Islamic Economics as Mesoscience

The theme of ethico-economics is introduced in terms of the interactive, integrative, and evolutionary learning properties of the epistemology of unity of knowledge. The attenuating methodology yields a unique and universal model of circular causation between the selected complementary variables. The circular causation model conveys the empirical possibility of ethico-economic problem-solving in the context of the epistemology of unity of knowledge. The empirical perspectives of epistemic and economics and the conforming formalism of unity of knowledge open up a vast coverage of policy-theoretic and strategic studies that contest with and provide distinctively different results and their explanations in the framework of heterodox economic theorizing involving ethico-economics.

As claimed often, religion and science, be this in meso-economics and mesoscience, are not in conflict. That is true only if the explanation is based on reasoned analyticity. Indeed, the universal law of monotheistic oneness is unravelled by the signs of God as the ones that are explained in the order and scheme of all things. Such a reasoned unravelling of reality is both by way of abstraction that leads into analytical logical formalism, as it is also phenomenological in explanation, application, empiricism, and sustained continuity across knowledge, space, and time dimensions. The construction of the underlying ontological, epistemological, and phenomenological worldview arises from Tawhid (monotheism) as the universal and unique law. This chapter explains these details.

Islamic economics is a field of mesoscience. What is mesoscience and meso-economics within it? The following excerpts will explain the underlying meaning: “Mesoscience implies there are some underlying principles that can unify different disciplines, and all disciplines may be involved in contributing available disciplinarily specific knowledge at corresponding levels to revealing common principles for meso-scales at all levels. A small change in the angle to view old problems could lead to a big progress in solving them.” [Springer Nature, Engineering (2019). “What is meso-science or mesoscience?” Switzerland.] “Mesoscale herewith refers to a range of scale in between the micro- (element) scale and the macro- (system) scale and, within this range of scale, a characteristic structure exists, namely meso-structure, featuring dynamic heterogeneity in space and time, which is critical to the performance of the system. Parameters at the mesoscale are needed to bridge the mechanism at the element scale to the behavior of the system. The objective of mesoscience is to develop a principle as general as possible to make such a bridge for different levels of disciplines…..” [Huang, W. Li, J. & Edwards, P. (2018). “Mesoscience: exploring the common principle at mesoscales”, Natural Science Review, 5:3, pp. 321–326.] Islamic economics as a scientific field of inquiry embodies in it the moral and material endogenous embedding in the light of the primal ontological law of monotheism conveying unity of knowledge. The mesoscience of this methodological worldview is explained by pervasive complementarities, participation, and symbiotic interrelations between the variables representing the good things of life in the wellbeing criterion cogently explained. The following definition is thereby adopted: “Islamic Economics is neither a microeconomic nor a macroeconomic study framed in these mainstream dichotomies. The moral and ethical foundation of Islamic economics emerges from the possibility of symbiotic inter-causality at the mesoscales of methodology, behaviour, applications, and continuity. Integrated together by methodological abstraction and applications, the resulting mesoscale phenomenological study presents a distinctive methodological worldview of organic unity of knowledge. In the qur’anic terminology this monotheistic worldview is referred to as Tawhid, the universal Law of unity of knowledge in ‘everything’.” [Choudhury, M.A. (2012). “The ‘Tawhidi’ Precept in Science”, in Muzaffar Iqbal (ed.)Studies in the Islam and Science Nexus Volume I, Ashgate, London, Eng.] In regard to its mesoscientific nature, Islamic economics is formally rendered in regards to the endogenous interrelationship between moral values and the legal injunctions that are derived from the Qur’an and the guidance of the Prophet Muhammad (sunnah). These two essences of formalism premise mesoscientific reasoning in the foundational ontological origins of its methodology. The emergent methodology is of the law of oneness explained by symbiotic unity of knowledge of monotheistic oneness. This primal ontology of Islamic economics makes this field a study in participatory endogenous relations in evolutionary learning dynamics of the inter-variable, transdisciplinary, and moral-material interaction and integration as processes of evolutionary learning by inter-causal relations between the variables of the wellbeing criterion. This process, analytical in nature, leads to formulating how the primal monotheistic methodology establishes the emergent analytical method of evaluation (estimation and simulation) of the wellbeing function. This is the formal criterion that explains the endogenous, that is pervasively complementary and participatory inter-causal relations between the multivariate vector of the wellbeing criterion. Islamic economics in this meso-economic category is a vastly interactive field of socio-scientific inquiry. This approach essentially involves moral values and their explained, analytical, conceptual, and quantitative organic embedding of material values by the full study of the wellbeing function. One of the arguments and the theory propounded in Islamic economics is to formalize the principle of avoidance of interest rate (riba) and its replacement by trade. This is a cardinal qur’anic principle. The profit-sharing rate via trade and exchange in the good things of life is provided as the inviolable replacement. The emergent symbiotic relationship between trade and the real economy in the midst of phasing out the rate of interest is shown to be actualized by the force of consciousness of belief causing reasoning by knowledge to induce the process of phasing out interest rate by the profit-sharing rate in an ethicizing market venue. The formal model underlying the phasing out of interest rate and its replacement by the rate of profit as the manifestation of deepening trade is an extensively mesoscientific undertaking. It concerns the ontological conceptualization as methodology leading into the evaluative method of a formalized wellbeing function. This formalism arises from the ontological premise of the fully endogenous participative nature of inter-variable feedback. The vector of selected variables results in multivariate inter-causal relations. Such interrelations take the form of recursive feedback in the light of their endogenous relations linked with the evaluation of the wellbeing function. The wellbeing criterion is ontologically derived from the formalism and dynamics derived from the ontological foundation of the organic unity of knowledge of the monotheistic law (Tawhid). This paper will firstly delineate the methodological theory that emanates from the ontological premise of monotheistic law of unity of knowledge (Tawhid) in the Qur’an and is epistemologically mapped by the prophetic guidance (sunnah) into the world-system. Next, the emergent methodology will be shown to lead to the formulation of the wellbeing criterion, which is evaluated by inter-variable circular causation relations expressed as equations. The emergent model of evaluation of wellbeing criterion with its inter-variable circular causation relations forms the resulting formal meso-economic perspective. The empirical problem of inverse relationship between profit-sharing rate and interest rate (riba) is thereby studied by Islamic financial data from Islamic banks in Malaysia. Pertinent conclusion is then made on the evidence of moral-material endogeneity of the problem of phasing out interest rate by profit-sharing rate by trade in the good things of life for attaining evolutionary learning evaluation of wellbeing substantively defined as a multi-systemic, multivariate evolutionary learning dynamic model premised on monotheistic organism of unity of knowledge.

The ontological worldview of Tawhid as the cardinal Law of unity of knowledge centering in monotheistic organic participatory methodology of the Qur’an is shown to have been evaded from the mind and actions of Islamic banks and their mentor, the Islamic Development Plan (IDB) and its think tank, Islamic Research and Training Institute (IRTI). Thereby the theory and practice of Islamic economics and finance as they must be in the true light of the qur’anic methodological worldview has remained unknown and ungrounded in the entirety of Islamic erudition in the socio-scientific meso-scale of learning. This chapter offers a critique, correction, and revived possibility to the much-needed reformation. Without such essential reformulation of the field of so-called Islamic economics, finance, science, and society, sheer banking on shari’ah and fiqh as human concocted origin, distances qur’anic erudition from the essentiality of Tawhid as the primal ontological law.

The failure of Islamic banks in general that is exemplified by Islamic Bank Bangladesh is pointed out by their absence of any true direction of wellbeing in the Tawhidi sense of methodology of organic unity of theory and application. In the end, Islamic banks as exemplified by the case of Islamic banks Bangladesh, are shown to be capitalist shareholding banks with blind reliance on shari’ah as human concocted jurisdictional approach contrary to the Tawhidi methodological worldview. Consequently, many of the actions by IBBL under the guidance of Islamic Development Bank (IDB) and Organization of Islamic Conferences (OIC) while claiming to be Islamically legitimate are flawed. There remain much room for improvement to know the legitimate understanding in accordance with the Tawhidi law.

The theory and application of wellbeing are substantively different from those of welfare of the neoclassical and social choice theory. The concept of wellbeing has the wider implication in constructing models of social contract out of serious consideration of moral and ethical issues in social construction and development. Yet wellbeing is neither an exclusively microeconomic nor a macroeconomic concept. That is because the individual is considered in respect of his potential within the interactive social milieu. The theory of wellbeing in its multidimensional human-centered development perspective is studied in terms of the human capability and its functioning approach (CF) for attaining or failing to attain human development as human potentiality. The CF-theory has been advanced in the light of Amartya Sen’s learned contribution to this field. In this chapter the CF-theory and its comparison and contrast with the social choice and utilitarian theory of the neoclassical type of welfare criterion is critically examined. Other critical approaches to the study of human wellbeing, as in the case of Islamic theorizing, are examined. Arising from such critical studies the different yet all comprehensive formalization and application of the wellbeing concept is propounded in the form of an analytical model premised on epistemic and ontological foundations of unity of knowledge. This approach treats human wellbeing as being interactively integrated with the physicalist and non-physicalist domains comprising the interaction between capabilities and functioning towards sustaining the moral worldview of a unique and universal law. It is the monotheistic law of unity of knowledge called Tawhid that forms the cardinal foundation of Islamic methodological worldview. An empirical explanation of the emergent model of the wellbeing criterion in the methodological framework of Tawhid is provided to establish the ontological, epistemological, and phenomenological properties of the corresponding meaning of the wellbeing criterion in its epistemic sense.

Wellbeing can be a subjective functional criterion caused by imagined hurt and benefit in an otherwise pure and real exchange economy, despite with dynamic preferences aggregating the endogenous inter-variable causality of microeconomic behavioural nature to aggregate preference system. I refrain from calling such an aggregation as macroeconomic phenomenon, or even as microeconomic foundation of macroeconomics because of the persistent problem of aggregation and the absence of behavioural representation in macroeconomic theory. Thus a mesoeconomics as meso-science approach to investigate the aggregative nature and logic of dynamic preferences is pertinent to the underlying analytical study.

The theory of evolutionary learning organization carries with it rationalist premises as well as behavioural aspects of decision-making that are increasingly becoming centerpiece of organizational decision-making that has significant impact on social preference formation. Indeed, organizational behaviour in such ethico-economic sense is the carrier of conscious attributes and consequences in the social spectrum where markets, institutions, and behavior interact. In this chapter we will study a special kind of a model of interaction that is different from many conventional ones. The primary difference is caused by the endogenous nature of preferences, decision-making, policies and programs in the ethico-economic frame of conscious decisions. Thus, while economic rationality is still the basis of formulating such organizational behavior, ethics is either considered exogenously or explained under the same postulates of economic rationality, bounded though by a certain slack in full-information. In this chapter, evolutionary organizational decision-making is explained as the process of interaction leading to integration, and thereby into incessant processual reproduction of knowledge as consciousness to establish stronger ethico-economic organizational social systems. This involves serious theoretical formalism belonging to behavioural aspects of organizations, institutions, and moral social reconstruction. Thus the goal of a technical meaning of wellbeing is studied. The structure and function of these entities in ethico-economic decision-making are explained.

This paper is a continuation of the recent papers by (Choudhury, ACRN J Finance Risk Perspect, Special Issue Soc Sustain Finance 6:37–52, 2017), (Choudhury, ACRN J Finance Risk Perspect, Special Issue SocSustain Finance 4:63–80, 2015), and (Choudhury and Hoque, J Econ Coop Dev 39:143–162, 2017) on the topic of endogenous nature of money (Choudhury, Money in Islam, Routledge, London, England, 1997) and monetary transmission as micro-money in Islamic financial economics. These papers have projected an Islamic economic theory of endogenous money that pursue the financing of projects in the real economy by bringing such project-specific spending to attain several much wanted goals of economic stability and performance. Among these is the 100% circulation of bank-savings that banks otherwise hold back into the liquid form of spending. A 100% Reserve Requirement Monetary System is maintained in Islamic monetary transmission and circulation with appropriate methodology and policies. Consequently, debt reduces to zero; the market transformation by the diversification of projects, the portfolio diversification of financing instruments to mobilize monetary units as micro-money into projects, and the increase in stakeholding altogether make the real output level statistically elastic. Thereby, prices stabilize in the absence of all forms of interest rates. The end result is the generalized inter-causality among the endogenous inter-variable relations.

The shari’ah orientation to the problem of money and real economy and all that such a relationship upholds has failed to give money its distinctive nature and logic. Only the mainstream monetary and its financial implications were copied from prevalent ideas and theories. Thus the profound theory of money, monetary policy, debt, interest and the real economy in Islamic perspective as derived from the cardinal qur’anic ontological precept of Tawhid as law could not be in quest, search, and discovery. The consequence of such a remiss of this most substantive field of knowledge was the unquestioned acceptance of debt-bound instruments, and thereby the ambivalence of the atemporal and intertemporal meaning of interest rate (riba). Thereby, the so-called field of Islamic economics and finance and its potential contribution to a most outstanding theory and functioning of the new financial architecture remained null and void. The Tawhidi law of monetary oneness with the wellbeing objective criterion of money and real economy remained unknown in shari’ah as a human concocted mechanism. This must change completely to bestow meaning, substance, and ultimate functioning of the Tawhidi law of unity of knowledge to money and real economy interrelationship and all the wellbeing implications that the Tawhidi law upholds.

This Conclusion brings together the most original and significant contribution of this work. This contribution in the field of meso-economics and mesoscience is for both Islamic economics and finance and conventional economics. much more can be developed from these contributions. The most profound focus is in delineating how Tawhid as the monotheistic law of the Qur'an explains ‘everything’ in details. This realism is far beyond the human-concocted cluttered nature of any other aspect of what is termed as Islamic law.