ResearchIslamic E Centerconomics for Islamicand Finance Economics Research and FinanceGroup, UniversitiUniversiti KebangsaaKebangsaann Malaysia,Malaysia Bangi 43600, Selangor, Malaysia Fax:Fax: +603603-89215789-89215789 http://www.ukm.my/ekonishttp://www.ekonis-ukm.my E-mail:E- mail:[email protected] [email protected]

Working Paper in Islamic Economics and Finance No. 1225

The Assumption, Economic Problem and the Definition of Economics: Revisited

Bayu Taufiq Possumah Institut Islam Hadhari, Universiti Kebangsaan Malaysia, 43000 Bangi, Selangor, Malaysia Universiti Muslim Indonesia, Makassar, Indonesia Tel: +6016-2412950 E-mail: [email protected]

Abdul Ghafar Ismail School of Economic, Universiti Kebangsaan Malaysia, 43000 Bangi, Selangor, Malaysia Tel: +601-36214133 E-mail: [email protected]

Abstract

The problem of scarcity resources is one of the most important topics in economics, even one reason for the emergence of economics itself. Al Qur'an as a source of economic science in Islam, of course, also talks about the Resources. The study finds that the concept of economic resources related to scarcity in al Qur'an different from what is understood by economic mainstream, and that is the foundation for the Muslim economists to build the consumer behavior theory in Islam.

Keywords: Scarcity; Economic problem; Economic science definition

Introduction

The problems of human economy have actually grown together with human life on earth, so are efforts to solve. What is consumed, how to produce, and how to distribute it? These issues remain a major issue for the human struggle throughout his life, whether or not recorded by history. Initially, the scarcity is important to be explored due to several reasons, such as economic resources and human economic choice.1 If we use the same framework, i.e., Starting from the definition of Islamic

1 Scarcity is the concept of finite resources in a world of infinite needs and wants. Economics assumes people are greedy and always have needs and wants. However, there is only a certain amount of most 2 economics, we would go nowhere. In line with other views, such as Zubair Hasan (2011), we use the deductive methods in deriving the subjects from the original sources. Because, the existing studies on scarcity in Islamic economics just quoted the Quran without trying to analyze it. The significance of this study is basically led towards: the relevancy of the current definition of economy, utility theory, distribution theory, market theory, and consumer behavior theory. The aim of this paper is an attempt to revisit the problem of scarcity theory in economics, then analyze that theory of Qur‟anic dimension as a resource principle in Islamic economics. The remaining discussion of this paper is, the paper organized into five sections. Section two explaining scarcity and economic theory in mainstream economics. Section three, Economic problem in Qur‟anic view , Section four analyzing the scarcity, the economic problem and Islamic economic theory, and the last section is concluded.

Scarcity and Economics Theory

In medieval origin, word of scarcity derived from the Old Northern French escarate, and was used to mean an insufficient supply of resources. In the fifteenth century the word took on a more specific meaning as an insufficient of supply of necessities, or dearth, and at the same time acquired a temporal characteristic implying a period of insufficiency, or a dearth. This was still the usage by the late eighteenth and early nineteenth century.2 Thomas Robert Malthus used the word in this sense in An Essay on The principle of Population of 1978, where he contrasted “years of plenty” to “years of scarcity”.3

By looking for various conventional economic definitions cited by economist, we can simply conclude that what they explain about the economy not far from regarding the relationship between human needs as living things that must maintain its existence, the resources as objects that can meet those needs and how the manner and process of fulfilling these needs, even though of course with a different view point. Samuelsen (1961) for example, defining economy as all activities related to production and distribution among human. This definition was further extended by Samuelson (1976), Nordhaus (1991) and Temin (1976) who defines economic science as the study of human behavior in relation to using scarce productive resources to provide their wants4.

The same line of definition was offered by McConnell (1969) and Mankiw (2006). The former offers a definition that the economy is the social science concerned with the problem of using or administering scarce resources (the means of producing) so as to attain the greatest or maximum satisfaction of society‟s unlimited wants (the goal

. Therefore, people are forced to choose among their needs and wants, because Mother Nature does not satisfy our needs and wants infinitely. Scarcity encompasses these choices. 2 Nicholas Xenos, 1984, Out of Paradise an Essay on Scarcity, Doctoral Dessertation, Princeton University, p.18 3 Thomas Robert Malthus, 1960, On Population, ed. Gertrude Himmelfarb, New York:Modern Library, p.16 4 Samuelson, P. A.and P. Temin. 1976. Economics, 10th Ed. New York: McGraw Hill,p.3 3 of producing)5. While the latter, Mankiw (2006) defines economic science as the study of how people manage limited and scarce resources.6

However, the definition given by Lord Robbins is among those most accepted by western economics. He said that economics is the science which studies human behavior as a relationship between ends and scarce means which have alternative uses.7 This definition has a wide scope and consequently economics has approached a wide range of issues. Here, the notion of scarcity holds a crucial position, separating the economic dimension from other dimensions of purposeful human behavior involving the utilization of means to achieve ends. So, basically the science of economics is the study of the efforts both as individuals and communities in order to make a choice use of finite resources to meet the infinite demand for goods and services. This definition has led Assad Zaman (2009) to conclude that economics are also referred to as a normative science because science is considered to involve themselves and solve the problems of human weakness and limitations 8.

Nearly all modern conventional textbooks use scarcity as the fundamental defining problem of economics. For instance, the opening paragraph of a microeconomics textbook by Perloff (2001) states that: “If each of us could get all of the food, clothing and toys we wanted without working, no one would study economics. Unfortunately, most of the good things in life are scarce – we can‟t all have as much as we want.” Thus, Most of the current economic theory is derived from the law of (relative) scarcity which “states that goods are scarce because there are not enough resources to produce all the goods that people want to consume” (Samuelson and Nordhaus, 1989).9 Furthermore, scarcity “exists simply because it is human nature for people to want more than they have” (see Ruffin and Gregory, 1993). 10

The dimension of the economic problem is accentuated through Robbin‟s definition of economics. Robbin defines economics as the science which studies human behavior as a relationship between giving ends and scarce means which have alternative uses11 and based on four conditions; the first two are related to ends, one is posed toward multiplicity and the second towards diversity in importance and priority order. The second two relates to means, one asserts its limitation, while the second provides its various uses. Economics is the science of purposeful human action--that is, our choices. Without scarcity, economics is impossible. If things were not scarce and people did not have to make choices because everything was freely available,

5 McConnell, C. R. 1969,Economics: Principles, Problems and policies, McGraw-Hill, New York,p.23 6 Heinz Kohler, Scarcity Challenged An Introduction to Economics, 1968 ,Holt, Rinehar and Winston Inc.USA, p.3,see also Mankiw, G,2006, Principles of Economics 4th ed. South-Western College Pub, Ohio 7Roger E. Backhouse & Steve G. Medema, 2007,Defining Economics: Robbins’ Essay In Theory And Practice, , Unpublised Paper, UK, see also simon James, A Dictionary of Economic Quotations, compilation 8 www.wikipedia.org/wiki/ilmuekonomi.(1March 2009 ) see also Asad zaman, Normative foundation Of Scarcity, 2009,IIUI, Islamabad 9 Samuelson, P.A. and Nordhaus, W.D.,(1989), Economics, 13th ed., McGraw-Hill, New York, p.26 10. Ruffin, R.J. and Gregory, P.R. (1993), Principles of Microeconomics, 5th ed., Harper Collins, New York,p.3, See also Perloff, Jeffrey M. (2008), Microeconomics, 5th Edition, Addison-Wesley, New York, see Asad zaman, Normative foundation Of Scarcity, 2009,IIUI, Islamabad 11 Lionel Robbins, An Essay on the Nature and Significance of Economic Science , London: MacMillan, 1932 4 then people would not force to make any tradeoffs among their needs and wants--and thus, no economy.

Economics assumes people are greedy and always have needs and wants. However, there is only a certain amount of most goods. Therefore, people are forced to choose between their needs and wants. An individual must economize. Every decision to produce or consume something means that people forego producing or consuming something else. If you want to earn more money, you must work longer and harder, which means less leisure time. If you want to drive a nice car, you must spend more money. Spending more for a car may mean less money for the vacation you were planning. This existence of scarcity problems, makes economists review how people make decisions about how much they work, what they buy, how much they save, and how much they will invest. In this approach, the human, who always fear of what to eat and clothes on tomorrow. In a nutshell, the concept scarcity in mainstream economic can be summarized as:

Limited Factors of Production (Resources) + (Unlimited Wants) = Scarcity

Scarcity is also causes resources have value, sacrifice is necessary to get it. As The consequences of an unlimited human desire, while the tool is limited to the fulfillment of desire, every sacrifice has made, or option that is not taken is considered an opportunity cost.12 How does human make a choice among the various choices faces by utilizing the limited resources led to the Consumer Behavior theory? With his two basic economic principles – the cost-benefit principle and the scarcity principle.

On the other side, human also has a tendency to always get what they want, so any economic decisions will always be guided by the interest rationalism, individualism, selfishness, or utilitarianism, to satisfy her desire. This is the basic principle of consumer behavior theory in the positive economic analysis. And this branch of knowledge can be conceived in two perspectives: (a) pure positive perspective, (b) some normal positive perspective.

In pure positive perspective, only those aspects of human behavior are analyzed which are independent of norms or values; it is assumed that there is no normative or value based restriction on the behavior. In normal positive perspective, those aspects of human behavior are analyzed which are governed by some norms or values that a society imposes on its members, and which may be in the form of written legal injunctions or in the form of unwritten rules and traditions. We can say that Islamic economic perspective on consumer behavior include in normal positive perspective. 13

Economic Problem in Qur’anic View

Beside providing the foundational theory of resources, in which we can conclude that Scarcity not the main problem in Economic of a human‟s life, the Qur‟an also

12 Rian C. Amacher & Holley H.Ulbrich, Principle of Macroeconomic,1986,Ohio,South-western Publishing.co,p.26 13 M. Fahim Khan, 1995,Theory of Consumer Behavior in the Islamic Perspective, Islamic Foundation Markfield Da‟wah Centre,Leicester UK,p.29 5 provides some argument shown that the economic problem in Islamic economic perspective based on four principles are : - All the wealth belongs to Allah (swt): “And give them of the wealth of Allah which He has given you.”14 - The community is the trustee of the wealth: “Believe in Allah and His Messenger, and spend whereof He has made you heirs.” 15 - Hoarding of wealth is prohibited: “And those who hoard up gold and silver and spend not in the way of Allah; announce to them a painful chastisement.”16 - Circulation of wealth is a duty: “Whatsoever Allah may restore into His Messenger – is due unto Allah and unto His Messenger – the orphans and the needy … so that it may not be confined to the rich amongst you.” 17

From these principles, Islam differs fundamentally from man-made systems (such as communism/socialism and ) in defining the economic problem. Why? Because in fact the concept scarcity as a main economic problem in mainstream economic not born from nothing. The concept actually started with definitions of human being in the western philosophy, where the human being traditionally is defined as rational animals.18 Result of thought is “Rational animal” as the basis of Rationality in economic. The concept of rational animal teaches us that human being always life in unlimited wants. The later concept of rational animal then known as concept of Economic man and was used for the first time in the late nineteenth century by critics of John Stuart Mill‟s work on political economy.19 Below is a passage from Mill‟s work that those 19th-century critics were referring to:

"[Political economy] does not treat the whole of man‟s nature as modified by the social state, nor of the whole conduct of man in society. It is concerned with him solely as a being who desires to possess wealth, and who is capable of judging the comparative efficacy of the means for obtaining that end20

Based on the Qur‟anic description of the relation between economic behavior of human and economic resources problem above, also we find that the real problem in an is the way human to economize. The way human satisfied his unlimited want, the way human thinking about economics and paradigm of economic science itself. As Roger Bootle (2009) has challenged the concept of homo economicus and of market mechanism as the sole arbiter of economic decision making. He says:

14 QS.23:33 15 QS.57:7 16 QS.9:34 17 QS.59: 7 18 A Dictionary of Philosophy, edited by Anthony Flew, p 300, see The Nature of Human Beings: East and West, J. L. Shaw 19 Persky, Joseph. "Retrospectives: The Ethology of Homo Economicus." The Journal of Economic Perspectives, Vol. 9, No. 2 (Spring, 1995), pp. 221-231 20 Mill, John Stuart. "On the Definition of Political Economy, and on the Method of Investigation Proper to It," London and Westminster Review, October 1836. Essays on Some Unsettled Questions of Political Economy, 2nd ed. London: Longmans, Green, Reader & Dyer, 1874, essay 5, paragraphs 38 and 4 6

“There is no doubt that homo economicus (as the self interested, rational individual) is a simplifying assumption (in contemporary paradigms of economics) that yields results of analytical value and frequent applicability. But as an attempt at a total description of what drives human beings, there is also no doubt it is profoundly misleading. There are two problems: the first concern rationality and the second concerns motivation”21 A similar statement has also come from Kalatsky (2010), who is pleading for the birth of a new economics: “Economics today is a discipline that must either die or undergo a paradigm shift- to make itself more broad-minded and more modest. It must broaden its horizons to recognize the insights of other social sciences and historical studies and it must return to its roots…. Either economics will reform itself quickly or the funeral will be in the discipline as a whole”22

The Quranic solution to scarcity at the level of „wants‟, is to ask people to lead simple lifestyles, and be content with what they have, not to envy others who have more. The Quran berates those who have taken their desires for their God 23, and states that paradise is for those who fear God and restrict their desires24. Allah teaches us not to envy luxurious lifestyles of those who do not believe in the Day of Judgment, since all they have is the life of this world, which is pitifully small and limited compared to the next. “Hence, do not covet the bounties which God has bestowed more abundantly on some of you than on others. Men shall have a benefit from what they earn, and women shall have a benefit from what they earn. Ask, therefore, God [to give you] out of His bounty: behold, God has indeed full knowledge of everything”25 ”And yet, [it would be but for their own good] if they were to content themselves with what God has given them and [caused] His Apostle [to give them], and would say, "God is enough for us! God will give us [whatever He wills] out of His bounty, and [will cause] His Apostle [to give us, too]: verily, unto God alone do we turn with hope!" 26

The Scarcity, The economic problem and Islamic Economic Theory: An Analysis

Relation of resources and scarcity in economic theory if we looked into Islamic perspective base on what the Al Qur‟an said in fact can be viewed into several issues: - Islamic Economic Definition

The concept of scarcity is important and has to be included in any modern definition of economics. We can see the concept in various definitions of economic science, i.e.

21 Roger Bootle, (2009), the Trouble with Market: Saving Capitalism from itself , London/Boston: Nicholas Berkley Publishing, p.3 22 Anatoly Kalatsky, (2010), Capitalism 4.0: the Birth of a New Economy, London, Bloomsbury, pp.185-186 23 QS.45:23 24 QS.79:41-42 25 QS.4:32 26 QS.9:59 7

As given by P. Samuelson that embraces the scarcity concept is “Economics is the study of how people and society choose to employ scarce resources that could have alternative uses in order to produce various and to distribute them for consumption, now or in the future, among various persons and groups in society” [Samuelson and Nordhaus (1985, p. 4)]. All the aspects of the economic problems including production, distribution, consumption, and growth in the future linked in this definition. The definition also emphasizes the necessity of the best possible exploitation of economic resources since they are scarce relative to unlimited wants. This is an important point of conventional economic for the society in order to obtain the maximum quantity of goods and services that can possibly be produced in any given period of time, i.e. Maximum possible level of economic welfare.

On other side Islamic economics has been defined in various ways. Unfortunately some of the definitions have followed the spirit of conventional economics in their emphasis on the central problem of “relative scarcity” itself even though it logical sequences within Shariah constraints. In other definitions conceptions and expressions are taken from the Qur‟an and Hadith to assert the particular nature of consumption, production earnings and social justice and to confirm the Islamic choice and orientation of the discipline.

To understand the true nature, scope and extent of the Islamic economics in the Qur‟an linked to the economic problem, we have to understand that the Qur'an establishes a three-dimensional system comprising fundamental rights, fundamental duties and fundamental prohibitions in economics. This because economics related to fundamental prohibitions has become massive in the current world order leading to serious problems at the individual, family, social, national and international level. However we will have to discuss in detail what the Qur‟an intends and how the aims of Islamic economic philosophy itself. According to Avid Jamil (2010) in his paper Economic Problems and the Qur'anic Solution, the philosophy of Islamic economic in Qur‟an is: - Islamic economy is based on the supremacy of peace, which is a comprehensive state covering individuals, family and society; human peace, health, security and welfare are the guiding factors, and howsoever strong are the economic reasons, any activity that threatens comprehensive peace cannot be permitted. - In Islam, economics cannot be seen or developed separately from the grand objectives of the system; the economic system has not only to work within the framework of fundamental rights, fundamental duties and fundamental prohibitions but has to play a proactive role in achieving those objectives. In the current economic scenario, market forces rule and play the most decisive role in determining what is good or bad for society; their interests are often directly opposite to the interests of a healthy, secure and peaceful society. - In Islam, all actions are economic activities but it makes a clear distinction between prohibited, undesirable, desirable and highly desirable activities depending upon their effects on society. An activity that is prohibited cannot be allowed to take place; if it takes place, the culprits will have to be punished in accordance with the procedure of Law, the punishment being proportional to the dangers posed by the activity. In the current international system dominated by the market, only an activity that is supportive of the market 8

interests is a desirable economic activity; other activities are either totally disregarded or are given minimal importance. - The aims and objectives of Islamic economics are for the whole world, not just in the Muslim world. Its aims are: (i) To ensure the overall peace in society at every level: individual, family, national and international; (ii) To ensure that no individual or group of individual indulges or is made to indulge in any activity that is dangerous to their own health or the health of others or for the general level of peace and security of society; (iii) To ensure that all the activities are duly rewarded in accordance with their benefices for society or punished in accordance with their hazards. (iv) To ensure that while individuals are given adequate freedom to engage in economic activities of their liking, society acts proactively to reverse any large scale disparities and prevent all forms of exploitation; (v) To ensure that the disabled, the less privileged, the needy and the ones who sacrifice themselves for larger aims are duly protected, socially and economically; (vi) To ensure that the diverse abilities of individuals are given societal and economic support.

Unfortunately, some "Islamic Economics" definition fails to capture the Qur‟anic philosophy related to the economic problem and has been reduced to Islamic finances meant for Muslims and has failed to address the needs of the world. For example "Islamic economic jurisprudence", appearing on Wikipedia and "Islamic Economics" says: "Islamic economics is economics in accordance with Islamic law. Islamic economics can refer to the application of Islamic law to economic activity either where Islamic rule is in force or where it is not; i.e. It can refer to the creation of an Islamic economic system, or to simply follow Islamic law in regards to spending, saving, investing, giving, etc. Where the state does not follow Islamic law."

Therefore based on the discussion above, we agree and propose some of the definition of Islamic Economic as given by Islamic Economits such Yousuf Ibrahim27 which define Islamic economic as: “Islamic economics is a science studying the guidance of the human behavior towards the use of resources to satisfy the needs". and from K urshid Ahmad (1981) which defines Islamic economics as, “A study of human behavior in their attempts to satisfy the needs of the abundant resources whose ultimate aim is to maximize benefit of self and society both in this world and the hereafter.” This because the two definitions is based upon the following facts: . The resources are enough for satisfying the needs. . But the resources should be protected from the waste, improper use and injustice distribution. . The human behavior towards the resources should be controlled by divine injunctions to avoid harm and injustice behavior . Only legal needs, needs that build life on the earth, should be satisfied. . Illegal needs (desires), which destroy life on earth, should not be satisfied; they are never ending and never satisfied.

27 Professor of Islamic Economic, Qatar University, see A Study On The Efficiency Of Islamic Economic Instruments In Selected Islamic Countries, A Thesis Doctorate in Kochi University India, p.114 9

. Islamic Economic takes into account the economic behavior of man in all the context of his overall conduct. It does not restrict itself to the “market‟ variables; instead, it integrates the findings of other social sciences into its subject matter.

The definition also certifies that there is no economic problem on grounds of scarcity. But there is an economic problem in the sense of "rational" utilizing resources to fulfill the needs. This is the type of economic problem which is visible in almost all societies in varying degrees. The scarcity axiom will not help identifying this problem. On the other hand, if Maslahah and hence needs (as explained earlier) alone is the basis for economic decision making than the above mentioned man is obliged to fulfill all his needs and his needs would be endless, if meeting social needs is recognized as an individual need. Thus, take scarcity as well as the definition of the economic problem of human in the same perspective as conventional economics takes.

- Availability versus Accessibility

With regard to the common conceptualization of scarcity in economic theory, the most basic semantic reflection on the concept scarcity is revealed to lack of something (in case of economic is quantity resources). Therefore the point must be explored: the idea of a lack of resources which include a discussion of the “Accessibility” and “Availability”. If the resource quantity in economic theory is understood as scarce, and referring to a scarce thing, the concept scarcity resources can be interpreted with regard to availability versus accessibility. Availability refers to whether or not there is verifiable aspect of the resources. But in Islamic economic availability is not the only criteria in the determination of scarce resources, because according to the Qur‟an that said:

“And He gave you from all you asked of Him. And if you count favor of Allah, you could not enumerate them. Indeed mankind is (generally) most unjust and ungrateful”.28 “For Us God sufficed, and He is the best organizer”29 “He it is who has made the earth subservient to you; so walk in the paths thereof and eat of His provision And to Him will be the resurrection.” 30

In these verses we can conclude that economic resources in Islam have viewed always available, thus if the scarcity of resources interpreted as lack of quantity and availability does not in line with what the Qur‟an said. Therefore the role of availability quantity as part of the criteria for determining scarce resources need to be clarified. What is exactly the role of availability in determining of scarcity ? If for example, we say something is unavailable, in contemporary language it can be deemed scarce because it is in fact also inaccessible. However, on the other hand, if something is available, it can be deemed scarce because it might be not be accessible. In this concern of availability is not emphasized. The following scenarios may be can explain the statement. The assessment food is scarce does not imply it isn‟t available somewhere in some form, but rather that the people does not have access to the food (e. g. Due the to lack of finance) or that it is because me rely a distributional problem.31 In this case, we can

28 QS, 14 : 34,16:18 also 3:27&37 29 QS. 33:48 30 QS, 67:15, also see 21:80, 45:12-13,57:25,80:24-32 31 Current resources exist to feed everyone at level only slightly less than average Italian. But only if current consumption and distribution patterns are radically altered and population growth is checked. See David Schweickart, After Capitalism, Maryland:Rowman and Littlefield publisher, 2002, p.116 10

say that the food is available but inaccessible, the case inaccessibility or lack of access meant also scarcity. But inaccessibility cannot be made toward unavailability of things.

Referring to the discussion, now we can in line with the argument from some Islamic economist who agrees to the term of Scarcity as problem in economic theory such as Zubair Hasan (2011) when he reject argument from Monzer Kahf (1992), who who have voiced resource scarcity as inadmissible from an Islamic perspective. Hasan (2011) said: “..... However inexhaustible, is not a sufficient condition for the availability of resources for human beings in desired measure at any time or space. Existence of resources is necessary but it is their availability to mankind that lends content and meaning to the notion of scarcity as the basis of economics. The availability of resources for human beings depends on the state of their knowledge and expands as they strive to discover more and more about their uses, location, methods of extraction, and cost effectiveness through continued learning research and action..”

And the point to ponder from his view, “A final point for review is the distinction invariably made between absolute and relative versions of scarcity. Attaching adjectives to the word may be confusing. Talking of absolute scarcity is obscurant in definition unless one has mistakenly referred to rarity. And, relativity clearly is an internal attribute of scarcity as nothing can be scarce except in relation to a demand for it. Relative scarcity could possibly make sense when one is comparing the availability of the same thing over time or space. In all other situations using the term would be internally inconsistent.”

As a result, the scarcity issues only arise due to the „availability‟ or inaccessibility which caused by limited knowledge and capability of men to search the location of creating resources, to derive the method to extract and to formulate its usage for the 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:

“He said: “I know what you know not” 32

From the argument and assertion above, there is no scarcity in term of quantity in Islamic economy. Summarily, it can be written as:

Sufficient Resources Created by God + (Human‟s constraints to acquire, to locate and to use of the resources + Unlimited Wants) = Scarcity in Accessibility (Relative Scarcity)

All the three economic agents that are households, firms and the 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.

- Access-based, Relative Scarcity and Injustice Distribution of Resources

32 QS.2:30 11

This paper argues that when resources treated as in economic and related to supply and demand, in fact scarcity of resources should be understood in term un- justice distributive within the supply and demand system. That is, not because scarcity deemed does exist in resources quantity, but because access cannot be gained by any who desire it. It means this conception of scarcity is related to issues of distribution and does not involve an actual empirically shortage of quantity resources.

Access based scarcity is a relationship between supply and demand, a temporary state, potentially erased considering the redistribution of resources or with the fluctuation of demand. Consequently, because the indeterminate and contingent nature of access- based scarcity, what is scarce is always relative. Thus, relative scarcity, economically based on accessibility and its relation to the dynamic supply (availability) and demand (desires). If economically relative scarcity closely related to accessibility of human to the resources, that mean also closely related to how the resources or the wealth was distributed, justice or injustice issues.

When looking at the above, what comes to the relationship between scarcity and distribution, there may be physical quantities of resources present but scarcity exists because of supply or distribution problems. Meeting the demand for that resource might mean exploiting lower quality resources. For example, food production may require cultivating lands that are poorly suited to farming, such as on steep slopes or in very arid areas, requiring a greater effort (more labor) and other inputs (chemical fertilizers, irrigation) in order to meet the demand. Another example concerns the exploitation of fossil fuels. When the most accessible and best quality fuels are fully exploited (e.g., sweet crude from the middle or other areas) we may turn to lower quality fuels (tar sands) to meet our needs.

We can re-classify scarcity into two kinds of scarcity ("need scarcity" and "want scarcity"), then we can properly analyze the relationship between scarcity and distribution in a social-economic context. Now if we analyze the relationship between scarcity and distribution. Let's say there are $100,000 dollars worth of resources available to two people. Let's say that $30,000 is required to satisfy "need scarcity" for both. # Scenario 1: RM50, 000 for each In this scenario, there is abundance. Both people have their needs satisfied and have an extra RM20,000. #Scenario 2: One person has RM80, 000 and the other has RM20, 000 Now, the person with RM80, 000 has a lot of abundance and have their needs satisfied. However, the person with RM20, 000 does not have enough resources to satisfy their needs and, therefore, experience "need scarcity". From this little experiment, we can conclude that scarcity is relative in terms of distribution. If the factor in "want scarcity" at RM50, 000 each, then here's what we have: #Scenario 1: RM50, 000 for each Nobody has enough. Scarcity for everyone! #Scenario 2: One person has RM80, 000 and the other has RM20, 000 One has just enough, but the other is in really bad shape! Scarcity once again.

As we can see, if we consider both kinds of scarcity together, we will notice that scarcity is a lot more present when "wants" are considered. The importance of wants, therefore, must be taken into account and must be properly valued. Scarcity is not the 12 only concern when economic problem is to be seen as a problem of meeting needs rather than satisfying wants. The primary concern is to make sure that the resources are being allocated to meet the needs and needs do not get ignored while meeting instinctive desires.

In conclusion, the economist must consider the distribution of resources before determining whether there is truly a scarcity of resources or not. While wants may be infinite, needs are not. This is one of the factors that must be considered when analyzing economic problems. Also, while wants may be infinite, there's a limit to what people can actually use, so an excess of resources can result in stagnant resources that are not actually being used by those who own them. Given the fact that the world population owns over 80% of the world's resources, it turns out that the fundamental economic problem is not a problem of scarcity, but a problem of distribution. Even if the factor in "Want scarcity" , it will notice that the rich have a whole lot more than they are actually able to use and end up leaving large sums of resources stagnant in bank accounts while over 50% of the world population suffers

On this argument, Islam does not share this idea of relative scarcity. Islam does not allow this to happen. The basic needs are guaranteed to every Muslim and non- Muslim living under the rule of Islam. These needs include the tangible, such as adequate food, clothing, and shelter, as well as the intangible, such as medicine, education and security. The primary goal is to have everyone producing and everyone consuming. The Islamic economic system is not based on price as the method of distribution of goods, but rather, how to distribute funds and benefits to all citizens. With the basic needs satisfied, everyone can live a happier life because people are allowed to search for the livelihood that suits them best and makes them the happiest. The whole society prospers from this system because when people are doing what makes them happy instead of only what makes them money, they are more successful and productive. There may be great economic differences among the people and the means to have the basics for life will be provided for all. This takes into account the fact that people have different skills, motivational levels and entrepreneurial desires and there is no sin in high earnings. The Islamic economic system is just a part of Islam. It cannot be separated from it and discussed as an individual component

Conclusion

- The discussion in this paper indicates that the failure to properly distinguish between “wants” and “needs” imparts a scarcity problem and circularity to the concept of opportunity cost, which are inherent in a capitalistic economic concept. - Scarcity is not the problem in Islamic Economics, because Islamic economic describing: Muslim has Tauhid that teach, Allah has created all in the universe with unlimited size. Allah is who emerge lost or dead resources. - Scarcity or abundant resources are Allah‟s prerogative, under His Ilahiyah mechanism. - Resources will always available to human beings as well as thought and activity of human under the sharia rules. In other words, Islamic Economic must be exist and applied in individual and society to guarantee equal and justice distribution of resources to the social community. 13

- Relative scarcity appears in the economy based solely on consideration of accessibility and its relation to the dynamic between supply (Availabiltiy) and human demand (desire) - The main problem is a Human economic behavior. Therefore scarcity in essence, arise because mistake of human economic activity to fulfill the human unlimited want and desires.

Acknowledgements

We would like to acknowledge that this paper benefits from Institut Islam Hadhari grant No. UKM-11KH-05-FRGS0087-2009.

References

Abul Hasan and Aidit Ghazali, (1992), Readings in Islamic Economic Thought, Longman Malaysia SDN BHD, Selangor, see also Asad Zaman, (2008), Islamic Economics: a Survey of the Literature, IIUI, Pakistan

A.K Sen, (1982), Choice, Welfare, and Measurement, Oxford: Oxford University Press

Al Mawardy, (1982), an Nukat wa al „Uyun Tafsir al Mawardy, Kuwait, Wizarah al Auqaf wa asy Syu‟un al Islamy, 2/414

A. Schotter, Economics, a Critical Appraisal, 1985, St.Martin‟s Press, New York

Ar Rifa‟i, Muhammad Nashib, (1989 M/1410 H), Taisir al Aliyy al Qadir, Maktabah Al Maarif, Riyad

As-Sadr, Baqir, (1973), Iqtishâdunâ, Beirût: Dâr al-Fikr. Vol. IV.

An Nabhany, Taqiyuddin, (1990M/1410H), An Nidhom al Iqtishod al Islamy, Dar al Ummah, Beirut, vol.4.

Ar Razi, (1978), Tafsir al Kabir: Tafsir Fakhr ad Din ar Razi, Beirut, Dar al Fikr, 4/264

Choudhury, Mausudul Alam, (1986), Contribution to Islamic Economic Theory, St. Martin Press, New York

E. K. Hunt, (1979), History of Economic Thought, Wadsworth Publishing Co. Inc, California

Hart, H.L.A., (1982), Essays on Bentham Studies in Jurisprudence and Political Theory, Oxford University Press, New York, USA

14

Hasan, Zubair, (1992), Profit Maximization: Secular Versus Islamic‟ in Sayyid Tahir et al (Ed) “Readings in Microeconomics: An Islamic Perspective‟ Longman, Malaysia (Chapter 20, PP. 239-255).

Hasan, Zubair, (2011), Scarcity, Self-interest and Maximization from Islamic angle, http://mpra.ub.uni-muenchen.de/31631/

Heinz Kohler, (1968), Scarcity Challenged an Introduction to Economics, Holt, Rinehar and Winston Inc. USA

Heap, Shaun Hargreaves, Martin Hollis, Bruce Lyons, Robert Sugden, and Albert Weale (1994), the Theory of Choice: A Critical Guide, Oxford: Blackwell Publishers.

Ibnu al Jauzi, (1964), Zad al Maisir Fi al Ilmi Tafsir, Damaskus, al Maktab al Islamy, 8/296

Ibn Kathir, (1980), Tafsir al Qur‟an al Adhim, Dar al Fikr, Beirut, 7/124

Karim, Adiwarman, (2001), Sejarah Pemikiran Ekonomi Islam, the International Institute of Islamic Thought Indonesia (IIIT-I), Jakarta

Khan, M. Fahim, (1995), Theory of Consumer Behavior in the Islamic Perspective, Islamic Foundation Markfield Da‟wah Centre, Leicester UK

Mannan, M.A. (1982), Scarcity, Choice and Opportunity Cost: Their Dimension in Islamic Economics. Saudi Arabia: International Centre for Research in Islamic Economics

Mankiw, G, 2006, Principles of Economics 4th Ed. Southwestern College Pub, Ohio

McConnell, C. R. (1969), Economics: Principles, Problems and policies, McGraw- Hill, New York

Mill, J. S. And Bentham, J., (1824), an Introduction to the Principles of Morals and Legislation, Utilitarianism and Other Essays, Harmandsworth: Penguin.

Oscar Lange, (1974), Political Economy, Pergamon Press, Vol I

Perloff, Jeffrey M. (2008), Microeconomics, 5th Edition, Addison-Wesley, New York

Pindyck & Rubinfeld, (1998), Microeconomics, 4th edition, Prentice Hall

Rian C. Amacher & Holley H. Ulbrich, (1986), Principle of Macroeconomic, Ohio, Southwestern Publishing. Co

Ruffin, R.J. and Gregory, P.R. (1993), Principles of Microeconomics, 5th Ed., Harper Collins, New York

15

Samuelson, P. A. And P. Temin, (1976), Economics, 10th Ed. New York: McGraw Hill

Syakir,Ahmad, (2005), Umdah at Tafsir an al Hafidz Ibnu Kathir, 1426 H, Dar al Wafa, Al Mansurah,ch.3, pp.535-537

Siddiqi, M. N (1984): Islamizing economics, International Institute of Islamic Thought (IIIT), Herndon, VA 22070 – 4705, USA

Sidgwick, Henry, (2000), “Pleasure and Desire,” in Essays on Ethics and Method, edited by Marcus G. Singer. Oxford: Oxford University Press

Smith, Adam (1996 print): An Inquiry into the Nature and Causes of the Wealth of Nations, The Glasgow Edition

Schotter, A. (1985), Free Market Economics, a Critical Appraisal, St. Martin‟s Press, New York

Swasono, Sri-Edi, (2005), Ekspose Ekonomika: Mewaspadai Globalisme dan Pasar Bebas, Edisi Baru Yogyakarta, PUSTEP-UGM

Syekh Ahmad Syakir, (2005 M/1426 H), Umdah at Tafsir an al Hafidz Ibnu Kathir, Dar al Wafa, Al Mansurah,ch.2, pp.544-545

Weber, Max, (1958), The Protestant Ethics and the Spirit of Capitalism, Charles Siribner‟s and Sons, New York

Yusuf al Qardhawi, (1997), Norma dan Etika Ekonomi Islam. Gema Insani Press, Jakarta