Understanding the Sustainability of Islamic Economics Versus Neo-Classical and Keynesian Models

Abstract

The enduring predicament facing contemporary schools of economics is to reform their theoretico-practical pillars in a way to strike a dynamic trade-off between efficiency and equity at the level of practice, the key precondition of achieving the sustainability of an economic system. Islamic economics has recently resurged as the unique model hypothesized to have an institutional structure for striking the cited trade-off. Against this backdrop, this paper aims first to theoretically investigate this hypothesis. The second aim of the paper is to investigate if Islamic economics could capacitate Muslim nations to achieve the same trade-off at the level of practice. The paper concludes first that Islamic economics merges its idiosyncratic macro and micro economic, political, behavioral, ethical, and socio-cultural institutions in a way to achieve a sustainable economic order in both the short and long run. Second, contemporary Muslims fail in their developmental effort not because Islamic economics does not provide them with necessary institutional infrastructure but because they fail in implementing its theoretical construct in a systemically complementary manner. Ultimately, the paper provides insight into the sustainability of Islamic economics at the level of theory and practice in light of the qualitative and quantitative data coming out of the previous sections.