28. Islam, Trade, and Innovation

This chapter provides a discussion on the pervasiveness of innovation, or the lack thereof, at different points of history in the Muslim world. The idea put forth is the interconnection of innovation with trade, and the puzzle is the interruption of the former despite the continuation of the latter in the contemporary world. The first step is to present a brief overview of core Islamic principles that encourage trade but discourage innovation by the inclusion of property right matters in Islamic law. We then look at the historical contribution of trade in uniting the Muslim world and initially triggering innovation and achieving the Islamic Golden Age. Finally, the chapter suggests reasons why innovation eventually came to a halt in Islamic lands, including political economy arguments, tolerance, diversity, and institutions.