L4: Critical Lessons for the Way Forward

This lecture explores the unique approach of Islamic economics as a moral alternative to capitalist economics, emphasizing long-term social change through Ibn Khaldun’s concept of Umran. It critiques Western social sciences for their secular, deterministic foundations, shaped by Newtonian laws and materialism, which ignore the moral and metaphysical dimensions crucial in Islamic thought. The lecture highlights the importance of grounding policies for social change in historical realities, class dynamics, and moral values, with the ultimate goal of striving for Ahsan-e-Amal (the best of deeds) to create a just and spiritually aligned society.

1. GRADE 03: Islamic Economics: the Polar Opposite of Capitalist Economics Lecture 4: Critical Lessons for the Way Forward. Download THESE slides from: bit.ly/IE2024L4

2. قُلْ هَلْ يَسْتَوِي الَّذِينَ يَعْلَمُونَ وَالَّذِينَ لَا يَعْلَمُونَ ۗ إِنَّمَا يَتَذَكَّرُ أُولُو الْأَلْبَابِ Say, 'Are those who know equal to those who do not know?' Only they will remember [who are] people of understanding.

3. Critical Lessons for the Way Forward Session #:4 The Polar Opposite of Capitalism with Asad Zaman Islamic Economics: GRADE COURSE Fonts : EB Garamond Montserrat - Normal - Medium - Semi Bold - Bold 17 Aug - 5 Oct 2024 Every Saturday

4. Critical Lessons for the Way Forward Dr. Asad Zaman

5. How to wage war on battlefield of knowledge?

6. Ibn-e-Khaldun’s Unique Methodology Ibn Khaldun was the founder of a unique approach to history. This approach provides us with the basis and foundations for a new approach to the entire body of the social sciences. Central to Ibn Khaldun’s approach was the concept of Umran: people living together, in cities. This approach is so unique, and so different from anything which currently exists in Western Social Science, that it is useful to call it Uloom-ul-Umran, to differentiate it, and to honor its inventor. Uloom-ul-Umran: Islamic Approach to Humanities : bit.ly/AZUUU

7. Basics of Uloom ul Umran UUU: Study of long-term causes of social change Contrast: Economics studies equilibrium – no change. Central to UUU is the idea that societies are always in process of change. Contrast: Short-term factors are easy to observe and understand. Deeper underlying causes of long-term change spanning centuries, rise and fall of empires, cannot be analyzed by focusing on historical events: X occurred, then Y occurred, and then Z occurred. UUU: As societies change, driven by underlying factors, social, economic, and political structures change. These changes create changes in social theories, which co-evolve with societies.

8. Entanglement: All social theory is produced by scholars studying a particular society. Since societies are continuously changing and evolving, to understand social theory, we must know the historical and societal context which generated that theory. Theories CANNOT be understood as universal laws valid across time and space. Humans actively produce social change by using their scholarly theories to suggest policies to guide ongoing social change in directions favorable to their class interests. Thus, social theory is directly involved in creating social change.

9. Historical Experiences of Past Century In Orientalism, Edward Said writes that about 85% of the globe was colonized by the early 20 th Century. The two World Wars between European Powers were enormously destructive. More than 100 Million died as a result of direct and indirect effects of these wars. The Youth, Armies, and Power of European Colonizers were depleted. The USA made plans to take over world leadership from UK, but practiced a very different brand of Imperialism.

10. Critical Lesson #1Social Theories cannot be understood outside their historical context. Thoughts/Ideas are generated within a historical context. Meta-thinking is essential for understanding. We cannot understand thoughts without understanding the historical context within with they are created. This appears to conflict with the idea of universal validity of the lessons of the Quran. Resolution lies in understanding that the Quran provides us with META-Knowledge. Specific Knowledge must also be uplifted to meta status

11. CL #2 Policies for Social Change MUST be guided by theories A policy prescribes actions we must undertake, in order to produce desirable change. What will the effect on an action be on a society? To answer this question, we must have a theory of the dynamics of that society – the factors which govern social change. By manipulating these factors (if we have the right theory), we can create social change. Having the wrong theory, manipulating the wrong factors, getting the wrong results is VERY COMMON throughout history. Fighting the Last Battle : Very Common, Almost unavoidable!

12. CL #3: Drivers of Social Change Social Classes (united by Asabiyya or social cohesion factors). Theories (often wrong) generated by social classes to understand change. Class Struggle and Power determines which theory is accepted, which policies are enacted, and thereby the direction of further social change. External Circumstances, beyond the control of any of the parties, can also be drivers of social change.

13. Emergence of Western Social Sciences (WSS) Goal of this discussion is to provide students with meta-knowledge: How learning historical origins of knowledge illuminates the substance/contents of that knowledge. We have already discussed Western Social Science, so this discussion will be very brief. For a detailed discussion, see: Zaman, Asad, The Origins of Western Social Sciences (March 11, 2009). Journal of Islamic Economics, Banking and Finance, Vol. 5, No. 2, pp. 9-22, 2009, SSRN: https://ssrn.com/abstract=1357823

14. Illustration of UUU via WSS: Entanglement WSS is a body of knowledge created by European to solve the problem of religious wars. These historical origins lead to deep insights, not available from studying the contents of WSS. It is based on a (false) theory about the cause of religious wars: Religion. How do we know it is false? Because wars continued and increased, even after the successful implementation of solutions based on this theory. How did this false theory shape European history? DEEPLY on many fronts.

15. What do we learn about WSS? Historical context does not DETERMINE the theories chosen to analyze it – WSS is just one of the many possible approaches to understanding and solving the causes of religious wars. It is important to understand the collective agency of human beings in shaping history. The best way to do this is by looking at alternative histories. This is prohibited and proscribed by positivist thought. Historians, influenced by Newton’s Laws, thought that human history was more or less deterministic. This is far from the truth.

16. Alternative Histories: The Paths Not Chosen Emergence of a Peaceful Christianity (Quakers?): Some major influential thought leader in Europe emphasizes peace, and this ethos spreads through populace and rulers. War is barbaric! Political Non-Aggression Pact: Any aggression on any country is considered as an attack on all, and will be countered. Deeper Enlightenment: Kantian philosophies grounded in Christian morality, if popularized and enforced, could create peaceful societies. Economic ties and cooperative progress (as in EEU) can promote peace.

17. What do we learn from Alternative Histories? Human agency: We choose our collective futures, by analyzing the past – in light of theories – and taking actions to create change. Each human choice is free, so there are BILLIONS of alternative futures – the opposite of materialistic determinism. Exploring alternative histories gives us a chance to evaluate the consequences of different kinds of actions – in fact, this is the only method of doing so. Consequences are always multidimensional so choosing among policies is always a subjective preference. Actions vs Outcomes.

18. Deeper Analysis of the Path Chosen Why did WSS take the shape that it did? Abandonment of religion requires replacement by rule-of-law: Hobbes - Leviathan. Historical Experience: Internal Moral Compass remains essential, and cannot be replaced by external regulations. But this takes centuries to observe, because moral drift occurs slowly. Failure 1: Loss of Internal Moral Compass.

19. Influence of Newton’s Laws on WSS Loss of certainties of faith led to search for alternative certainties Newton’s Laws made a spectacular impression on European intellectuals: It was possible to arrive at truth using only observations and reason. Furthermore, this truth was all-encompassing. God is in control of movement of all particles in the universe was replaced by Newton’s Laws control all motion in the universe. This led to the birth of “Naturalism” or the worship of Nature, and the laws of nature were considered to be the force governing the universe.

20. Critical Mistake: Newton’s Laws as Absolute Truth Newton’s Laws are a hypothesis about the universe, based on the observable trajectories of the stars. Like all scientific hypotheses, they are conjectures, ultimately unprovable. Newton worked on absolute space-time. Relativity means that space-time itself is not absolute. Newtons laws are metaphysical. Later, they turned out to be false.

21. The Banishment of Metaphysics & Morality Enlightenment intellectuals wanted to banish religion as metaphysics – going beyond the realm of the observable. Assuming that Newton’s Laws were absolute truths about the universe led to the belief that we can learn everything about the universe just by using observations and logic, without metaphysics. This led to the attempt to ban metaphysics. This effort has been going on since the 17 th Century, and continues to be dominant epistemology. One consequence is banishment of morality – not observable.

22. The Entire Structure of Western Knowledge is built on concealed Metaphysical & Moral Foundations All human knowledge must be built on M&M Foundations. Babies are born with these foundations (not tabula rasa). Developmental psychologists have proven these empirically. Methodology for Winning the War in the Central Battleground: Uncover concealed assumptions, and then reject them. Of course, it is possible that the concealed assumptions are right, in which case we would accept them. But, in social sciences, the rejection of God leads to very unpleasant moral assumptions, in conflict with Islam.

23. Christian => Secular Views on History Christian Views: God’s Plan controls our destiny. All historical events are meaningful part of God’s plan. Sacred History: History is driven by a GOAL: second coming of Christ, and establishment of God’s Kingdom on Earth. Secular Views: Human beings can control and plan the future, to create progress. This overall progress gives meaning to our trials and sufferings. Progress will eventually create Heaven on Earth, with plenty for all, and end of suffering and evil.

24. Understanding, and Self-Liberation: Think of the Opposite Idea. No God’s Plan, and no Laws of History: History is determined by billions of free choices, of all humans. Outcomes are impossible to predict or determine. Our goal is to act correctly. Deontological vs Consequentialist No Kingdom of God on Earth: Kingdom of God was established 1400 years ago. Downhill since then, with upward surges from time to time. Cyclical history with downward long-term trend.

25. Revolutionary Changes in Thinking & Acting Outcomes Oriented Thinking: There are good and bad worldly situations. Our goal is to change the bad to the good. Process Oriented Thinking: All situations – good or bad – are equally tests from God. Our goal is to discover what God wants from us in this situation, and to act upon this knowledge. Success is moment-to-moment and does not depend on achieving goals. If we recognize the order of God, and fulfill it, we have succeeded. If we fail to recognize, and we fail to act, then we have failed the test of this moment.

26. Consumer Theory and Firm Theory Consumers: Utility comes from consumption of goods and services (outcomes). Happiness ( s’aadat ) comes from obedience – from giving to others in need, instead of spending on luxuries. Firms: cannot maximize profits, because profits depend on actions and decisions of so many others. Instead, they use markup pricing. Theory of the JUST price was part of scholastics tradition, abandoned by secular economists. Replaced by theory of mechanically determined price, subject to LAWS of supply and demand.

27. Price Theory is Wrong: But Dominates: WHY? What is price theory? Prices are determined at intersection of supply and demand, and represent equilibrium. If prices are set above or below equilibrium, market forces will move them towards equilibrium. Demand Curve comes from utility maximization theory for consumers – this is wrong. See: Empirical Evidence Against Utility Maximization bit.ly/ WEAbvn Supply Curve comes from profit maximization – this is wrong. The entire theory is based on perfect competition – doesn’t exist.

28. Denial: Alan Blinder "The overwhelmingly bad news here (for economic theory) is that, apparently, only 11 percent of GDP is produced under conditions of rising marginal cost.” p.102, Asking About Prices Baumol & Blinder Microeconomics Textbook, continues to ignore this bad news, and present conventional theory, and state that this has empirical support! WHY? There are many other cases, where the empirical research of the same author contradicts his own ideological theories, and he continues to espouse ideology.

29. We must understand why theories come to dominate, even though they are wrong. Theories are drivers of social change. Power/Knowledge connection works in both directions. Those with power create theories which favor them. If we can change theories, we can change the balance of power. Theories come to dominate, not because they are true, but because they serve the perceived interests of the powerful. ALSO, theories must be crafted to appeal to the masses. This requires deception. One aspect of deception is masking lies in mathematics.

30. Why does S&D price theory dominate? We must look through the theories to the class war. Marxist charge against Capitalists was that they exploit labor. Value is created by labor. Price is a markup over labor cost. Exploitation is the difference between price and wage. This is a normative theory of price. It says that wages are not just. Capitalism offers a mechanical theory of price, determined by impersonal market forces – “objectively”. This is a counter to the Marxist theory, and meant to defend capitalists and capitalism.

31. Both sides are making a moral argument But both sides accept secular principles. So, neither side mentions morality. This makes the arguments extremely confusing. Enormous amounts of self-deception are involved in creating an “objective” theory of social sciences. Puzzles about Quantum Theories, String Theory, and many modern physical problems, arise because of massive confusions about metaphysics. “What is this thing called Science?” Alan Chalmers

32. The Great Debate: Realism vs. Nominalism We infer the existence of unobservable objects, effects, causes, from patterns in what we see. Do these unobservables (like gravity, or God) EXIST in reality? Nominalists say NO – or we cannot say anything about this. Realists say YES – we can talk about these unobservables.

33. The Unrealized Central Problem: The Quest for Certainty Inferences about the unobservables are always (logically) uncertain. We can never provide OBJECTIVE proofs. In Western epistemology, if something is uncertain, it cannot be part of knowledge. At the same time, everyone realizes that a huge part (maybe ALL) of our knowledge is uncertain. Denial of metaphysics means that we deny knowledge going beyond what we can observe, because this is always uncertain. YET: all of science is metaphysical hypotheses, hence uncertain.

34. Islamic Solution: Certainty comes from the HEART, not the MIND. The heart and soul were excluded as sources of knowledge in Western epistemology, for reasons we have discussed. Imam Al-Ghazali was trapped in despair, in his search for certain knowledge, using the senses and logic. It was illumination by the noor of Allah that led to restoration of his faith in observations and logic. Ultimately, in words of Descartes, we can rely on observations and logic ONLY on the premise that “God is not a deceiver”. So ALL knowledge is based on trust in God (a quality of the heart).

35. Weapons for the War of Knowledge ALL of secular knowledge is built on HIDDEN metaphysical and moral foundations. We need to uncover these foundations, assess their plausibility and validity, and replace them if necessary. In general, the physical sciences are built on sound metaphysical foundations (but there are many exceptions). In general, the social sciences are built on toxic moral foundations: individualism, greed, hedonism, competition. All are consequences of denial of God, and reduction of man to an animal.

36. One Example: Scarcity: The Foundation of Modern Economics

37. The Normative Foundations of Scarcity Zaman, Asad, The Normative Foundations of Scarcity (June 1, 2012). Real-World Economics Review, issue no. 61, 26 September 2012, pp. 22-39, Available at SSRN: https://ssrn.com/abstract=1554202 Scarcity is presented as, and appears to be, an objective feature of the world around us. There isn’t enough food for the billions currently living below poverty line. Half of Pakistan is malnourished.

38. Three Normative Principles => Scarcity Western Property Rights. Discipline Boundaries separating Economics from Politics and Psychology. Misconceptions about Human Welfare.

39. Property Rights: Diverse Cherokee Constitution: All land is common property (Islamic: Natural Resources are God’s gift to mankind). Natural: Property is a trust, in our temporary possession, to be used with responsibility, and respect for social obligations. Western: Property belongs exclusively to me, to do with as I please, without any consideration for others. Locke. With first two conceptions of property, there would be no scarcity.

40. Discipline Boundaries How does taste formation occur? Social norms can create taste for luxuries, or distaste for them. A simple life, avoidance of Israf and Tabzeer , would lead to elimination of scarcity. But Capitalism requires Israf and Tabzeer , because it is built on massive overproduction.

41. Misconceptions about Welfare Consumption of Goods and Services provides short term pleasure, but is uncorrelated with long-term welfare. The Coca-Cola theory of happiness is absurd. Similarly for direct electrode stimulation of pleasure centers. Genuine long run welfare is built on two factors: Character Traits: Sabr & Shukr in face of life-events. Social Relationships: A believer loves, and is loved. Once we understand that generosity leads to greater welfare than greed, scarcity can be eliminated. Dickens: A Christmas Tale.

42. History of Ideas: Material Welfare conception of economics was replaced by scarcity in early 20 th Century, by Lionel Robbins. This was the effect of the rise of logical positivism. References to internal states of satisfaction were considered unscientific. Meta-Theory: Scarcity means that we should produce more. Material Welfare means that we should redistribute. Scarcity suits the perceived interests of the small minority of rich and powerful Logical Positivism and Islamic Economics (2013). IJoEMaA , Vol 21, No. 2, pp1-18. IIUMalaysia , https://ssrn.com/abstract=2195043

43. How to Create Social Change? Khaldunian theories of social change and complex, with multiple drivers. A central driver is “class consciousness and cohesion” driven by a sense of common identity. The stronger this sense, and the larger the community, the more powerful this driver becomes. Nations overcame and destroyed City-States, even though they were “Imagined Communities” (Benedict Anderson). Imagining the Ummah as one body is a POWERFUL ideal.

44. Three Dimensional Process for Social Change bit.ly/AZ3DIE An Islamic Approach to Humanities:  https://ssrn.com/abstract=3066267 Positive: Describe the existing on-the-ground realities. Normative: Describe the goals, the ideal and desired situation. Transformative: Act upon strategies to get from here to there.

45. Critical Ignored Principle (Shaykh Chilli ): Change Starts from Where You Are Standard alternative: Destroy everything, and start afresh. This means, no need for the Positive Element – start from zero. The model of walking towards goal. Goal or normative ideal determines the direction to move towards. This can be the North Star (currently unachievable). The Next Step must be CAREFULLY devised with respect to local conditions. These might even require moving away from goal! It is not useful to pay too much attention to the goal. No need to map out the fine details. General Direction is enough.

46. Concluding Dua اللهم ارزقنا علماً نافعاً وعملاً صالحاً، ووفقنا لنكون من الذين يستمعون القول فيتبعون أحسنه، واجعلنا من الذين يسعون للإحسان في الأعمال كما أمرتنا في كتابك الكريم. "O Allah, grant us beneficial knowledge and righteous actions, and enable us to be among those who listen to words and follow the best of them. Make us among those who strive for excellence in deeds, as You have commanded in Your Noble Book.“ Download THESE slides from: bit.ly/IE2024L4