Coursework: Assignment No.

[2] Course Title: Islamic Economics Course Code: MEF 3043 Programme: BAC / BBA (RMT) Faculty / Dept.: Faculty of Business, Management and Accountancy, Dept. of Management Academic Year / Semester: Session 2012/2013, Semester II Student Name: AHMAD FAUZI BIN SUPONO Student ID: 032816 Date of Submission: [30/04/2013]

Assignment Questions:

1. Discuss and contrast the significant differences between conventional and Islamic
Economics concerning the economic problem and our understanding of Islamic Economics as a science or a system. There are plainly about contrast the significant differences between conventional and Islamic economic problem:-

CONVENTIONAL EECONOMICS
SCARCITY OF RESOURCES As the term suggests, a scarce resource can be traced to the fundamental problem of scarcity. Scarcity is the widespread condition of limited resources and unlimited wants and needs. A scarce resource is more specifically a resource with limited availability relative to desired use. The two concepts are closely related. Scarce resources can be broken down into four key ingredients: land, labor, capital and enterprise. Land includes all natural resources; labor includes all physical and mental effort; capital includes machinery and other items that go into further production; and enterprise is the art of combining the other three factors in the production process. Scarcity can be seen as resulting from the lack of availability in resources, from people's insatiable wants, or from a combination of the two. Scarcity is based on the idea that oftentimes a limited supply of goods or services comes up against an ever increasing demand for it and that, as such, every effort must be made to ensure its proper utilization and distribution so as to avoid inefficiency. Most goods and services can be

definable as scarce since individuals desire more of them than they already possess (scarcity is maintained by demand). Those that are readily abundant are referred to as free goods. UNLIMITED WANTS A person desires to use goods and services that provide satisfaction for themselves. A characteristic of people such that they are never totally satisfied with the quantity and variety of goods and services. The other half of the scarcity problem is limited resources. Unlimited wants and needs essentially means that people never get "enough that there's always something else that they would want or need.

For example, once John eats a hearty breakfast of pancakes and sausage, is he satisfied? Perhaps. But then in a couple of hours he wants a tuna salad sandwich for lunch. Then he wants linguini with alfredo sauce and bottle of Chianti for dinner. And then wants a bedtime snack of chocolate chip cookies and milk.Before long, the morning sun pops up and John is hungry. It is breakfast time all over again. Quite obviously, no one ever permanently satisfies that old hunger need.

What about other needs, like clothing, cars, or kitchen appliances. Once Duncan has a car, then he HAS a car and his car need is satisfied, right? The same can be said for other goods, right? Once Duncan has a can opener, then his can-opener need is satisfied, right? This seems to imply that, in principle, Duncan could obtain every good that satisfies his assorted wants and needs. Perhaps. But once he has a car, then he needs gasoline, and motor oil, and insurance, and fuzzy dice to hang from the rear view mirror, and more gasoline, and new tires, and an oil change, and more gasoline, and. wanting and needing things. Human people want some things

like hot fudge sundaes and red sports cars. Human people need other things like food, water, and oxygen1.

CHOICE: Scarcity of resources requires choices to be made. Economic choice is deciding between different uses of scarce resources. Efficiency A measure of how well workers, business, government or a country produces goods or Services. Efficiency is also producing at a lower cost or using fewer resources when making a Product or providing a service and also meeting the needs of consumers. We can become efficient by using fewer raw materials, fewer workers, replacing high cost labor with low cost technology, lowering waste etc. Opportunity cost It is the value of the second best alternative forgone. It is the benefit that is lost in making a choice between two competing uses of scarce Resources.
CHOICES AND OPPORTUNITY COST TABLE

(http://www.ssag.sk/SSAG%20study/EKO/scarce%20resources.pdf)

Dan Moynihan, Brian Titley - ECONOMICS, A Complete Course, Oxford University Press 2000

PRODUCTION POSSIBILITIES CURVE DIAGRAM

(http://www.dineshbakshi.com/igcse-gcse-economics/basic-economic-problem/revision-notes/1261-

production-possibility-curve)

From the point of view of an Economy, there is an opportunity cost of using its resources. Production Possibility curve (PPC) shows the maximum combinations of goods and services that can be produced by an economy in a given time period with its limited resources.

In the graph, if all the resources are used to produce Schools then there will be no Hospitals. If you move to the other end then all the resources would be used to produce Hospitals and not Schools will be there in the economy. Government has to move along this curve and decide the best possible combination of goods to produce. For example Z, shows the possible combinations of School buildings and Hospitals. Thus, it is impossible to build more Schools without also building fewer Hospitals. Resources have to be switched from building more Hospitals to building more Schools. This is known as reallocation of resources. Before the reallocation of resources we will have to consider the costs of reallocating these resources between uses. This cost will include retraining cost of our workforce and the time consumed in this relocation.Any point outside the curve is unattainable unless there is an outward shift of the PPC. This can only be possible if there is an improvement in the quantity and/or quality of factors of production. This is known as economic growth. It is a process of increasing the economys ability to produce goods and services.

ALLOCATION OF RESOURCES This is about how resources are allocated between competing uses. Any individual, organization or nation has to make three fundamental types of choices About how to allocate the scarce resources available to it. It has to decide: WHAT TO PRODUCE food or industrial machinery, books or newspapers, And so on HOW TO PRODUCE how many workers will be used, with what Machinery. FOR WHOM TO PRODUCE will some people get a bigger share of? Resources than other? Will some people get so few resources that they cannot Survive, while other live in luxury? Societies develop an economic system to determine how it makes choices - a system is an ideology, which involves a mechanism to respond to the economizing problem, e.g. a market system or a command system. In a command economy (socialism, communism) there is no private property, no inheritance, a central bank, graduated income tax, and central planning of the use of resources, composition & distribution of output and organization of production. In a market economy (capitalism), there is private ownership of resources, inheritance, a central bank, graduated income tax, and markets & prices are used to coordinate and direct economic activity. Private ownership permits freedom of choice. Choice involves a trade-off (opportunity cost), in order to determine which combination of goods and services an economy can produce at a particular point in time according to available factors of production

(http://www.ssag.sk/SSAG%20study/EKO/scarce%20resources.pdf)

PROBLEM IN ISLAMIC ECONOMIC PERSPECTIVES

Scarcity of Resources Unlimited Wants & Choice

When it comes to Islam, it analyzes the concept of scarcity from a different perspective where there is no concept of relative scarcity in the economy as believed by the secularism. To Islam, ALLAH SWT has created abundant and sufficient resources for the usage of all people and His other creations inclusive of animals and plants. Thus, there is no a big deal to recognize the factors of production being relatively scarce. There are few verses in the Holy Quran relating to this issue. In Surah al-Ahzab for example, ALLAH SWT mentioned that: For us God sufficed, and He is the best organizer2 (al-Ahzab: 48) Further, in another Surah of Ibrahim He asserted as: It is Allah who has created the heavens and the earth and sends down rain from the skies, ad with it brings out fruits wherewith to feed you; it is He who has made the ships subject to you, that they may sail through the sea by His command; and the rivers (also) has He made subject to you3 As a result, the scarcity issues only arise due to the availability which caused by limited knowledge and capability of men to search the location of created resources, to derive the method to extract and to formulate its usage for benefits of the people. The limited knowledge of men occurred because ALLAH SWT releases knowledge to them bit by bit and up to certain limitations. The men would not know everything about themselves and other creations. Only He knows at utmost. Due to this, ALLAH SWT said in Surah al-Baqarah:

2 3

al-Ahzab : 48 Surah Ibrahim : 32

He said: I know what you know not4 (Surah al-Baqarah: 30) From the above assertion, there is no scarcity in term of quantity in Islamic economy. Summarily, it can be written as: Sufficient Resources Created by God + (Humans constraints to acquire, to locate and to use of the resources + Unlimited Wants) =Scarcity in Availability All the three economic agents that are households, firms and state face the availability scarcity in land, capital , labor and entrepreneur towards the limited knowledge and physical constraints and their unlimited wants and needs. Not because of the factors of production are limited in nature. Mans inability to reach the abundant resources and convert Gods bounties into goods and services might in part be due to mans choices due to a lack of knowledge, skills, etc., but Mans ability to produce in abundance is constrained due to Mans negligence involving a mal-distribution of resources associated with the structural injustice of distribution derived from the economic system, which is biased in favour of inefficient resource utilization (idle capacity and unemployment), and socially undesirable resource allocation reflected in inadequate production of necessitiesa misallocation of resources attributed to usury and banking5.

Mans inability to reach the abundant resources and convert Gods bounties into goods and services might in part be due to mans choices due to a lack of knowledge, skills, etc., but Mans ability to produce in abundance is constrained due to Mans negligence involving a mal-distribution of resources associated with the structural injustice of distribution derived from the economic system, which is biased in favour of inefficient resource utilization (idle capacity and unemployment), and socially undesirable resource allocation reflected in inadequate production of necessitiesa misallocation of resources attributed to usury and banking6.

Unlimited Wants
Concerning the second economic problem, Islam has recognized that human desires are unlimited. This had been highlighted in many Quranic verses and addressed in many Hadith Fair in the eyes of men is the love of things they covet: Women and sons; Heaped-up hoards of gold and silver; horses branded (for blood and excellence); and (wealth of) cattle and well-tilled land. Such are the possessions of this world's life; but in nearness to Allah is the best of the goals (to return to) (Al-Imran, 3:14) And ye love wealth (mal) with inordinate love!7 (Al-Fajr, 89:20) He thinks that his wealth would make him last for ever!8 (Al-Humazah, 104:3)

4 5

Surah al-Baqarah :30 Al-Sadr, Iqtisaduna, 1982, Vol.1-2, pp.110-16, Vol.2-2, p.145) 6 Al-Sadr, Iqtisaduna, 1982, Vol.1-2, pp.110-16, Vol.2-2, p.145 7 Al-Fajr, 89:20

While in an Islamic perspective we may argue against the idea that human beings have unlimited wants or that they should be seen as having unlimited wants, the idea that at any one time, ones resources have alternative uses and you have to make choices as to which alternative to choose is acceptable and applicable. If it were to be western economic system, they would have chosen to produce or consume what maximizes their satisfaction or profit within the constraints of budget or income and the laws of the land. But in Islamic economics, we have some modifications to this economic pursuit. Firstly, the goal to be achieved must be derived from the Islamic worldview. Our goal of achieving falah is our overrideeng goal. Since wealth and economic prosperity is part of the external means to achieving falah, a Muslim is justified in his economic pursuits so long as his economic

Thinking that his wealth would make him last forever!(104:3) If man is given a valley of gold, certainly, he wants the second and third one and he will .. Hadith Narrated Ibn Abbas: I heard Allahs Apostle saying, If the son of Adam is given a valley of gold, then he will wish for another similar to it, for nothing can satisfy the eye of the son of Adam except dust. And Allah forgives him who repents to Him9

Choice in Islam
Hence scarcity of means necessitates choice which can provide higher values but at same time performing ones mission in this life.Choice in Islam should be ranking according to need fulfillment and not to greediness for the third economic problem regarding choice, in Islam, choices must be ranked according to the need fulfillment and not to greed, and must be accompanied by the concept of brotherhood. Muslims must also accept we are subject to qadr (pre-destination) and this also applies to rizk (sustenance).Choice is according to the fulfillment of the basic needs (daruriyyah) for food, clothing, shelter, medical care and education: man is driven by his choice of needs (al-hajat). ISLAMIC ECONOMIC AS SCIENCE: Social science which studies the economics problems of people imbued with islamic values M A Mannan. Study of how man can achieve al-falah through his control, ownership & uses of these worldly

Al-Humazah, 104:3 Bukhari, Vol.8, 76:445

resources based on the concepts of cooperation & partnership Akram Khan Islamic economics studies man not only as an isolated individual but of a social individual having; Faith: believing in Allah (s.w.t). Ethics: believing in the six articles of faith (arkan al-iman), his deeds are accountable to Allah (s.w.t.) as guided by the Shariah. Responsibility: he is responsible in propagating good doing and prohibiting bad doing in the society (al-Amr bil Maruf wa al-Nahy anil Munkar). Mans inability to reach the abundant resources and convert Gods bounties into goods and services might in part be due to mans choices due to a lack of knowledge, skills, etc., but Mans ability to produce in abundance is constrained due to Mans negligence involving a maldistribution of resources associated with the structural injustice of distribution derived from the economic system, which is biased in favour of inefficient resource utilization (idle capacity and unemployment), and socially undesirable resource allocation reflected in inadequate production of necessitiesa misallocation of resources attributed to usury and banking. (Al-Sadr, Iqtisaduna, 1982, Vol.1-2, pp.110-16, Vol.2-2, p.145 A study used by man to fulfill his as well as societys wants according to syariah principle10 Amir Mohd al-Faysal as Saud.A study of human activities for obtain, manage & use the economic resources according to the syariah principles for the betterment of human life both materially, spiritually in order to achieve the blessing of Allah (al-falah) Islamics

10

Amir Mohd al-Faysal as Saud

2. Discuss the differences, between a capitalist market economy, a socialist command economy and an Islamic economic system, including motivation, ownership, decision making and implementation? (20 marks)

Capitalist market economy

Motivation- profit maximization by seller and buyer seek for highest satisfaction In capitalism, the motive for producing goods and services is to sell them for a profit, not to satisfy people's needs. The products of capitalist production have to find a buyer, of course, but this is only incidental to the main aim of making a profit, of ending up with more money than was originally invested. This is not a theory that we have thought up but a fact you can easily confirm for yourself by reading the financial press. Production is started not by what consumers are prepared to pay for to satisfy their needs but by what the capitalists calculate can be sold at a profit. Those goods may satisfy human needs but those needs will not be met if people do not have sufficient money. Each participants act in their own self-interest. Sellers are to attain profit maximization whereas buyers are to seek wants satisfaction. The only aim to start the business is to earn and maximize the profit in capitalism. Buyer will looking and buys the good and services

which give them satisfaction through utilities by quality, lower price and durable. For firms in a capitalist economy, high profits are necessity. The desire for moneyperhaps even greed might be one reason a firm seeks high profits. But greed alone does not explain why firms seek high profits; survival in a competitive capitalist economy requires that firm earn high profits. The profit motive is not just the result of greed on behalf of individual capitalists. They do not have a choice about it. The need to make a profit is imposed on capitalists as a condition for not losing their investments and their position as capitalists. Competition with other capitalists forces them to reinvest as much of their profits as they can afford to keep their means and methods of production up to date.As you will see, we hold that it is the class division and profit motive of capitalism that is at the root of most of the world's problems today, from starvation to war, to alienation and crime. Every aspect of our lives is subordinated to the worst excesses of the drive to make profit. In capitalist society, our real needs will only ever come a poor second to the requirements of profit. Edge worth stated the first principle of economics is that every agent is actuated [activated] only by self-interest.11 Friedman declared that the social responsibility of business it is to increase its profit 12

Ownership- private enterprises own all property and resources.The private sector is the principle component of the economy. Labor resources, natural resources, capital resources e.g., equipment and buildings, and the goods and services produced in the economy are largely owned by private individuals and private institutions rather than by government. This private ownership combined with the freedom to negotiate legally binding contracts permits people, within very broad limits, to obtain and use resources as they choose. Characteristics include: private ownership of land and other means of production; private ownership of businesses; individual and firm decisionmaking; risk and reward for risk-taking; job availability depends on economic conditions; workers are compensated based on contributions to efficiency and output, creating incentives for innovation, hard work, education, and entrepreneurship; market forces provide efficiency; equality of opportunity is a common goal. Central to the belief in economic freedom is the concept of private property. Goods and services and factors of production are privately held by individuals. As owners of productive resources, individuals are free to utilize or dispose of their property as they see fit. Thus, individual ownership includes the right to reap the rewards or suffer the risks of economic decision making.
11

Edge worth, F.Y. (1881). Mathematical Psychics: An Essay on the application of Mathematics to the Moral Science. London: C.Kegan Paul & Co .(1881:16)
12

Friedman, M. (1962). Capitalism and Freedom. Chicago: Chicago University Press, 2002:133

As owners of the factors of production, individuals may be rewarded with "rent" for the use of their "land," "wages" for the use of their "labor,'' " interest" as a return on their "capital," and "profit" as a reward for their "entrepreneurship." The opposite of private ownership is public (or government) ownership of the means of production. Public ownership precludes individual decision making, thus limiting the economic choices of the individual.

Decision making- every decision is made by buyers and sellers through market Individual decisions in a capitalist economy are directly influenced by self-interest. Self-interest is pursued by responding to a system of economic incentives. Positive economic incentives encourage economic decision makers and negative economic incentives discourage economic decision makers. These economic incentives guide resource allocation toward the production of goods and services that society wants and away from the production of goods and services not desired by society. In this manner, a business owner pursuing his own economic self interest would benefit society as a whole. The desire for profit would direct him to put his productive resources into the production of goods and services commanding a high demand in the marketplace. The desire to avoid losses would discourage him from putting productive resources into the production of goods and services that people did not want. In the same manner, consumers seek low prices and avoid high prices for the goods they want, savers seek high interest rates and avoid low ones, workers are encouraged to engage their labor in jobs that command high wages and shift their labor away from those occupations that pay low wages or in which there is a high degree of unemployment. Responding to these positive and negative incentives, economic decision makers pursue their self-interest. Adam Smith, the father of capitalism, noted that if everyone pursues his own economic self-interest, everyone will benefit. The desires of buyers and sellers are communicated in the market place through a price system. Buyers communicate the quantities of a good, service, or resource they are willing and able to purchase at various prices, and suppliers communicate the quantities of those items they are willing and able to sell at various prices. The interaction of the buyers and sellers results in a market price. Adam Smith believed that the market place acted as an "invisible hand" operating to balance the desires of both buyers and sellers and establish a price both could agree upon. The prices determined in the market place assist in determining the answers to the "what," "how," and "for who" questions.

If all the other characteristics are in place, capitalist (market) theory advocates a limited (laissez-faire) role for government in the economy. Government is to make and enforce the rules (laws) and settle disputes that arise between economic players. Its role is to establish a legal framework for the economic system to operate in, rather than to play a role in making economic decisions. Adam Smith believed that government intervention in the market place would interfere with the "invisible hand" and prevent the system from operating efficiently; therefore, he advocated a "laissez-faire" economic policy for government.

Implementation- The implementation in capitalist economy through interaction of supply and demand. At the same time you need to understand the interaction; even if you have a high supply, if the demand is also high, the price could also be high. In the world of stock investing, the law of supply and demand can contribute to explaining a stocks price at any given time. It is the base to any economic understanding. Supply and demand and the economy system are interrelated to each other. It like man and his heart. If heart bits stops man die and viseversa.so in economy if demand and supply function well in a nation then definitely the economic system goes up, it doesn't matter with what goes up and what goes down in society. I mean by supply and demand of course it affects the whole economy system. One condition is that large numbers of buyers and sellers must be present in the market place for competition to exist. The numbers must be so large that no one buyer or seller can control the demand or supply of the good or service, therefore, the price. Another condition or assumption of competition is freedom of entry or exit from the marketplace. If one business exists and commands a high price for the products it sells, other producers must be able to move

into the market and compete; therefore, there should be no artificial or real barriers to entry or exit from the marketplace. Consumers and producers must be aware of markets that exist and the prices of products sold in those markets. Suppose a town has many restaurants. If consumers are unaware that more than one exists, the impact of their ignorance will be that the one restaurant they are aware of will be able to monopolize the marketplace. If all the conditions for competition are present in the market place, it is believed that the benefits of competition will be lower prices, greater variety, and better quality. These are benefits desired by all consumers in the marketplace.

Socialist command economy

Motivation Communism emphasizes income equality at the expense of individual productivity. Capitalisms system of incentives motivates high productivity, but the excess of its monetary rewards wastes collective wealth, encourages greed, and disrupts social unity. Maximize the efficiency of incentive while minimizing social inequality. Everybody would have free access to the goods and services designed to directly meet their needs and there need be no system of payment for the work that each individual contributes to producing them. All work would be on a voluntary basis. Producing for needs means that people would engage in work that has a direct usefulness. The satisfaction that this would provide, along with the increased opportunity to shape working patterns and conditions, would bring about new attitudes to work.

Ownership
Ownership of capital, resources and production capability reside with and are controlled by the citizens. In theory, citizens have equal access to the products and resources and are compensated based on the amount of work performed. This form of economic control claims to have the benefit of allocating resources, services and compensation equitably among the population. In other words, the system purports to be fair to everyone and to provide everyone with an equal piece-of-the-pie. Public sector is the principle component of the economy no private ownership of land; limited private ownership of property; businesses are state-owned; workers are employees of the state; workers are guaranteed jobs, with little incentive for hard work; businesses have little

incentive for efficiency and innovation; consumer choices are limited; prices and output are often set by the state rather than market forces, creating shortages; rationing occurs via long lines, quantity limits on purchases, and a black market where incentives exist for corruption. Command economies are often associated with socialism, where equality of outcome is a goal. The terms command economy, socialism, and communisms are often confused with one another, or are treated as being interchangeable. Actually, there are distinctions. A command economy is an economy with the features listed above. Socialism is pretty much the same, but with a narrower definition; socialism is an economic system that is characterized by state ownership and control of the means of production, and the distribution of output. Communism is different: communism is a political philosophy that uses a socialist economic system as part of its philosophy. Communism requires socialism as a step in the development of society. In order to advance the philosophy, it mandates a socialist economy.

Decision making In socialist economic, government directly manages supply and demand for goods and services by controlling production, prices, and distribution in accordance with a long term design and schedule of objectives. This way, purposed to distribute equity for income distribution, wealth and resources. Implementation An economy based on economic planning appropriates its resources as needed, so that allocation comes in the form of internal transfers rather than market transactions involving the purchasing of assets by one government agency or firm by another. Decision-making is carried out by workers and consumers on the enterprise-level. The command economy is based on the organizational model of a capitalist firm, but applies it to the entire economy. Where market fails to make economic decisions, the determine prices becomes helpful. Governments attempts to maintain effective demand so that inflation and deflation could be avoided. In this respect the fiscal and monetary measures are adopted.

Government doesn't allow the monopolies to grow as monopolistic forces obstruct the working of the market mechanism. In this connection government makes anti monopoly and anti cartel laws. For the sake of community betterment of socialization government provides the basic facilities of health, education and recreation. On the other hand in socialism there is a planning board. Such board formulated the plans which cover the whole economy. The central planning board has unlimited parts regarding allocation of the resources and production of goods.

Islamic economic system

Motivation In Islam, man is motivated to work (i.e.: to pursue economic activities) because he is entrusted by God as the khalifah (vicegerent) on this earth and to obey the will of Allah (s.w.t.).The primary motivating factor is mans desire to return to his-self by holding to the covenant (mithaq) in order to attain the ultimate happiness (saadat haqiqiya).Unlike capitalism where the primary motivating factor is more materialistic in nature Ownership Muslim has a right to possess any amount of wealth or property with the following conditions: His acceptance that his ownership is temporary and not absolute. It is acquired by lawful means. His responsibility towards his society through zakat and other voluntary deeds. In

terms of ownership (milkiyyah), the (Majallah) defines owned property (mulk) as anything owned by a human being, be it a specified property (ayn), or usufruct of a property (manfaah) .According to Hanafi and Maliki jurists ownership is an exclusive association of the owned item with its owner, which gives the owner the right to deal in what he owns in any way that is not legally forbidden13 .In the event that his ownership is in conflict with legitimate social interest, governments may intervene, since common interest has greater priority than selfinterest in order to facilitate the acquisition of goods and services Islam put forward rules related to the manner of possessing wealth without any complications. Islam defined the legal means of ownership, and it defined the contracts through which possession can take place. Private property is allowed in Islam that bond which entitles the owner to do whatever he likes with his property without any restriction or restraint. From the Islamic point of view this kind of ownership belongs to Allah only. He alone can do whatever He likes with all the existing things of this world. He can bring and can take away. He can give life and can take it. He can make ill and can cure. He can give and can take. He can punish and can forgive. And so on and so forth. No external restriction exists in His case, for everything rightly belongs to Him. The Qur'an says: "Whatever is in the heavens and the earth belongs to Allah 14 Public property is derived form the hadith:People are partners in three things namely water, fire and pastures15 which may included common property includes natural resources such as mines and energy resources16.

13 14

(Al-Zuhayli, 2003, 2:417). (Surah al-Najm, 53:31). 15 (Al-Zuhayli, 2002, 2:427) 16 Al-Zuhayli, W. (2003). Financial Transactions in Islamic Jurisprudence. Vols.2. Damascus: Dar al -Fikr.

State property involves revenues collected by the state: Includes fai, kharaj, jizya, ushur, and acquired from inheritance when a Muslim has no beneficiaries, such revenues are for the state to decide its expenditure. Includes certain natural resources, as well as other property that can't immediately be privatized. Public property in Islam refers to natural resources (forests, pastures, uncultivated land, water, mines, oceanic resources etc.) to which all humans have equal right. Such resources are considered the common property of the community. Private property based on consensus amongst Islamic jurists and social scientists that Islam recognizes and upholds the individual's right to private ownership. The Qur'an extensively discusses taxation, inheritance, prohibition against stealing, legality of ownership,

recommendation to give charity and other topics related to private property. Decision making Islam gives priority to the role of individual decision making, which is also tied to the concept of accountability. On that Day, will men proceed in companies sorted out to be shown the Deeds that they had done, then shall anyone who has done as atoms weight of good, see it and anyone who has done an atoms weight of evil, shall see it.17 The above ayat shows that man is responsible for what he has done. Thus, individual are free to choose what they desire since Allah has given them the intellect (aql) to differentiate between the good (maaruf) from the evil (munkar).Individuals are also encouraged to make shura (a collective of individuals, consulting and making decisions) on important issues that affected larger number of people.

17

(Az-Zalzalah, 99:6-8)

In this case the role of the government is to establish a good society with peace, justice and security. Within the bounds of lawful (Halal) and unlawful (Haram) prescribed by Allah and also keeping in view the rules of moderation and prudence, the man has been allowed to make full enjoyment of Gods gifts bestowed on him All things have been created by Allah for mans use and service. To restrain oneself or forbid others from the enjoyment of lawful items of food and other articles of use tantamount to renouncing the blessings and favors of Allah which has been strongly condemned.

Implementation Ultimate objective in Islam to achieve al-Falah meaning that to achieve success in this world for accountability, and for getting the outcome of all deeds including economic activities, in an eternal life for leading a good life and discharging socio-Islamic obligations in this world and for achieving the home of hereafter.The distribution of resources, how goods and services should be given to the public, whether they should go to the rich or the orphans, aristocracy or the landlords is not a discussion upon the reality i.e. understanding the reality at hand does not lead one to a conclusion. Man economic existence is to achieve ultimate success (falah) and happiness (saadat haqiqiya). Falah refers to a situation where an individual is adequately provided for in respect of his basic needs, and enjoys necessary freedom and leisure to work for his spiritual and material advancement; whereas at macro level, it aims at establishment of an egalitarian and happy society with clean environment, with freedom from want and with opportunities to its members for progress in socio-political and religious affairs. The concept of Falah, in strictly

economic field, refers to material well-being of the citizens of an Islamic state. The economic system of Islam, therefore, aims to achieve economic well-being and betterment of the people through equitable distribution of material resources and through establishment of social justice. To make sure that all activities and decision makings are carried out based on: philosophic foundation of Islamic economic systems which are based on: the

i) Hablumminaan Allah: the relationship between man and his Creator Allah S.N.T. Through the concept of Tawhid - the unity of thought or the unity and sovereignty of Allah S.N.T. in Islam ii) Hablumminannaas: The relationship between man and his fellow men. The responsibility of individuals to his society through the zakat. iii) The relationship between man and the Nature and his surroundings: Production activity must consider with environmental effects and taken into account the economic welfare of the consumers. To ensure no wastage of resources. iv) The meaning of his living in this world. To achieve the highest moral and spiritual benefits for all concerned

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Chapra, M. Umer (1995) The Islamic welfare state and its role in the economy, in Gulaid, M.A. and Abdullah, M.A. (Eds) Readings in Public Finance in Islam, Jeddah: Islamic Research and Training Institute. Hoexter, Miriam, Eusenstadt, Schmuel N. and Leutzion, Nehemia (2002) The Public Sphere in Muslim Societies, New York: State University of New York. Hosseini, Hamid (1988) Notions of private property in Islamic economics in contemporary Iran: a review of literature. International Journal of Social Economics, 15(9), pp. 51-61. Iqbal, Munawar (1995) Distributive Justice and Need Fulfillment in an Islamic Economy, Islamabad: International Islamic University of Islamabad, International Institute of Islamic Economics. Iqbal, Zamir and Mirakhor, Abbas (2005) the stakeholders model of governance in an Islamic economic system. In Chapra, M. Umar. Islam and the Economic Challenge. Leicester, UK: Islamic Foundation. Chapel, Rothko, A New Strategy for Development (New York: Pergamon Press, 1979).