another. Quantitative methods usually involve
one or more statistical techniques, from the simplest descriptive sta-
tistics to the most advanced cross-sectional, time-series, or panel data
econometric techniques. Qualitative methods, albeit seen as less credible
by economists, have their own strengths, especially when applied to
research questions for which they are well suited.64 In the event that
 SUS AMTO: TOWARD A NE W FR AME WORK OF ISL AMIC ECONOMIC ANALYSIS  49

results from multiple empirical studies are available, systematic reviews

and meta-analysis methods can be applied.65
To predict what will happen in the economy, given that individuals,
firms, markets, and governments act as they do, economic theoretical
modeling methods are again appropriate. For those with strong mathe-
matical tendencies, techniques such as geometry, calculus, matrix algebra,
and computational mathematics can be advantageous, while for others
theoretical modeling methods using plain language remain an alternative.
To identify key points of comparison and to recognize gaps between
ideal and actual economic behavior, a combination of literature reviews
and ideal-actual comparative analyses can be used. The latter involves
ideal behavior as its baselines, which can be assumed either to be fixed
at a certain starting point or to be retrospectively emergent.
To identify key strategies and specific actions to redress discrep-
ancies between ideal and actual economic behavior, strategic analyses
can be used. The same methods are also suited to describe the roles that
different parties are expected to play, and to determine pitfalls that need
to be addressed. Of course, whatever strategies and specific actions are
formulated must not contravene the teachings of Islam. Some kinds of
fiqh consultation are therefore required during the analyses.
The above examples are not at all exhaustive. In fact, in this frame-
work it would be acceptable for particular work in Islamic economics
to cover more than one field and use different combinations of methods.
That is not to say that methods are not important. Nor to say that the
opinion of Siddiqi can be taken for granted, when he writes that “the
Islamic tradition in economics has always been free of formalism, focus-
ing on meaning and purpose with a flexible methodology.”66 Methods are
surely important and the use of different methods in Islamic economics
is certainly “a definite solution,” rather than “a reflection that the meth-
odological discussion has reached a deadlock.”67

Implications and Further Discussions

Given the conditions under which an economics can be considered
Islamic, and its proposed scope and methods, it is now time to expand
50  A M ER I C AN JO U RN AL OF ISL AM AN D SO CIE T Y 41:1

on three implications of this discussion. The first of these is that Islamic

economics can be developed and its body of knowledge built without
waiting for an Islamic economic system to be fully implemented. In
fact, the field of Islamic economics (conceived of in this way) is there
to inspire and guide societies to transform their economy toward the
realization of welfare, as the Islamic worldview dictates.
The notion that Islamic economics can only be developed after its
practicable system is in place is not uncommon in the current litera-
ture. For example, it has been argued that the economic science of Islam
can only flourish after Islamic economic doctrines are understood and
practiced.68 For Sadr, the science of economics comprises “every theory
which explains the reality of economic life,”69 while economic doctrines
consist of “every basic rule of economic life connected with the ideol-
ogy of [social justice].”70 Since the reality of economic life is affected
by prevailing economic doctrines, the proper theories explaining an
Islamic economy integrally depend upon the implementation of Islamic
economic doctrines. The problem with this approach is that it limits
the relevance of Islamic economics to societies where this economic
system has already been implemented. It also begs the question of who
will contribute to its implementation: Islamic economists? Using which
theories? How will such theories have been developed, in the absence
of an operational Islamic economic system?
The conditions proposed in this paper entail that Islamic economics is
relevant, no matter the operational state of the economic system. Rather
than waiting for a fully-implemented Islamic economic system, Islamic
economists are able to actively contribute to its emergence and flourish-
ing—for example, as noted here, by establishing its axioms,71 evaluating
the actual conditions of the prevailing economic system, examining the
gap between its ideal and the actual conditions, and prescribing strategies
to bring its actual conditions as close as possible to the ideal.
The second implication is that Islamic economics may address any
topic, not solely topics conventionally covered in this literature.72 Indeed
the scope of Islamic economics should extend to any topic relevant to the
realization of welfare. In the absence of clarity on what economics can
be considered Islamic, it was difficult for researchers to delimit the scope
 SUS AMTO: TOWARD A NE W FR AME WORK OF ISL AMIC ECONOMIC ANALYSIS  51

of economic inquiry—especially when proposed topics seemed related

to conventional economic research. Islamic finance became the one pre-
serve of the literature which could clearly claim an Islamic pedigree.
Given the conditions spelled out above for declaring research under
the ambit of “Islamic” economics, it becomes easier to broaden the scope
of inquiry. It is certainly not mention of key terms that makes research
Islamic; rather, such work must reflect the ontological and epistemolog-
ical foundations of the Islamic worldview. Thus the topics of research in
Islamic economics can legitimately range from poverty and income inequal-
ity in the realm of development economics, to taxation and subsidies in the
realm of public economics, to antitrust in the realm of industrial economics,
to cryptocurrency in the realm of monetary economics, to the impacts
of parental divorce at the household level, to the impact of government
budget allocations at the national level, and to the consequences of free
trade agreements at the international level. Some of this research will likely
resemble that inquiry undertaken in conventional economics—but this is
because conventional economics ought to be seen as a subset within Islamic
economics, not the other way around.73 Regardless of disagreements over
whether conventional economics contains any normative content, it does
have positive analytic content. Conventional economics uses what has
occurred in the past to explain what occurs today or to predict the possible
occurrence of events in the future. Limiting our focus solely to its positive
analytic content, we will find that conventional economics is much like
the second field of work of Islamic economics proposed in this article.
Whatever its similarities to conventional research, nuanced work in Islamic
economics should also explain its Islamic presuppositions which motivate
the research, the gaps in Islamic economic literature that this research
redresses, and how its implications facilitate the realization of welfare.
The third implication is that there is no need to entirely overhaul the
fields of Islamic or conventional economics. Rather, much of the work that
has already been done (not only in terms of results and findings, but also
in methods of analysis) can find its place within this reconfigured frame-
work. The current Islamic economic literature has seen divergent opinions
over how to utilize existing material. Some argue that conventional eco-
nomics is simply ill-suited for Muslim societies, and so Islamic economics
52  A M ER I C AN JO U RN AL OF ISL AM AN D SO CIE T Y 41:1

must begin anew.74 For example, for Tahir, seeking to “Islamicize” conven-
tional economics bears risks: “The argument may be off-tracked, and the
true distinction between Islamic economics and conventional economics
lost.”75 Zaman has a similar view and writes that “the only solution to
this problem is to reject conventional economic theories as well as their
methodology and start from the background assumptions furnished by
Islam.”76 In contrast, others hold that Islamic economists can and should
benefit from the experience of conventional economics.77 This is done by
selectively and critically approaching the latter, in order to acknowledge
which of its components are “Islamic” and rejecting those which are not,78
thereby replacing the values on which economics should be based.79 In
Siddiqi’s words, “the craving for a de novo discipline of Islamic econom-
ics is ill conceived. No such thing is possible.”80 This second approach
has however faltered on a methodological basis, lacking clear criteria to
determine what should be accepted or rejected.
The conditions newly-proposed here provide solid ground; there
is no need to reinvent the wheel. They provide a map to demonstrate
the interface between Islamic economics and its conventional coun-
terpart. Certain findings from conventional economics, particularly
those obtained through empirical analyses, can easily be used in Islamic
economics to evaluate the actual economic behavior and impacts of
individuals, firms, markets, and governments. It is also clear that the
immediately available and well-advanced methods in conventional eco-
nomics can be used in Islamic economics for further analyses.
Together, the implications above give rise to a hope that to develop
Islamic economics and to build its body of knowledge is much less com-
plicated than what Islamic economists have thought. The newly-proposed
conditions under which an economics can be considered Islamic lay solid
ground for a genuine and robust discipline of Islamic economics—but
also a simple operational framework for Islamic economic analysis.

Concluding Remarks
This paper has argued that it is the absence of clarity on what eco-
nomics can be considered Islamic which impedes the development of
 SUS AMTO: TOWARD A NE W FR AME WORK OF ISL AMIC ECONOMIC ANALYSIS  53

Islamic economics. It has thus proposed three conditions under which an

economics can properly be considered Islamic. First, it must not ontolog-
ically separate worldly from divine affairs, the profane from the sacred,
and the material from the spiritual. Second, it must not epistemologically
limit the sources of knowledge to experience and reason, and instead
must recognize revelation as another source of knowledge. Third, it must
not be barren; it must rather be able to help guide societies to transform
their economy toward the realization of welfare as the Islamic worldview
dictates.
Based on these conditions, this paper has further proposed that the
scope of Islamic economics consists of four distinct fields of work. First
of these is proposing the ideal economic behavior of individuals, firms,
markets, and governments, and its possible impacts on economy and
society. Second is evaluating the actual behavior and impacts of these
economic actors. Third is comparing the ideal and actual behaviors of
these economic actors, and explaining any discrepancy. Fourth is for-
mulating strategies that could bring actual economic behavior as close
as possible to the ideal. In addition, this paper has proposed that the
methods used in Islamic economics vary depending on the end sought
within each field of work.
Three implications emerge from these proposals. The first is that
Islamic economics and its body of knowledge can be developed without
waiting for an Islamic economic system to already be fully implemented.
The field can thus function to inspire and help guide societies toward its
full implementation. The second implication is that Islamic economics
may deal with any topic. What makes economic research “Islamic” is
not that it contains reference to such terms as ribā, zakāt, waqf, ḥalāl,
Muslims, or even Islam itself. Rather, it must base itself on ontological
and epistemological foundations consistent with the Islamic worldview
and be able to help guide societies to transform their economy toward the
realization of welfare. The third implication is that much of the findings
and methods in conventional economics can in fact be used for further
analyses in Islamic economics.
This paper is an initial statement toward a new, more comprehensive
framework of Islamic economic analysis. Future research into its details
54  A M ER I C AN JO U RN AL OF ISL AM AN D SO CIE T Y 41:1

may include reviewing past discussions on the assumptions of Islamic

economics and exploring the operational details of the framework for
each field of work. For example, the strong assumption of homo islam-
icus touched on above is likely neither helpful nor necessary to support
the development of this field, as it will be relevant only in those cases
that Islamic economists deal with the ideal behavior of economic actors.
Future research should also use the framework as a basis to develop
Islamic economics’ body of knowledge. With the framework set in this
paper, it will be possible to develop not only the branches of microeco-
nomics and macroeconomics but also such sub-branches as development
economics, public economics, monetary economics, and international
economics. Finally, it can be speculated that the framework set in this
paper is relevant to the broader social sciences, such that the conditions
for what is considered “Islamic” may be expanded to other social-scien-
tific and humanistic disciplines.
 SUS AMTO: TOWARD A NE W FR AME WORK OF ISL AMIC ECONOMIC ANALYSIS  55

Endnotes
1 Rodney Wilson, “The Development of Islamic Economics: Theory and Practice,” in
Islamic Thought in the Twentieth Century, ed. Suha Taji-Farouki and Basheer M. Nafi
(London: IB Tauris, 2004), 195–222.
2 See, for example, articles published in Khurshid Ahmad, ed., Studies in Islamic
Economics (Leicester, UK: The Islamic Foundation, 1980).
3 Asad Zaman, “Crisis in Islamic Economics: Diagnosis and Prescriptions,” JKAU:
Islamic Economics 25, no. 1 (2012): 147–69.
4 Mohamed Aslam Haneef, “Preliminary Thoughts on Diagnosing Some
Methodological Issues in Developing Islamic Economics,” in Workshop on the
Future of Islamic Economics (Jeddah: Islamic Economics Institute, King Abdulaziz
University, 2012).
5 Monzer Kahf, “Islamic Economics: What Went Wrong?” (2004), http:// monzer.kahf.
com/papers/english/islamic_economics_what_went_wrong_sept_03_irti.pdf, 10.
6 M. Akram Khan, What Is Wrong with Islamic Economics? Analyzing the Present State
and Future Agenda (Cheltenham: Edward Elgar, 2013), xiii–xiv.
7 Masudul Alam Choudhury, “Tawhidi Islamic Economics in Reference to the
Methodology Arising from the Quran and the Sunnah,” ISRA International Journal
of Islamic Finance 10, no. 2 (2018): 263–76.
8 Masudul Alam Choudhury, Islamic World View (London: Routledge, 2001), 104.
9 M. Umer Chapra, The Future of Economics: An Islamic Perspective (Leicester: The
Islamic Foundation, 2000), 375.
10 Seyyed Vali Reza Nasr, “Islamization of Knowledge: A Critical Overview,” Islamic
Studies 30, no. 3 (1991): 387–400.
11 Chapra, The Future of Economics, 375.
12 Muhammad Nejatullah Siddiqi, “Obstacles of Research in Islamic Economics,” JKAU:
Islamic Economics 21, no. 2 (2008): 87; M. Aslam Haneef, “Funding Research in
Islamic Economics and Finance,” in The Seventh International Conference on Islamic
Economics (Jeddah: King Abdulaziz University, 2008), 378; Abbas Mirakhor, “A Note
on Islamic Economics,” Islamic Development Bank (IDB) Prize Winner’s Lecture
Series, no. 20 (Jeddah: Islamic Research and Training Institute (IRTI), 2007), 9.
13 See, for example, M. Aslam Haneef and Hafas Furqani, “Contemporary Islamic
Economics: The Missing Dimension of Genuine Islamization,” Thoughts on Economics
19, no. 4 (2009): 34 and 39; Abdulkader Cassim Mahomedy, “Islamic Economics: Still
in Search of an Identity,” International Journal of Social Economics 40, no. 6 (2013):
567–68; Kahf, “Islamic Economics: What Went Wrong?”
14 Muhammad Abdul Mannan, “Islamic Economics as a Social Science: Some
Methodological Issues,” Journal of Research in Islamic Economics 1, no. 1 (1983):
41–50.
56  A M ER I C AN JO U RN AL OF ISL AM AN D SO CIE T Y 41:1

15 Chapra, The Future of Economics.

16 Douglas L. Medin and Megan Bang, Who’s Asking? Native Science, Western Science
and Science Education (Cambridge, MA: MIT Press, 2014), 121.
17 Thomas Kuhn, The Structure of Scientific Revolutions (Chicago: University of Chicago
Press, 1962), 10.
18 Robert L. Heilbroner, The Nature and Logic of Capitalism (New York: W.W. Norton,
1985), 108.
19 Ibid., emphasis original.
20 Joseph J. Spengler, Origins of Economic Thought and Justice: Political and Social
Economy (Carbondale, IL: Southern Illinois University Press, 1980), xiii.
21 Ibid., xii.
22 Robert L. Heilbroner, The Worldly Philosophers (New York: Simon and Schuster,
1999), 310.
23 Jeremy Bentham, An Introduction to the Principles of Morals and Legislation (Oxford:
Clarendon Press, 1789).
24 Haneef, “Funding Research in Islamic Economics and Finance,” 378.
25 Siddiqi, “Obstacles of Research in Islamic Economics,” 187.
26 Mirakhor, “A Note on Islamic Economics.”
27 Volker Nienhaus, “Method and Substance of Islamic Economics: Moving Where?”
JKAU: Islamic Economics 26, no. 1 (2013): 198–201.
28 Munawar Iqbal, “Development of Theory of Islamic Economics: Problems and
Proposals,” International Journal of Behavioral Accounting and Finance 4, no. 3 (2014):
270; Haneef and Furqani, “Contemporary Islamic Economics,” 34 and 39; Siddiqi,
“Obstacles of Research in Islamic Economics,” 84.
29 Mahomedy, “Islamic Economics,” 567–68.
30 Zaman, “Crisis in Islamic Economics,” 148–49.
31 Abdul Azim Islahi, “First vs. Second Generation Islamic Economists: Deviations
and Differences in Thoughts,” in Islamic Economics: Theory, Policy and Social Justice,
ed. Hatem A El-Karanshawy et al. (Doha: Bloomsbury Qatar Foundation, 2015), 14;
Kahf, “Islamic Economics: What Went Wrong?” 7–8.
32 Islahi, “First vs. Second Generation Islamic Economists,” 14.
33 Siddiqi, “Obstacles of Research in Islamic Economics,” 84
34 Kahf, “Islamic Economics: What Went Wrong?,” 7.
35 al-Fungari as cited in Zarqa, “Islamization of Economics: The Concept and
Methodology,” JKAU: Islamic Economics 16, no. 1 (2003): 5.
36 Monzer Kahf, “The Theory of Production,” in Readings in Microeconomics: An Islamic
Perspective, ed. Sayyid Tahir, Aidit Ghazali, and Syed Omar Syed Agil (Kuala Lumpur:
 SUS AMTO: TOWARD A NE W FR AME WORK OF ISL AMIC ECONOMIC ANALYSIS  57

Longman, 1992), 113–19; M. Akram Khan, An Introduction to Islamic Economics

(Islamabad: International Institute of Islamic Thought and Institute of Policy Studies,
1994), 44–45; M. Akram Khan, “Islamic Economics: Nature and Need,” Journal of
Research in Islamic Economics 1, no. 2 (1984): 51–55.
37 Kahf, “The Theory of Production,” 115.
38 Khan, “Islamic Economics,” 51. Cf. Amir Wahbalbari, Zakaria Bahari, and Norzarina
Mohd-Zaharim, “The Concept of Scarcity and Its Influence on the Definitions of
Islamic Economics: A Critical Perspective,” Humanomics 31, no. 2 (2015): 134–59;
and the critique in Zubair Hasan, “Scarcity, Self-Interest and Maximization from
Islamic Angle” (Munich Personal RePEC Archive, 2011).
39 Muhammad Nejatullah Siddiqi, “Some Notes on Teaching of Economics in an
Islamic Framework,” in Readings in Microeconomics: An Islamic Perspective, ed.
Sayyid Tahir, Aidit Ghazali, and Syed Omar Syed Agil (Kuala Lumpur: Longman,
1992), 1–30; Muhammad Nejatullah Siddiqi, Economic Enterprise in Islam (Lahore:
Islamic Publication, 1979), 96; Kahf, “The Theory of Production,” 64. For critiques, see
Mahmud Abu-Saud, “Critique of Teaching Economics in an Islamic Perspective,” in
Readings in Microeconomics: An Islamic Perspective, ed. Sayyid Tahir, Aidit Ghazali,
and Syed Omar Syed Agil (Kuala Lumpur: Longman, 1992), 24–31; Mahomedy,
“Islamic Economics.”
40 Islahi, “First vs. Second Generation Islamic Economists,” 14.
41 M. Fahim Khan, “Theorizing Islamic Economics: Search for a Framework for Islamic
Economic Analysis,” JKAU: Islamic Economics 26, no. 1 (2013): 229.
42 For a complete list, see Furqani, “Defining Islamic Economics: Scholars’ Approach,
Clarifying the Nature, Scope and Subject-Matter of the Discipline,” Turkish Journal
of Islamic Economics 5, no. 2 (2018): 69–94.
43 SM Hasanuzzaman, “Definition of Islamic Economics,” Journal of Research in Islamic
Economics 1, no. 2 (1984): 50.
44 Syed N.H. Naqvi, Islam, Economics and Society (London: Kegan Paul International,
1994), 176.
45 Muhammad Abdul Mannan, Islamic Economics: Theory and Practice (Cambridge: The
Islamic Academy, 1986), 18.
46 Siddiqi, “Some Notes on Teaching of Economics in an Islamic Framework,” 69.
47 See, for example, Choudhury, “Islamic Economics as a Social Science,” International
Journal of Social Economics 17, no. 6 (1990): 42.
48 Torstein Veblen, “Why Is Economics Not an Evolutionary Science?” Quarterly
Journal of Economics 12, no. 4 (1898): 389.
49 Choudhury, “Islamic Economics as a Social Science,” 42.
50 Sunan Ibn Majah, vol. 5, book 34, hadith no. 3843 English version.
51 Chapra, The Future of Economics.
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52 Siddiqi, “Obstacles of Research in Islamic Economics,” 86.

53 Masudul Alam Choudhury, “Islamic Political Economy: An Epistemological
Approach,” Social Epistemology Review and Reply Collective 3, no. 11 (2014): 82.
54 Masudul Alam Choudhury, “The Methodology of Islamic Economic and Socio-
Scientific Inquiry,” Research in the History of Economic Thought and Methodology: A
Research Annual 30, no. A (2012): 91–92.
55 Masudul Alam Choudhury, “Islamic Economics and Finance an Epistemological
Inquiry,” in Contributions to Economic Analysis, ed. BH Baltagi, E. Sadka, and
Masudul Alam Choudhury (Emerald Group Publishing Limited, 2011).
56 Muhammad Nejatullah Siddiqi, “An Islamic Approach to Economics,” in Islam:
Source and Purpose of Knowledge (Washington DC: International Institute of Islamic
Thought, 1988), 168.
57 Khan, What Is Wrong with Islamic Economics? 15.
58 Muhammad Anas Zarka, “Duality of Sources in Islamic Economics and Its
Methodological Consequences,” in Seventh International Conference in Islamic
Economics (Jeddah: King Abdulaziz University, 2008), 27.
59 Chapra, The Future of Economics: An Islamic Perspective, 127–28.
60 Ibid.
61 Ibid., 131.
62 For details of these methods, see M. Hashim Kamali, Principles of Islamic
Jurisprudence, 3rd ed. (Kuala Lumpur: Ilmiah Publishers, 2005).
63 Habib Ahmed, “Analytical Tools of Islamic Economics: A Modified Marginalist
Approach,” in Theoretical Foundations of Islamic Economics, ed. Habib Ahmed
(Jeddah: Islamic Research and Training Institute (IRTI), 2002), 140; Masudul Alam
Choudhury, “Crisis in Islamic Economics: Diagnosis and Prescription. Comments,”
JKAU: Islamic Economics 25, no. 1 (2012): 185–86.
64 For further discussion on this, see Starr, “Qualitative and Mixed-Methods Research
in Economics: Surprising Growth, Promising Future,” Journal of Economic Surveys
28, no. 2 (2014): 238–64.
65 See, for example, Stanley et al. “Meta-Analysis of Economics Research eporting
Guidelines,” Journal of Economic Surveys 27, no. 2 (2013): 390–94.
66 Siddiqi, “An Islamic Approach to Economics,” 155.
67 Hafas Furqani and Mohamed Aslam Haneef, “Methodology of Islamic Economics:
Typology of Current Practices, Evaluation and Way Forward,” in Islamic Economics:
Theory, Policy and Social Justice, ed. Hatem A. El-Karanshawy et al. (Doha:
Bloomsbury Qatar Foundation, 2015), 25.
68 M. Baqir as-Sadr, Iqtisaduna: (Our Economics), Volume I Part 2 (Tehran: World
Organization for Islamic Services, 1984), part 2, 96
 SUS AMTO: TOWARD A NE W FR AME WORK OF ISL AMIC ECONOMIC ANALYSIS  59

69 M. Baqir as-Sadr, Iqtisaduna: (Our Economics), Volume II Part 1 (Tehran: World

Organization for Islamic Services, 1984), part 1, 9.
70 Ibid.
71 See, for example, Mehmet Asutay, “A Political Economy Approach to Islamic
Economics: A Systemic Understanding for an Alternative Economic System,” Kyoto
Bulletin of Islamic Area Studies, no. 1–2 (2007): 3–18.
72 Islahi, “First vs. Second Generation Islamic Economists,” 14; Kahf, “Islamic
Economics: What Went Wrong?” 7–8.
73 For opposing views see, for example, Kahf, “Islamic Economics: Notes on Definition
and Methodology,” http://monzer.kahf.com/papers/english/paper_of_methdology.
pdf, and Shamim A Siddiqui, “Defining Economics and Islamic Economics,” Review
of Islamic Economics 15, no. 2 (2011): 113–42.
74 Sayyid Tahir, “Islamic Economics and Prospects for Theoretical and Empirical
Research” 30, no. 1 (2017): 14; Zaman, “Crisis in Islamic Economics: Diagnosis and
Prescriptions,” 149–50.
75 Tahir, “Islamic Economics and Prospects for Theoretical and Empirical Research,”
14.
76 Zaman, “Crisis in Islamic Economics: Diagnosis and Prescriptions,” 149–50.
77 Muhammad Nejatullah Siddiqi, “Nature and Methodology of Islamic Political
Economy,” in Seminar on Islamic Political Economy in the Age of Capitalist
Globalization (Penang: Universiti Sains Malaysia, 1994), 6; Abdulrahman Yousri
Ahmed, “The Scientific Approach to Islamic Economics: Philosophy, Theoretical
Construction and Applicability,” in Theoretical Foundations of Islamic Economics, ed.
Habib Ahmed (Jeddah: Islamic Research and Training Institute (IRTI), 2002), 37.
78 Muhammad Anwar, “Islamic Economic Methodology,” Journal of Objectives Studies
2, no. 1 (1990): 28–46.
79 Zarqa, “Islamization of Economics: The Concept and Methodology,” 3 and 17–18.
80 Siddiqi, “Nature and Methodology of Islamic Political Economy,” 6.