THE UNIVERSITY OF CHICAGO INTERPRETING IMMUTABLE LEGAL TEXTS: THE POSNERIAN PRAGMATISM OF ISLAMIC LAW A DISSERTATION SUBMITTED TO THE FACULTY OF THE LAW SCHOOL IN CANDIDACY FOR THE DEGREE OF DOCTOR OF JURISPRUDENCE BY PRAMUDYA AZHAR OKTAVINANDA CHICAGO, ILLINOIS JUNE 2018 TABLE OF CONTENTS LIST OF FIGURES ....................................................................................................................................... V ACKNOWLEDGEMENTS ........................................................................................................................ VI ABSTRACT ................................................................................................................................................ VII 1. INTRODUCTION.......................................................................................................................... 1 A. Key Questions and Purpose of the Dissertation .......................................................... 1 B. A Short Course in Islamic Law .................................................................................... 13 C. Structure of the Dissertation ........................................................................................ 29 2. A GENERAL SURVEY ON THEORIES OF LEGAL INTERPRETATION ........................... 32 A. Introduction .................................................................................................................... 32 B. Semantic-Based Theories of Interpretation ................................................................ 33 1. United States Variants ..................................................................................... 33 2. Islamic Variants ................................................................................................ 37 C. Intent-Based Theories of Interpretation ...................................................................... 41 1. United States Variants ..................................................................................... 41 2. Islamic Variants ................................................................................................ 46 D. Context-Based Theories of Interpretation .................................................................. 48 1. United States Variants ..................................................................................... 48 2. Islamic Variants ................................................................................................ 57 E. Consequence-Based Theories of Interpretation ......................................................... 60 1. United States Variants ..................................................................................... 60 2. Islamic Variants ................................................................................................ 76 ii F. Conclusion ...................................................................................................................... 89 3. ISLAMIC LAW AND THE CLAIM OF PERFECTION ........................................................... 94 A. Defining a Perfect Law: Understanding the Claim ................................................... 94 B. Using Well-Being Criteria in Testing the Claim of Perfection ............................... 104 C. The Rationality Parameters ........................................................................................ 107 4. A CHALLENGE TO ISLAMIC LAW’S IMMUTABILITY .................................................... 121 A. Introduction .................................................................................................................. 121 B. Prohibiting Permissible Acts: Unilateral Divorce and Slavery ............................. 123 1. Limitation of the Husbands’ Unilateral Right to Divorce Their Wives .. 123 2. Prohibition of the Slavery Institution .......................................................... 127 C. Waiving Obligated Acts: The Elimination of Theft’s Penal Sanctions ................. 135 D. Permitting Prohibited Acts: The Puzzle of Islamic Financing Structure ............. 140 1. The Murabahah Financing Scheme (Fixed Interest Debt Financing) ...... 142 2. The Bay’ al-‘Inah Controversy ..................................................................... 145 3. The Ijarah Financing Scheme (Floating Interest Debt Financing) ........... 148 5. THE CONSEQUENTIALIST NATURE OF ISLAM .............................................................. 153 A. Islam, Economic Incentives and CBA ....................................................................... 153 B. The Most Important Story in the Qur’an: Khidr versus Moses ............................. 173 C. The Consideration of Well-being in Islam and the Problem of Satisficing .......... 190 6. THE ECONOMIC STRUCTURE OF ISLAMIC LAW AND LEGAL INSTITUTIONS ...... 196 A. Introduction .................................................................................................................. 196 B. Slavery and The General Theory of Second Best .................................................... 198 iii C. Economic Incentives and Unfairness in The Design of Penal Sanctions For Theft ........................................................................................................................ 221 D. The Cost of Enforcement and The Puzzle of Riba ................................................... 230 7. CONCLUSION .......................................................................................................................... 247 BIBLIOGRAPHY ..................................................................................................................................... 255 iv LIST OF FIGURES 3.1 Murabahah Financing Structure ............................................................................................... 143 3.2 Bay' al-'inah Financing Structure ............................................................................................. 146 3.3 Sukuk Al-Ijarah Financing Structure ........................................................................................ 150 v ACKNOWLEDGEMENTS Writing this dissertation has been a challenging ride, and yet it was also fun and thrilling, as it allowed me the chance to see the world of Islamic law and the religion of Islam from a vividly new lens. Rediscovering the gems of Islamic legal theory and their deep connection with pragmatism and Law & Economics is indeed exhilarating. My huge sincere thanks and gratitude to Professor Anup Malani and Professor Tom Ginsburg for their helpful advice and support as my advisors during my study in the JSD program at the University of Chicago Law School. I am especially indebted to Prof. Malani for his suggestion (or maybe a “discrete” order) to enroll in the Price Theory class at the Economics Department of the University of Chicago. Taking that class was one of my best decisions in life as it was an eye-opening experience and made me fall in love again and again with the fascinating study of economics and its profound effects toward the law. Of course, this dissertation would not have been completed without the support of numerous other people and I am extremely grateful for their help throughout the years of writing this dissertation, including: (i) Associate Dean Richard I. Badger for his consistently efficient administrative assistance since my LLM year, (ii) my research associate, Anaq Pratama, for his helpful assistance in reviewing the citations and bibliography of this dissertation, (iii) Prof. Ahmed El-Shamsy for generously sharing his encyclopedic thoughts in Islamic law, and (iv) my JSD colleagues who, in accordance with the beloved tradition of our law school, challenged my core ideas vigorously and helped me strenghten and made them more coherent. Finally, I would like to express my deepest gratitude to my parents, my brother, and my wife for their moral support during the process of writing this dissertation. Academic research is a never-ending journey, and there are tons of interesting questions left unanswered and problems left unresolved out there. Their continuing support for the next steps of my academic journey is indispensable and for that, I will be forever in debt. vi ABSTRACT The law is ubiquitous and yet it does not always suit the people’s needs and interests. There are at least two strategies for dealing with that problem. We can either amend the relevant legal texts through various means, ranging from exercising formal amendment procedures to a violent rebellion or civil war, or we can impose a different meaning on those texts through various techniques of interpretation, heeding appropriate limits in stretching the applicable meaning. This dissertation focuses on the second strategy and seeks to illuminate the role of consequence-based theories of interpretation, when formally amending the law is costly or impossible, as is the case when legal texts are formally immutable. The Islamic legal system provides an excellent case study. Being governed or at least inspired by divine texts that have survived with no change for almost 1,500 years, it is a unique legal system that claims to be perfect, since it is assumed to be ordained by God, the omniscient entity, and not mere fallible human beings. If this claim is true, and perfection is translated into flawlessness, the Islamic legal system would never experience the problems usually faced by human-made legal systems, such as the hardships in discovering the original intent of the lawmakers or the possibility