Neoclassical Economics (NCE) Vs IE

Understanding Neoclassical Economics (NCE)

Neoclassical economics is the dominant school of thought in modern economics. It emerged in the late 19th century as a refinement of classical economics. It’s built upon a set of core assumptions and concepts that shape how economists analyze and understand economic phenomena.

Core Concepts of Neoclassical Economics:

Rationality and Maximization:
- Homo Economicus: NCE assumes individuals are rational economic agents (often called “homo economicus”). This means they are self-interested, consistent in their preferences, and make decisions to maximize their utility (satisfaction) or profits.
- Utility Maximization (Consumers): Consumers aim to maximize their satisfaction given their budget constraints. They weigh costs and benefits and choose the combination of goods and services that provides them with the highest level of happiness.
- Profit Maximization (Firms): Firms aim to maximize their profits. They make production and investment decisions based on cost-benefit analysis, seeking to produce at the lowest cost and sell at the highest price.
Market Equilibrium and Efficiency:
- Supply and Demand: NCE emphasizes the role of supply and demand in determining prices and allocating resources in markets. Prices adjust to equilibrate supply and demand.
- Market Efficiency: In ideal conditions (perfect competition, perfect information, no externalities), NCE posits that free markets lead to allocative efficiency. This means resources are allocated to their most valued uses, and it’s impossible to make someone better off without making someone else worse off (Pareto efficiency).
- Invisible Hand: Adam Smith’s concept is central. Individual pursuit of self-interest in free markets, guided by the “invisible hand” of the price mechanism, leads to socially desirable outcomes.
Methodological Individualism:
- NCE focuses on the behavior of individual agents as the fundamental building blocks of economic analysis. Macroeconomic phenomena are seen as aggregations of individual decisions.
Emphasis on Mathematical Modeling:
- NCE heavily relies on mathematical models, equations, and statistical analysis to describe and predict economic behavior. This provides a seemingly rigorous and objective approach to economic analysis.
Limited Role of Government:
- Due to the belief in market efficiency, NCE generally advocates for limited government intervention in the economy. Government’s role is often seen as primarily focused on:
  - Enforcing property rights and contracts.
  - Providing public goods (like national defense).
  - Correcting market failures (like externalities and monopolies, though even this is sometimes debated within NCE).

In essence, Neoclassical Economics provides a powerful framework built on the idea that rational individuals interacting in free markets, driven by self-interest, lead to efficient and optimal economic outcomes.

Problems with Neoclassical Economics

Despite its influence, Neoclassical Economics faces significant criticisms and has demonstrated limitations in explaining and addressing real-world economic problems. Here are some key issues:

Unrealistic Assumptions about Rationality:
- Behavioral Economics: Decades of research in behavioral economics have demonstrated that human beings are not always perfectly rational in the way NCE assumes. We are prone to cognitive biases, emotions, and heuristics that lead to predictable deviations from rational decision-making.
- Bounded Rationality: Herbert Simon argued for “bounded rationality,” acknowledging that individuals have limited information, cognitive abilities, and time, making truly maximizing behavior impossible. We “satisfice” rather than maximize, choosing “good enough” solutions.
- Implications: If rationality is not as pervasive as assumed, the efficiency and optimality results of NCE become questionable. Market outcomes may not be as efficient or welfare-maximizing as predicted.
Ignoring Ethical and Social Considerations:
- Focus on Efficiency over Equity: NCE primarily focuses on allocative efficiency but often neglects distributional equity and ethical concerns. Market outcomes can be highly unequal, even if they are considered “efficient” in the Pareto sense.
- Individualism vs. Social Welfare: The emphasis on methodological individualism can overshadow the importance of social cohesion, community well-being, and ethical values in economic systems.
- Commodification of Everything: The NCE framework can lead to the view that everything can be commodified and subjected to market forces, potentially ignoring moral boundaries and the value of things that are not easily priced (like natural resources, relationships, or cultural heritage).
Market Failures and Instability:
- Real-World Market Imperfections: The ideal conditions for market efficiency (perfect competition, perfect information, no externalities) rarely exist in reality. Markets are prone to imperfections, information asymmetries, externalities (like pollution), and public goods problems.
- Financial Instability and Crises: NCE models often struggle to explain financial bubbles, crashes, and systemic risks. The assumption of efficient markets and rational expectations can fail dramatically in financial markets, leading to instability and crises. The 2008 financial crisis highlighted the limitations of NCE in predicting and preventing such events.
- Environmental Degradation: NCE’s focus on production and consumption growth within a narrow framework can lead to the neglect of environmental externalities. Unfettered markets can incentivize unsustainable resource use and pollution, leading to environmental degradation.
Ignoring Power Dynamics and Inequality:
- Unequal Distribution of Wealth and Power: NCE models often treat individuals as having equal market power, but in reality, wealth, income, and political power are unevenly distributed. This inequality can significantly influence market outcomes and perpetuate further inequality.
- Market Outcomes Reflect Existing Power Structures: Market prices and allocations reflect not just individual preferences but also pre-existing distributions of wealth and power. This can lead to outcomes that are efficient in a technical sense but socially unjust.
Oversimplification of Human Motivation and Behavior:
- Narrow View of Motivation: Reducing human motivation solely to self-interest and material gain is a simplification. People are motivated by a range of factors including altruism, fairness, social norms, ethical values, and a sense of purpose beyond personal wealth.
- Limited Understanding of Social Context: NCE often treats economic agents in isolation, neglecting the importance of social context, culture, institutions, and relationships in shaping economic behavior.
Methodological Limitations:
- Over-Reliance on Mathematical Models: While mathematical models are useful, an over-reliance on them can lead to a disconnect from real-world complexity. Models are simplifications, and if the underlying assumptions are flawed, the models can be misleading.
- Positive vs. Normative Confusion: NCE sometimes blurs the line between positive (descriptive) economics and normative (prescriptive) economics. What is described by NCE models can be implicitly presented as what should be in terms of policy, without sufficient ethical reflection.

Islamic Economic Model as a Potential Solution to NCE Problems

Islamic Economics (IE) emerges as a contrasting paradigm that offers potential solutions to some of the problems associated with Neoclassical Economics. It’s important to understand that IE is not just about applying Islamic principles to NCE, but often represents a fundamentally different worldview and set of priorities.

Core Principles of Islamic Economics:

Ethical and Moral Framework:
- Tawhid (Oneness of God): This central concept shapes the entire worldview. It implies accountability to God, a sense of trusteeship over resources, and the interconnectedness of all aspects of life.
- Adl (Justice): Justice is a core value, encompassing distributive justice, procedural justice, and social justice. It emphasizes fairness, equity, and preventing exploitation.
- Maslaha (Public Interest/Welfare): Economic activities should serve the overall public interest and promote the well-being of society as a whole, not just individual self-interest.
- Prohibition of Riba (Interest/Usury): A central tenet is the prohibition of interest (riba). This is seen as exploitative and unjust, contributing to inequality and instability.
- Zakat (Mandatory Charity): Zakat is a system of wealth redistribution, requiring wealthy Muslims to give a portion of their wealth annually to the poor and needy.
- Prohibition of Gharar (Excessive Uncertainty/Speculation) and Maysir (Gambling): These principles aim to curb excessive speculation, gambling, and activities with high levels of uncertainty that can be detrimental to the real economy.
Human Behavior and Motivation:
- Beyond “Homo Economicus”: IE recognizes the complexity of human motivation. While self-interest is acknowledged, it emphasizes that individuals are also motivated by ethical and spiritual values, social responsibility, and a desire to seek God’s pleasure.
- Balance between Material and Spiritual: IE seeks a balance between material well-being and spiritual development. Economic activity should not be solely focused on material accumulation but should also contribute to personal and societal spiritual growth.
Role of the Market and Government:
- Market within Ethical Bounds: IE recognizes the role of markets in resource allocation but emphasizes that markets must operate within an ethical and legal framework guided by Islamic principles.
- Active Role for Government: Government in an Islamic economic system has a more active role than in laissez-faire NCE models. Its responsibilities include:
  - Enforcing ethical and legal frameworks.
  - Ensuring justice and equitable distribution of wealth.
  - Providing basic needs for all citizens.
  - Correcting market failures.
  - Promoting sustainable development.
Focus on Real Economy and Stability:
- Discouraging Speculation and Rent-Seeking: The prohibition of riba, gharar, and maysir aims to discourage excessive speculation and rent-seeking behavior, channeling resources towards productive activities in the real economy.
- Emphasis on Productive Investment: IE encourages investment in productive assets that create real goods and services, rather than purely financial speculation.
- Financial Stability: Islamic finance, based on profit and loss sharing and asset-backed financing, is argued to be more resilient to financial crises compared to interest-based systems.

How Islamic Economics Addresses Neoclassical Problems:

Here’s how IE can be seen as a solution to problems derived from NCE:

NCE Problem	Islamic Economics Solution
Unrealistic Rationality Assumption	Acknowledges bounded rationality and human emotions; integrates ethical and spiritual motivations.
Ignoring Ethical and Social Considerations	Embeds ethics and morality as core principles; prioritizes justice, social welfare, and public interest (Maslaha).
Market Failures and Instability	Active government role in regulation and correction of market failures; discourages speculation (gharar, maysir); riba prohibition aims for financial stability.
Ignoring Power Dynamics and Inequality	Zakat system for wealth redistribution; emphasis on distributive justice (Adl); principles against exploitation; focus on fulfilling basic needs of all.
Oversimplification of Human Motivation	Broader view of human motivation beyond self-interest; incorporates ethical, spiritual, and social motivations; emphasizes balance between material and spiritual well-being.
Methodological Limitations	Combines quantitative and qualitative analysis; ethical and philosophical foundations provide a broader framework beyond purely mathematical models; focus on real-world impact.

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Examples of Islamic Economic Solutions in Practice:

Islamic Banking and Finance: Offers alternatives to conventional interest-based banking, using profit and loss sharing, asset-backed financing (Murabaha, Ijara, Sukuk), and ethical investment principles.
Zakat Institutions: In some Muslim-majority countries, Zakat collection and distribution systems are established to alleviate poverty and support social welfare.
Waqf (Charitable Endowments): Historically and in some contemporary contexts, Waqf institutions have played a significant role in providing public services, education, and social support.
Ethical Investment and Socially Responsible Finance: Islamic finance principles naturally align with ethical and socially responsible investment approaches, focusing on investments that are halal (permissible), ethical, and contribute to social good.

Important Considerations and Nuances:

Diversity within Islamic Economics: Like any school of thought, there is diversity and debate within Islamic Economics regarding interpretations and implementation of principles.
Practical Implementation Challenges: Translating Islamic economic principles into practical policies and institutions in diverse modern economies can be complex and requires ongoing research and development.
Comparisons and Integration: Some scholars explore potential for integration and synthesis between aspects of Neoclassical Economics and Islamic Economics, rather than seeing them as completely mutually exclusive.
Effectiveness in Real-World Scenarios: The real-world effectiveness of Islamic economic models is still being studied and debated. Empirical evidence on the performance of Islamic financial institutions and economies operating under Islamic principles is growing.
Not a Panacea: Islamic Economics is not presented as a utopian solution to all economic problems. It is an alternative framework with its own strengths, weaknesses, and challenges.

Conclusion:

Neoclassical Economics, while a powerful analytical framework, faces significant criticisms for its unrealistic assumptions, neglect of ethical considerations, and limitations in addressing real-world problems like inequality, instability, and environmental degradation.

Islamic Economics offers a distinct paradigm rooted in ethical and moral principles derived from Islamic teachings. It presents itself as a potential solution to many of the problems associated with NCE by:

Embedding ethical and moral values into economic analysis and decision-making.
Broadening the understanding of human motivation beyond narrow self-interest.
Emphasizing justice, social welfare, and sustainability.
Offering alternatives to interest-based finance to promote stability and equitable resource allocation.
Advocating for a more active role of government in ensuring justice and public interest.

While Islamic Economics is not without its own challenges and is still developing in its practical applications, it provides a valuable alternative perspective and a growing body of thought that can contribute to a more just, ethical, and stable economic system. It is crucial to approach both NCE and IE with a critical and nuanced understanding, recognizing their strengths and limitations and engaging in ongoing dialogue and research to find the best pathways for human economic well-being.

Understanding Neoclassical Economics (NCE)

Neoclassical economics is the dominant school of thought in modern economics. It emerged in the late 19th century as a refinement of classical economics (Schumpeter, 1954). It’s built upon a set of core assumptions and concepts that shape how economists analyze and understand economic phenomena.

Core Concepts of Neoclassical Economics:

Rationality and Maximization:
- Homo Economicus: NCE assumes individuals are rational economic agents (often called “homo economicus”) (Mill, 1836). This means they are self-interested, consistent in their preferences, and make decisions to maximize their utility (satisfaction) or profits (Friedman, 1953).
- Utility Maximization (Consumers): Consumers aim to maximize their satisfaction given their budget constraints (Jevons, 1871). They weigh costs and benefits and choose the combination of goods and services that provides them with the highest level of happiness.
- Profit Maximization (Firms): Firms aim to maximize their profits (Marshall, 1890). They make production and investment decisions based on cost-benefit analysis, seeking to produce at the lowest cost and sell at the highest price.
Market Equilibrium and Efficiency:
- Supply and Demand: NCE emphasizes the role of supply and demand in determining prices and allocating resources in markets (Walras, 1874). Prices adjust to equilibrate supply and demand.
- Market Efficiency: In ideal conditions, NCE posits that free markets lead to allocative efficiency (Pareto, 1906). This means resources are allocated to their most valued uses, and it’s impossible to make someone better off without making someone else worse off (Pareto efficiency).
- Invisible Hand: Adam Smith’s concept is central. Individual pursuit of self-interest in free markets, guided by the “invisible hand” of the price mechanism, leads to socially desirable outcomes (Smith, 1776).
Methodological Individualism:
- NCE focuses on the behavior of individual agents as the fundamental building blocks of economic analysis (Hayek, 1948). Macroeconomic phenomena are seen as aggregations of individual decisions.
Emphasis on Mathematical Modeling:
- NCE heavily relies on mathematical models, equations, and statistical analysis to describe and predict economic behavior (Debreu, 1959). This provides a seemingly rigorous and objective approach to economic analysis.
Limited Role of Government:
- Due to the belief in market efficiency, NCE generally advocates for limited government intervention in the economy (Friedman, 1962). Government’s role is often seen as primarily focused on: enforcing property rights and contracts, providing public goods, and correcting market failures (Pigou, 1920).

Problems with Neoclassical Economics

Despite its influence, Neoclassical Economics faces significant criticisms and has demonstrated limitations in explaining and addressing real-world economic problems. Here are some key issues:

Unrealistic Assumptions about Rationality:
- Behavioral Economics: Decades of research in behavioral economics have demonstrated that human beings are not always perfectly rational in the way NCE assumes (Kahneman, 2011; Tversky & Kahneman, 1974; Thaler & Sunstein, 2008). We are prone to cognitive biases, emotions, and heuristics that lead to predictable deviations from rational decision-making.
- Bounded Rationality: Herbert Simon argued for “bounded rationality,” acknowledging that individuals have limited information, cognitive abilities, and time, making truly maximizing behavior impossible (Simon, 1957). We “satisfice” rather than maximize, choosing “good enough” solutions.
Ignoring Ethical and Social Considerations:
- Focus on Efficiency over Equity: NCE primarily focuses on allocative efficiency but often neglects distributional equity and ethical concerns (Sen, 1999). Market outcomes can be highly unequal, even if they are considered “efficient” in the Pareto sense.
- Individualism vs. Social Welfare: The emphasis on methodological individualism can overshadow the importance of social cohesion, community well-being, and ethical values in economic systems (Etzioni, 1988).
- Commodification of Everything: The NCE framework can lead to the view that everything can be commodified and subjected to market forces, potentially ignoring moral boundaries and the value of things that are not easily priced (Sandel, 2012).
Market Failures and Instability:
- Real-World Market Imperfections: The ideal conditions for market efficiency rarely exist in reality. Markets are prone to imperfections, information asymmetries (Akerlof, 1970), externalities (Coase, 1960; Baumol & Oates, 1988), and public goods problems (Samuelson, 1954).
- Financial Instability and Crises: NCE models often struggle to explain financial bubbles, crashes, and systemic risks (Minsky, 1986; Kindleberger, 1978). The 2008 financial crisis highlighted the limitations of NCE in predicting and preventing such events (Stiglitz, 2010).
- Environmental Degradation: NCE’s focus on production and consumption growth within a narrow framework can lead to the neglect of environmental externalities (Daly, 1996; Georgescu-Roegen, 1971). Unfettered markets can incentivize unsustainable resource use and pollution, leading to environmental degradation.
Ignoring Power Dynamics and Inequality:
- Unequal Distribution of Wealth and Power: NCE models often treat individuals as having equal market power, but in reality, wealth, income, and political power are unevenly distributed (Piketty, 2014). This inequality can significantly influence market outcomes and perpetuate further inequality.
- Market Outcomes Reflect Existing Power Structures: Market prices and allocations reflect not just individual preferences but also pre-existing distributions of wealth and power (Bourdieu, 1986). This can lead to outcomes that are efficient in a technical sense but socially unjust.
Oversimplification of Human Motivation and Behavior:
- Narrow View of Motivation: Reducing human motivation solely to self-interest and material gain is a simplification (Sen, 1987). People are motivated by a range of factors including altruism, fairness, social norms, ethical values, and a sense of purpose beyond personal wealth.
- Limited Understanding of Social Context: NCE often treats economic agents in isolation, neglecting the importance of social context, culture, institutions, and relationships in shaping economic behavior (Granovetter, 1985; North, 1990).
Methodological Limitations:
- Over-Reliance on Mathematical Models: While mathematical models are useful, an over-reliance on them can lead to a disconnect from real-world complexity (Lawson, 1997). Models are simplifications, and if the underlying assumptions are flawed, the models can be misleading.
- Positive vs. Normative Confusion: NCE sometimes blurs the line between positive (descriptive) economics and normative (prescriptive) economics (Myrdal, 1958). What is described by NCE models can be implicitly presented as what should be in terms of policy, without sufficient ethical reflection.

Islamic Economic Model as a Potential Solution to NCE Problems

Core Principles of Islamic Economics:

Ethical and Moral Framework:
- Tawhid (Oneness of God): This central concept shapes the entire worldview (Usmani, 1998).
- Adl (Justice): Justice is a core value, encompassing distributive justice, procedural justice, and social justice (Siddiqi, 1996).
- Maslaha (Public Interest/Welfare): Economic activities should serve the overall public interest and promote the well-being of society as a whole, not just individual self-interest (Al-Shatibi, n.d.).
- Prohibition of Riba (Interest/Usury): A central tenet is the prohibition of interest (riba) (Ibn Taymiyyah, n.d.). This is seen as exploitative and unjust, contributing to inequality and instability.
- Zakat (Mandatory Charity): Zakat is a system of wealth redistribution (Qur’an, 9:60).
- Prohibition of Gharar (Excessive Uncertainty/Speculation) and Maysir (Gambling): These principles aim to curb excessive speculation, gambling, and activities with high levels of uncertainty (Al-Ghazali, n.d.).
Human Behavior and Motivation:
- Beyond “Homo Economicus”: IE recognizes the complexity of human motivation (Naqvi, 2003). While self-interest is acknowledged, it emphasizes that individuals are also motivated by ethical and spiritual values, social responsibility, and a desire to seek God’s pleasure.
- Balance between Material and Spiritual: IE seeks a balance between material well-being and spiritual development (Chapra, 1992).
Role of the Market and Government:
- Market within Ethical Bounds: IE recognizes the role of markets in resource allocation but emphasizes that markets must operate within an ethical and legal framework guided by Islamic principles (Hasanuzzaman, 1995).
- Active Role for Government: Government in an Islamic economic system has a more active role than in laissez-faire NCE models (Kahf, 1989). Its responsibilities include: enforcing ethical and legal frameworks, ensuring justice and equitable distribution of wealth, providing basic needs for all citizens, correcting market failures, and promoting sustainable development.
Focus on Real Economy and Stability:
- Discouraging Speculation and Rent-Seeking: The prohibition of riba, gharar, and maysir aims to discourage excessive speculation and rent-seeking behavior (El-Gamal, 2006), channeling resources towards productive activities in the real economy.
- Emphasis on Productive Investment: IE encourages investment in productive assets that create real goods and services, rather than purely financial speculation (Iqbal & Mirakhor, 2011).
- Financial Stability: Islamic finance is argued to be more resilient to financial crises compared to interest-based systems (Sundararajan & Errico, 2002).

How Islamic Economics Addresses Neoclassical Problems: (This section is based on the principles and problems already discussed and cited above, so specific citations are not repeated here for brevity).

Examples of Islamic Economic Solutions in Practice:

Islamic Banking and Finance: Offers alternatives to conventional interest-based banking (Iqbal & Mirakhor, 2007).
Zakat Institutions: In some Muslim-majority countries, Zakat collection and distribution systems are established to alleviate poverty (Kahf, 1989).
Waqf (Charitable Endowments): Historically and in some contemporary contexts, Waqf institutions have played a significant role in providing public services (Cizakca, 2000).
Ethical Investment and Socially Responsible Finance: Islamic finance principles naturally align with ethical and socially responsible investment approaches (AAOIFI, various standards; IFSB, various reports).

Important Considerations and Nuances:

Diversity within Islamic Economics: Like any school of thought, there is diversity and debate within Islamic Economics regarding interpretations and implementation of principles.
Practical Implementation Challenges: Translating Islamic economic principles into practical policies and institutions in diverse modern economies can be complex and requires ongoing research and development.
Comparisons and Integration: Some scholars explore potential for integration and synthesis between aspects of Neoclassical Economics and Islamic Economics, rather than seeing them as completely mutually exclusive.
Effectiveness in Real-World Scenarios: The real-world effectiveness of Islamic economic models is still being studied and debated. Empirical evidence on the performance of Islamic financial institutions and economies operating under Islamic principles is growing.
Not a Panacea: Islamic Economics is not presented as a utopian solution to all economic problems. It is an alternative framework with its own strengths, weaknesses, and challenges.

Conclusion:

Embedding ethical and moral values into economic analysis and decision-making.
Broadening the understanding of human motivation beyond narrow self-interest.
Emphasizing justice, social welfare, and sustainability.
Offering alternatives to interest-based finance to promote stability and equitable resource allocation.
Advocating for a more active role of government in ensuring justice and public interest.

References:

AAOIFI. (Various years). Standards for Islamic Financial Institutions. Accounting and Auditing Organization for Islamic Financial Institutions.
Akerlof, G. A. (1970). The Market for “Lemons”: Quality Uncertainty and the Market Mechanism. The Quarterly Journal of Economics, 84(3), 488–500.
Al-Ghazali, A. H. M. (n.d.). Ihya Ulum al-Din (Revival of Religious Sciences).
Al-Shatibi, A. I. M. (n.d.). Al-Muwafaqat fi Usul al-Sharia.
Baumol, W. J., & Oates, W. E. (1988). The Theory of Environmental Policy. Cambridge University Press.
Bourdieu, P. (1986). The Forms of Capital. In J. Richardson (Ed.), Handbook of Theory and Research for the Sociology of Education (pp. 241–258). Greenwood Press.
Chapra, M. U. (1992). Islam and Economic Development: A Strategy for Development with Justice and Equity. Islamic Research Institute, International Islamic University.
Chapra, M. U. (2008). The Islamic Vision of Development in the Light of Maqasid al-Shari’ah. Islamic Research Institute, International Islamic University.
Cizakca, M. (2000). A History of Philanthropic Foundations: The Islamic World From the Seventh Century to the Present. Bogazici University Press.
Coase, R. H. (1960). The Problem of Social Cost. Journal of Law and Economics, 3, 1–44.
Daly, H. E. (1996). Beyond Growth: The Economics of Sustainable Development. Beacon Press.
Debreu, G. (1959). Theory of Value: An Axiomatic Analysis of Economic Equilibrium. Yale University Press.
El-Gamal, M. A. (2006). Islamic Finance: Law, Economics, and Practice. Cambridge University Press.
Etzioni, A. (1988). The Moral Dimension: Toward a New Economics. Harvard University Press.
Friedman, M. (1953). The Methodology of Positive Economics. In M. Friedman (Ed.), Essays in Positive Economics (pp. 3–43). University of Chicago Press.
Friedman, M. (1962). Capitalism and Freedom. University of Chicago Press.
Georgescu-Roegen, N. (1971). The Entropy Law and the Economic Process. Harvard University Press.
Granovetter, M. (1985). Economic Action and Social Structure: The Problem of Embeddedness. American Journal of Sociology, 91(3), 481–510.
Hasanuzzaman, S. M. (1995). Readings in Islamic Economic Thought. Islamic Research Institute, International Islamic University.
Hayek, F. A. (1948). Individualism and Economic Order. University of Chicago Press.
Ibn Taymiyyah, T. A. D. (n.d.). Majmu’ al-Fatawa.
IFSB. (Various years). Islamic Financial Services Board Stability Report. Islamic Financial Services Board.
Iqbal, Z., & Mirakhor, A. (2007). An Introduction to Islamic Finance. John Wiley & Sons.
Iqbal, Z., & Mirakhor, A. (2011). Economic Development and Islamic Finance. World Bank Publications.
Jevons, W. S. (1871). The Theory of Political Economy. Macmillan and Co.
Kahf, M. (1989). The Islamic Economy: Analytical Study and Comparative System. Plainfield, IN: Muslim Students’ Association of the United States and Canada.
Kahneman, D. (2011). Thinking, Fast and Slow. Farrar, Straus and Giroux.
Khan, M. F. (1984). Essays in Islamic Economics. Islamic Foundation.
Kindleberger, C. P. (1978). Manias, Panics, and Crashes: A History of Financial Crises. Macmillan.
Lawson, T. (1997). Economics and Reality. Routledge.
Marshall, A. (1890). Principles of Economics. Macmillan.
Mill, J. S. (1836). On the Definition of Political Economy; and on the Method of Investigation Proper to It. London and Westminster Review, 6(2), 293-305.
Minsky, H. P. (1986). Stabilizing an Unstable Economy. Yale University Press.
Myrdal, G. (1958). Value in Social Theory: A Selection of Essays on Methodology. Routledge & Kegan Paul.
Naqvi, S. N. H. (2003). Perspectives on Morality and Development: A Distributive Justice Approach. Edward Elgar Publishing.
North, D. C. (1990). Institutions, Institutional Change and Economic Performance. Cambridge University Press.
Pareto, V. (1906). Manuale di economia politica con una introduzione alla scienza sociale. Società Editrice Libraria.
Pigou, A. C. (1920). The Economics of Welfare. Macmillan.
Piketty, T. (2014). Capital in the Twenty-First Century. Belknap Press of Harvard University Press.
Qur’an. (9:60). (Translation and interpretation may vary).
Samuelson, P. A. (1954). The Pure Theory of Public Expenditure. The Review of Economics and Statistics, 36(4), 387–389.
Sandel, M. J. (2012). What Money Can’t Buy: The Moral Limits of Markets. Farrar, Straus and Giroux.
Schumpeter, J. A. (1954). History of Economic Analysis. Oxford University Press.
Sen, A. (1987). On Ethics and Economics. Basil Blackwell.
Sen, A. (1999). Development as Freedom. Oxford University Press.
Siddiqi, M. N. (1996). Role of the State in Islamic Economy. Islamic Foundation.
Simon, H. A. (1957). Models of Man: Social and Rational; Mathematical Essays on Rational Human Behavior in a Social Setting. John Wiley & Sons.
Smith, A. (1776). An Inquiry into the Nature and Causes of the Wealth of Nations. W. Strahan and T. Cadell.
Stiglitz, J. E. (2010). Freefall: America, Free Markets, and the Sinking of the World Economy. W. W. Norton & Company.
Sundararajan, V., & Errico, L. (2002). Islamic Financial Institutions and Products in the Global Financial System. International Monetary Fund.
Thaler, R. H., & Sunstein, C. R. (2008). Nudge: Improving Decisions About Health, Wealth, and Happiness. Yale University Press.
Tversky, A., & Kahneman, D. (1974). Judgment under Uncertainty: Heuristics and Biases. Science, 185(4157), 1124–1131.
Usmani, M. T. (1998). An Introduction to Islamic Finance. Idara Isha’at-e-Diniyat.
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Memahami Ekonomi Neoklasik (ENK)

Ekonomi Neoklasik (ENK) merupakan aliran pemikiran dominan dalam ekonomi moden. Ia muncul pada akhir abad ke-19 sebagai penambahbaikan kepada ekonomi klasik (Schumpeter, 1954). Ia dibina atas set andaian dan konsep teras yang membentuk cara ahli ekonomi menganalisis dan memahami fenomena ekonomi.

Konsep Teras Ekonomi Neoklasik:

Rasionaliti dan Pemaksimuman:
- Homo Economicus: ENK mengandaikan individu adalah ejen ekonomi rasional (sering dipanggil “homo economicus”) (Mill, 1836). Ini bermakna mereka mementingkan diri sendiri, konsisten dalam pilihan mereka, dan membuat keputusan untuk memaksimumkan utiliti (kepuasan) atau keuntungan mereka (Friedman, 1953).
- Pemaksimuman Utiliti (Pengguna): Pengguna bertujuan untuk memaksimumkan kepuasan mereka berdasarkan kekangan belanjawan mereka (Jevons, 1871). Mereka menimbang kos dan faedah serta memilih kombinasi barangan dan perkhidmatan yang memberikan mereka tahap kebahagiaan tertinggi.
- Pemaksimuman Keuntungan (Firma): Firma bertujuan untuk memaksimumkan keuntungan mereka (Marshall, 1890). Mereka membuat keputusan pengeluaran dan pelaburan berdasarkan analisis kos-faedah, berusaha untuk mengeluarkan pada kos terendah dan menjual pada harga tertinggi.
Keseimbangan dan Kecekapan Pasaran:
- Penawaran dan Permintaan: ENK menekankan peranan penawaran dan permintaan dalam menentukan harga dan memperuntukkan sumber dalam pasaran (Walras, 1874). Harga menyesuaikan diri untuk menyeimbangkan penawaran dan permintaan.
- Kecekapan Pasaran: Dalam keadaan ideal, ENK mengandaikan bahawa pasaran bebas membawa kepada kecekapan peruntukan (Pareto, 1906). Ini bermakna sumber diperuntukkan kepada penggunaan yang paling bernilai, dan adalah mustahil untuk menjadikan seseorang lebih baik tanpa memburukkan keadaan orang lain (kecekapan Pareto).
- Tangan Halimunan (Invisible Hand): Konsep Adam Smith adalah teras. Usaha individu untuk kepentingan diri dalam pasaran bebas, dipandu oleh “tangan halimunan” mekanisme harga, membawa kepada hasil yang diingini secara sosial (Smith, 1776).
Individualisme Metodologi:
- ENK memberi tumpuan kepada tingkah laku ejen individu sebagai blok binaan asas analisis ekonomi (Hayek, 1948). Fenomena makroekonomi dilihat sebagai pengagregatan keputusan individu.
Penekanan pada Pemodelan Matematik:
- ENK sangat bergantung pada model matematik, persamaan, dan analisis statistik untuk menggambarkan dan meramalkan tingkah laku ekonomi (Debreu, 1959). Ini memberikan pendekatan yang nampaknya teguh dan objektif terhadap analisis ekonomi.
Peranan Kerajaan yang Terhad:
- Disebabkan kepercayaan pada kecekapan pasaran, ENK secara amnya menyokong campur tangan kerajaan yang terhad dalam ekonomi (Friedman, 1962). Peranan kerajaan sering dilihat sebagai terutamanya tertumpu pada: menguatkuasakan hak harta dan kontrak, menyediakan barangan awam, dan membetulkan kegagalan pasaran (Pigou, 1920).

Masalah dengan Ekonomi Neoklasik

Walaupun pengaruhnya, Ekonomi Neoklasik menghadapi kritikan yang signifikan dan telah menunjukkan batasan dalam menjelaskan dan menangani masalah ekonomi dunia nyata. Berikut adalah beberapa isu utama:

Andaian Tidak Realistik tentang Rasionaliti:
- Ekonomi Tingkah Laku: Penyelidikan selama beberapa dekad dalam ekonomi tingkah laku telah menunjukkan bahawa manusia tidak semestinya rasional sepenuhnya seperti yang diandaikan oleh ENK (Kahneman, 2011; Tversky & Kahneman, 1974; Thaler & Sunstein, 2008). Kita terdedah kepada bias kognitif, emosi, dan heuristik yang membawa kepada penyimpangan yang dapat diramal dari membuat keputusan rasional.
- Rasionaliti Terhad (Bounded Rationality): Herbert Simon berhujah untuk “rasionaliti terhad,” mengakui bahawa individu mempunyai maklumat, kemampuan kognitif, dan masa yang terhad, menjadikan tingkah laku yang benar-benar memaksimumkan mustahil (Simon, 1957). Kita “memuaskan” dan bukannya memaksimumkan, memilih penyelesaian yang “cukup baik”.
Mengabaikan Pertimbangan Etika dan Sosial:
- Fokus pada Kecekapan Berbanding Kesaksamaan: ENK terutamanya menumpukan pada kecekapan peruntukan tetapi sering mengabaikan kesaksamaan pengagihan dan kebimbangan etika (Sen, 1999). Hasil pasaran boleh menjadi sangat tidak sama rata, walaupun ia dianggap “cekap” dalam pengertian Pareto.
- Individualisme vs. Kebajikan Sosial: Penekanan pada individualisme metodologi boleh membayangi kepentingan kohesi sosial, kesejahteraan masyarakat, dan nilai etika dalam sistem ekonomi (Etzioni, 1988).
- Komodifikasi Segala-galanya: Rangka kerja ENK boleh membawa kepada pandangan bahawa segala-galanya boleh dikomodifikasi dan tertakluk kepada kuasa pasaran, berpotensi mengabaikan batasan moral dan nilai perkara yang tidak mudah diberi harga (seperti sumber semula jadi, hubungan, atau warisan budaya) (Sandel, 2012).
Kegagalan dan Ketidakstabilan Pasaran:
- Ketidaksempurnaan Pasaran Dunia Nyata: Keadaan ideal untuk kecekapan pasaran jarang wujud dalam realiti. Pasaran terdedah kepada ketidaksempurnaan, asimetri maklumat (Akerlof, 1970), eksternaliti (Coase, 1960; Baumol & Oates, 1988), dan masalah barangan awam (Samuelson, 1954).
- Ketidakstabilan Kewangan dan Krisis: Model ENK sering bergelut untuk menjelaskan gelembung kewangan, kejatuhan, dan risiko sistemik (Minsky, 1986; Kindleberger, 1978). Krisis kewangan 2008 menyoroti batasan ENK dalam meramalkan dan mencegah kejadian tersebut (Stiglitz, 2010).
- Kemerosotan Alam Sekitar: Tumpuan ENK pada pertumbuhan pengeluaran dan penggunaan dalam rangka kerja yang sempit boleh membawa kepada pengabaian eksternaliti alam sekitar (Daly, 1996; Georgescu-Roegen, 1971). Pasaran yang tidak terkawal boleh memberi insentif penggunaan sumber yang tidak mampan dan pencemaran, yang membawa kepada kemerosotan alam sekitar.
Mengabaikan Dinamik Kuasa dan Ketidaksamaan:
- Pengagihan Kekayaan dan Kuasa yang Tidak Sama Rata: Model ENK sering menganggap individu mempunyai kuasa pasaran yang sama, tetapi dalam realiti, kekayaan, pendapatan, dan kuasa politik diagihkan secara tidak merata (Piketty, 2014). Ketidaksamaan ini boleh mempengaruhi hasil pasaran dengan ketara dan mengekalkan ketidaksamaan selanjutnya.
- Hasil Pasaran Mencerminkan Struktur Kuasa Sedia Ada: Harga dan peruntukan pasaran mencerminkan bukan sahaja pilihan individu tetapi juga pengagihan kekayaan dan kuasa sedia ada (Bourdieu, 1986). Ini boleh membawa kepada hasil yang cekap dalam pengertian teknikal tetapi tidak adil dari segi sosial.
Penyederhanaan Motivasi dan Tingkah Laku Manusia:
- Pandangan Motivasi yang Sempit: Mengurangkan motivasi manusia semata-mata kepada kepentingan diri dan keuntungan material adalah penyederhanaan (Sen, 1987). Orang ramai didorong oleh pelbagai faktor termasuk altruisme, keadilan, norma sosial, nilai etika, dan rasa tujuan di luar kekayaan peribadi.
- Pemahaman Konteks Sosial yang Terhad: ENK sering melayan ejen ekonomi secara terasing, mengabaikan kepentingan konteks sosial, budaya, institusi, dan hubungan dalam membentuk tingkah laku ekonomi (Granovetter, 1985; North, 1990).
Batasan Metodologi:
- Terlalu Bergantung pada Model Matematik: Walaupun model matematik berguna, terlalu bergantung padanya boleh membawa kepada pemutusan hubungan daripada kerumitan dunia nyata (Lawson, 1997). Model adalah penyederhanaan, dan jika andaian asasnya cacat, model boleh mengelirukan.
- Kekeliruan Positif vs. Normatif: ENK kadang-kadang mengaburkan garis antara ekonomi positif (deskriptif) dan ekonomi normatif (preskriptif) (Myrdal, 1958). Apa yang digambarkan oleh model ENK boleh dibentangkan secara implisit sebagai apa yang sepatutnya dari segi dasar, tanpa refleksi etika yang mencukupi.

Model Ekonomi Islam sebagai Penyelesaian Potensi kepada Masalah ENK

Ekonomi Islam (EI) muncul sebagai paradigma yang berbeza yang menawarkan penyelesaian berpotensi kepada beberapa masalah yang berkaitan dengan Ekonomi Neoklasik. Penting untuk difahami bahawa EI bukan hanya tentang menerapkan prinsip Islam kepada ENK, tetapi sering mewakili pandangan dunia dan set keutamaan yang berbeza secara asas (Chapra, 2008; Khan, 1984).

Prinsip Teras Ekonomi Islam:

Rangka Kerja Etika dan Moral:
- Tawhid (KeEsaan Allah): Konsep utama ini membentuk keseluruhan pandangan dunia (Usmani, 1998). Ia membayangkan pertanggungjawaban kepada Allah, rasa amanah ke atas sumber, dan saling berkaitan semua aspek kehidupan.
- Adl (Keadilan): Keadilan adalah nilai teras, merangkumi keadilan distributif, keadilan prosedural, dan keadilan sosial (Siddiqi, 1996). Ia menekankan kesaksamaan, ekuiti, dan mencegah eksploitasi.
- Maslahah (Kepentingan/Kebajikan Awam): Aktiviti ekonomi harus berkhidmat untuk kepentingan awam keseluruhan dan mempromosikan kesejahteraan masyarakat secara keseluruhan, bukan hanya kepentingan diri individu (Al-Shatibi, n.d.).
- Larangan Riba (Faedah/Usury): Prinsip utama adalah larangan riba (faedah/bunga) (Ibn Taymiyyah, n.d.). Ini dilihat sebagai eksploitatif dan tidak adil, menyumbang kepada ketidaksamaan dan ketidakstabilan.
- Zakat (Derma Wajib): Zakat adalah sistem pengagihan semula kekayaan (Al-Quran, 9:60).
- Larangan Gharar (Ketidakpastian/Spekulasi Berlebihan) dan Maysir (Perjudian): Prinsip-prinsip ini bertujuan untuk membendung spekulasi berlebihan, perjudian, dan aktiviti dengan tahap ketidakpastian yang tinggi yang boleh memudaratkan ekonomi sebenar (Al-Ghazali, n.d.).
Tingkah Laku dan Motivasi Manusia:
- Melangkaui “Homo Economicus”: EI menyedari kerumitan motivasi manusia (Naqvi, 2003). Walaupun kepentingan diri diakui, ia menekankan bahawa individu juga didorong oleh nilai etika dan rohani, tanggungjawab sosial, dan keinginan untuk mencari keredaan Allah.
- Keseimbangan antara Material dan Rohani: EI mencari keseimbangan antara kesejahteraan material dan perkembangan rohani (Chapra, 1992). Aktiviti ekonomi tidak seharusnya hanya tertumpu pada pengumpulan material tetapi juga harus menyumbang kepada pertumbuhan rohani peribadi dan masyarakat.
Peranan Pasaran dan Kerajaan:
- Pasaran dalam Batasan Etika: EI mengiktiraf peranan pasaran dalam peruntukan sumber tetapi menekankan bahawa pasaran mesti beroperasi dalam rangka kerja etika dan undang-undang yang dipandu oleh prinsip Islam (Hasanuzzaman, 1995).
- Peranan Aktif untuk Kerajaan: Kerajaan dalam sistem ekonomi Islam mempunyai peranan yang lebih aktif daripada dalam model ENK laissez-faire (Kahf, 1989). Tanggungjawabnya termasuk: menguatkuasakan rangka kerja etika dan undang-undang, memastikan keadilan dan pengagihan kekayaan yang saksama, menyediakan keperluan asas untuk semua warganegara, membetulkan kegagalan pasaran, dan mempromosikan pembangunan mampan.
Fokus pada Ekonomi Sebenar dan Kestabilan:
- Tidak Menggalakkan Spekulasi dan Mencari Sewa (Rent-Seeking): Larangan riba, gharar, dan maysir bertujuan untuk tidak menggalakkan spekulasi berlebihan dan tingkah laku mencari sewa (El-Gamal, 2006), menyalurkan sumber daya ke arah aktiviti produktif dalam ekonomi sebenar.
- Penekanan pada Pelaburan Produktif: EI menggalakkan pelaburan dalam aset produktif yang mencipta barangan dan perkhidmatan sebenar, dan bukannya spekulasi kewangan semata-mata (Iqbal & Mirakhor, 2011).
- Kestabilan Kewangan: Kewangan Islam, berdasarkan perkongsian untung dan rugi serta pembiayaan berasaskan aset, dikatakan lebih berdaya tahan terhadap krisis kewangan berbanding sistem berasaskan faedah (Sundararajan & Errico, 2002).

Bagaimana Ekonomi Islam Menangani Masalah Neoklasik: (Bahagian ini berdasarkan prinsip dan masalah yang telah dibincangkan dan dipetik di atas, jadi petikan khusus tidak diulang di sini untuk ringkasnya).

Masalah ENK	Penyelesaian Ekonomi Islam
Andaian Rasionaliti Tidak Realistik	Mengakui rasionaliti terhad dan emosi manusia; mengintegrasikan motivasi etika dan rohani.
Mengabaikan Pertimbangan Etika dan Sosial	Menanamkan etika dan moral sebagai prinsip teras; mengutamakan keadilan, kebajikan sosial, dan kepentingan awam (Maslahah).
Kegagalan dan Ketidakstabilan Pasaran	Peranan kerajaan yang aktif dalam peraturan dan pembetulan kegagalan pasaran; tidak menggalakkan spekulasi (gharar, maysir); larangan riba bertujuan untuk kestabilan kewangan.
Mengabaikan Dinamik Kuasa dan Ketidaksamaan	Sistem Zakat untuk pengagihan semula kekayaan; penekanan pada keadilan distributif (Adl); prinsip terhadap eksploitasi; fokus pada memenuhi keperluan asas semua.
Penyederhanaan Motivasi Manusia	Pandangan motivasi manusia yang lebih luas melangkaui kepentingan diri; menggabungkan motivasi etika, rohani, dan sosial; menekankan keseimbangan antara kesejahteraan material dan rohani.
Batasan Metodologi	Menggabungkan analisis kuantitatif dan kualitatif; asas etika dan falsafah menyediakan rangka kerja yang lebih luas di luar model matematik semata-mata; fokus pada impak dunia nyata.

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Contoh Penyelesaian Ekonomi Islam dalam Praktik:

Perbankan dan Kewangan Islam: Menawarkan alternatif kepada perbankan konvensional berasaskan faedah, menggunakan perkongsian untung dan rugi, pembiayaan berasaskan aset (Murabahah, Ijarah, Sukuk), dan prinsip pelaburan etika (Iqbal & Mirakhor, 2007).
Institusi Zakat: Di beberapa negara majoriti Muslim, sistem kutipan dan pengagihan Zakat ditubuhkan untuk mengurangkan kemiskinan dan menyokong kebajikan sosial (Kahf, 1989).
Wakaf (Endowmen Amal): Dari segi sejarah dan dalam beberapa konteks kontemporari, institusi Wakaf telah memainkan peranan penting dalam menyediakan perkhidmatan awam, pendidikan, dan sokongan sosial (Cizakca, 2000).
Pelaburan Etika dan Kewangan Bertanggungjawab Sosial: Prinsip kewangan Islam secara semula jadi sejajar dengan pendekatan pelaburan etika dan bertanggungjawab sosial, memfokuskan pada pelaburan yang halal (dibenarkan), beretika, dan menyumbang kepada kebaikan sosial (AAOIFI, pelbagai piawaian; IFSB, pelbagai laporan).

Cabaran dan Pertimbangan yang perlu diberi antisipasi dalam melaksanakan Ekonomi Islam:

Kepelbagaian dalam Ekonomi Islam: Seperti lain-lain aliran pemikiran, kita tidak dapat lari dari kepelbagaian pendapat dan perdebatan dalam Ekonomi Islam berkaitan dengan tafsiran dan pelaksanaan prinsip-prinsipnya.
Cabaran Pelaksanaan Secara Praktikal: Bagi menterjemahkan serta menerapkan prinsip-prinsip ekonomi Islam dari bentuk teori ke bentuk yang praktikal amatalah kompleks yang mana ia memerlukan kepada proses penyelidikan serta pembangunan yang berterusan.
Perbandingan dan Integrasi: Melihat kepada hakikat penggunaan meluas Ekonomi Neoklasik di dunia ketika ini, majoriti sarjana ekonomi Islam meneroka potensi untuk menggabungkan serta mensintesiskan aspek-aspek Ekonomi Neoklasik dan Ekonomi Islam, namun masih ada antaranya yang menganggap ia sebagai sesuatu yang tetap bertentangan dengan syariat Islam.
Keberkesanan dalam Senario Dunia Sebenar: Keberkesanan model ekonomi Islam dalam dunia sebenar masih dikaji dan diperdebatkan. Bukti empirikal mengenai prestasi institusi kewangan dan ekonomi Islam yang beroperasi di bawah prinsip-prinsip Islam semakin berkembang.

Kesimpulan:

Ekonomi Neoklasikal menghadapi kritikan yang ketara disebabkan oleh andaian yang tidak realistik, mengabaikan pertimbangan etika, serta keterbatasannya dalam menangani isu-isu dunia sebenar seperti ketidaksamaan, ketidakstabilan, dan kemerosotan alam sekitar.

Ekonomi Islam menawarkan paradigma yang berbeza, berasaskan prinsip etika dan moral yang berpandukan ajaran Islam. Ia muncul sebagai penyelesaian berpotensi terhadap pelbagai masalah yang dikaitkan dengan Ekonomi Neoklasikal dengan:

Mengintegrasikan nilai etika dan moral dalam analisis serta pembuatan keputusan ekonomi.
Memperluas pemahaman mengenai motivasi manusia melangkaui kepentingan diri yang sempit.
Menekankan keadilan, kesejahteraan sosial, dan kelestarian.
Menawarkan alternatif kepada sistem kewangan berasaskan riba bagi mempromosikan kestabilan serta pengagihan sumber yang lebih adil.
Menggalakkan peranan kerajaan yang lebih aktif dalam memastikan keadilan dan kepentingan awam.

Walaupun Ekonomi Islam juga mempunyai cabaran tersendiri dan masih berkembang dalam aplikasi praktikalnya, ia menyediakan perspektif alternatif yang bernilai serta satu wacana pemikiran yang semakin berkembang, yang mampu menyumbang kepada sistem ekonomi yang lebih adil, beretika, dan stabil. Adalah penting untuk mendekati kedua-dua Ekonomi Neoklasikal dan Ekonomi Islam dengan pemahaman yang kritis dan mendalam, mengiktiraf kekuatan serta keterbatasannya, serta terus terlibat dalam dialog dan penyelidikan bagi mencari jalan terbaik untuk kesejahteraan ekonomi manusia.