Islamic Economics: A Short History

economic thought in the qur"àn and sunnah 67

belief in the system of reward/punishment in the hereafter, (c) the
principle of moderation, and (d) the relationship between saving and
investment (Kahf, 1980). While the concept of ownership has been
outlined, the influencing role of the other remaining factors of con-
sumption is discussed below.
The belief of the Muslim consumer in a system of reward and
punishment, in life and the hereafter, is envisioned to be influencing
the pattern of his consumption, the avenues in which he spends his
income and, consequently, the utility function he seeks to maximise.
His avenues of spending would cover not only secular aspects of sat-
isfaction, physio-sociological wants, but also those aspects that would
increase his reward in the Hereafter, mainly social-caring spending
and spending in the cause of God. The utility function which the
consumer seeks to enlarge, or maximize using the conventional terms,
consists, therefore, of two main components: secular utility and
Hereafter utility. His spending behaviour would be influenced by the
weight he gives to each utility depending upon his religious scale of
preference, i.e. degree of piety. Or in a mathematical presentation,
his spending, as differentiated from his consumption, is a function
of the satisfaction he gets from the consumption of goods and ser-
vices, the moral satisfaction he obtains from feeling that he will be
rewarded in the Hereafter, as a result of his religio-social-caring
spending, and the degree of piety, subject, of course, to his income.
This is shown as follows:

(maximize) V = U(C, H), F (P) (2)

S.t. Y

Where:

Y = income

V = spending function

C = consumption from goods and services

H = reward in the Hereafter from religio-social-caring spending

P = piety

Equation (1) would be analysed further in the light of the two remain-
ing factors, the principle of moderation and the relationship between
saving and investment.

The principle of moderation
Based on the teachings of the Qur"àn and Sunnah, Muslim jurists
have classified human physiological needs into various categories,