8 TECHNICAL ASPECTS The difference between constrained and restrained decision

8 technical aspects the difference between

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TECHNICAL ASPECTS The difference between constrained and restrained decision-making=> Restrained is concerned with our internal mechanism. For example, the Islamic consumer chooses not to consume haram items. Include tools and methods for precise solutions to constrained optimizations Example: Profit maximization in conventional economics: MR=MC In IE, profit maximization vs. maslahah maximization 9
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SHARI’AH PRINCIPLES OF RESOURCE ALLOCATION 10
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PRINCIPLES 1.Mechanis m 2.Agents of decision making 3.Rules of the game 4.Market structure 5.Role of the state 11
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PRINCIPLES 1.Mechanism : Could be market signals, or plan directives 2.Agents of decision making : Primarily individuals; but, government may intervene so that no transgression of limits set by Islam The Islamic rules of the game apply to demand and supply. They are based on the vision which sees individual to be responsible for the failure in society’s effort. 12
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PRINCIPLES 3.Rules of the game : Derived from vision: individual ultimately responsible for failure of community’s collective effort Demand and supply will follow shari’ah requirements for instance, no supply of haram goods and services . This will ensure that the prices determined by market forces are just. State may intervene in case market monopoly. 13
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PRINCIPLES 4. Market structure Market preferred; not laissez-faire [leave to do (by itself)] though 2 components: 1. Freedom : -individual bears ultimate responsibility for collective actions of society -free entry-exit, market information, no monopolistic element 14
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PRINCIPLES 2.Cooperation : -freedom expressed more in cooperation rather than competition: “…Help you one another in al-birr and at-taqwa (virtue, righteousness and piety); but do not help one another in sin and transgression. And fear Allah. Verily, Allah is severe in punishment.” (Al-Maidah: 2) 15
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PRINCIPLES 2.Cooperation : Trade openness is favoured: O mankind! We have created you from a male and a female, and made you into nations and tribes, that you may know one another. Verily, the most honourable of you with Allah is that who has at-taqwa . Verily, Allah is All- Knowing, All-Aware. (Al-Hujurat: 13) Multiple examples in Islamic legacy including during Prophet’s times and post-Muhammad periods eg. ‘international bazaar’ in Makkah during haj and ‘ umrah seasons. 16
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PRINCIPLES 2. Cooperation - However, Islam encourages healthy competition in matter of virtue. “… So hasten towards all that is good.” (Al-Baqarah: 148) E.g. the companions used to compete on matters bringing wider social benefits. - Positive and proactive actions are embedded to ensure cooperation: - application of fard kifayah concept - establishment of compulsory and voluntary institutions for redistribution of income and wealth 17
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PRINCIPLES 5. Role of State Play positive and complementary role to ensure rules of the game prevail Act as regulator to ensure adl (justice) and ihsan (benevolence) Ensure minimum standard of living (fulfillment of basic needs) Reduce concentration of wealth through zakat and fara’id 18
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