Contemporary economics is based on the idea that every decision-maker makes his or her economic decision on the basis of his or her own utility. This theory is presented not only to describe the existing human behavior but also as a preferred human behaviour. According to classical economics, if everyone chooses to maximize his or her utility, then the welfare of society will be maximized. Therefore, keeping an eye your own advantage is termed as rationality and is promoted as a preferred human behavior that can bring optimal economic outcomes for society.
There are several arguments to support this utility maximization theory, for example it is said that if every consumer in the market is deciding on the basis of his utility, then no supplier in the market would be able to charge extra price, because in this case the customer may switch to another supplier and the supplier will not want to lose his customer. Therefore, the so called rationality asks the supplier not to demand extra money for what he supplies. On the basis of this, the utility maximization is often taught as a preferred economic behavior.
It is true that sometimes utility maximization can bring optimal economic outcomes but this needs certain conditions under which this mechanism can work. You must have the freedom to choose your business client, the information about market must be available to everyone and no one should have extraordinary influence in the market. Under such these conditions, utility maximization can bring optimal outcomes for the individuals but there is no guarantee to have optimal outcomes for the society.
On the other hand, if these conditions are not met the utilitarianism can happen to be very harmful for the society. For example, the famine of Bengal in 1945 took many million lives due to shortage of food. At the time of this famine when millions of people were starving to death, at that the Bengal was producing enough grain not only for domestic needs but also for exports. The Japan and its allies from the East and have conquered Singapore and Burma, blocking the supply of rice from the east for the British army. The British in desperation started collecting food for their soldiers in western areas. They purchased rice from Bengal and started supplying to western regiments deputed in different parts of united India. Because the British had a lot of money, they were able to purchase grains at any price.
The prices of rice went up in Bengal but the locals did not have enough money to purchase the grains for survival. Therefore, millions of poor Bengalis suffered a tragic death. This kind of event can occur if there is any one influential party in the market who has the power to disrupt the free market.
Putting aside the discussion on free market, there are some questions about the definition of rationality. The people having a religion also consider the life after death in making their decisions and more than 90% people of the world are associated with one or another religion. If someone is making charity because he believes in the life after death where he will get reward of his charity, should it be considered rational or not?
The contemporary economics considers the rationality only in the context of this world without any regard to the life after death, and as we mentioned above, more than 90% of the world is assessed is associated with any religion, the common definition of rationality would not describe their behavior as rational. This would be a violation of basic assumption that economic agents are rational.
Dr. Syed Nisar Hamdani who has been a Professor at the Kashmir Institute of Economics, University of hazard Azad Jammu and Kashmir, he has quite different views about the definition of rationality. According to Dr. Hamdani, considering the life after death in economic decision making is also completely rational because the decision maker is expecting a reward in the life after death. If the view of Dr. Hamdani is taken into account, the nature of economic decision would change drastically.
Dr. Hamdani also discusses the concept of individual who has to maximize his utility. In the contemporary economics, individual is a human or an institution that makes decision in order to maximize the benefit for the same institution or human, but in reality, everyone thinks about his own life as well as for his family. If the individual is more responsible, he will also consider the advantage for his community, country and globe. Widening the circle of those you care about will change the nature of decision. If someone is maximizing the utility for his own personality, then installing a factory producing hundreds of tons of toxic gases would be an optimal decision if it can make money for the investor. On the other hand, if someone is taking into account welfare of his community, society or the future generations, then such decision would not be considered as a good decision.
Dr. Hamdani terms his interventions in economic theory as Divine Economics. His idea got a lot of popularity and has been admired by several top economists at top universities of the world including the experts at Harvard University and London School of Economics and Political Science.
The shortcoming in conventional economics that Dr Hamdani has pointed out is also realized by the world as well. There was a time when increasing GDP was only measure of development, however, now the definition of development is transformed into the Sustainable Development Goals (SDGs). The sustainable development goals are the goals set by the world leaders to achieve.
The sustainable development goals include many of the targets which are related to community, country, society and the world at large. However, what are theoretical foundations of pursuing the sustainable development goals, the mainstream economics which focuses on individual level utility maximization cannot provide a sensible answer to this question. The divine economics can provide theoretical foundations for the SDGs.
According to Dr Hamdani, the conventional economics is not a good description of the human behavior as more than 90% of the individuals in the world follows one or another religion and the religion often affects the economic decisions. For example, suppose pork and chicken have same nutrition and the chicken is sold for PKR 500 but the pork is available for PKR 200 only.
The economic theory would suggest purchasing pork because it can save money, but a Muslim consumer will weak prefer chicken over pork even though it is causing loss of money. Mainstream economics would see purchasing chicken as irrational but the Divine economics considers it as a normal behavior. Divine economics considers this decision as rational because individuals consider the divine guidance provided by the religion as an integral part of their decision making.
Now when the SDGs have become the talk of the town, the divine economics can actually help in achieving the SDGs. This is because the conventional economics does not provide theoretical foundations for the SDGs but the Divine Economics can provide such foundations. Divine Economics gives proper weighage to religions ad every divine religion asks to care about humanity along with the personality.
Given the above mentioned facts, you can like or dislike the Divine Economics but it is not possible to reject the fundamental logic of this newly designed framework, because no one can deny the role of religion in economic decision making.
However, a question arises; we can cover all these things under the discussion of Islamic economics instead of Divine Economics, then why is it necessary to use the term Divine Economics instead of Islamic Economics?
According to Dr. Hamdani, the Divine Economics framework is applicable for entire humanity having affiliation with any religion. It’s also true that every religion is having its own guidance for the economic decision making, and there is the opportunity to generalize the framework for all religions. To this point I agree with Dr hamdani. However, me and many other Muslims believe that there is only one true religion in the world and all other religions are deviations from reality, therefore, in my view, generalizing over all religions is not a good thing to do, and that is the point of differentiation with divine economics.
However, it is a true pride for me that one of our seniors and our teachers has designed a framework which gives you better understanding of the economy than the existing mainstream viewpoint and which can be helpful in achieving the sustainable development goals and which can provide theoretical foundations to the SDGs. It is a pride not only for the economics community of Kashmir, but for entire academic community of Pakistan that one of our senior has designed an economic framework which has been recognized by the world leading institutions like Harvard University and London School of Economics.
In his personal capacity, Dr Hamdani possesses a lot of beautiful characteristics. He is human friendly, visionary, humble, sympathetic and a person having thought for the nation and the humanity. He is most popular among his colleagues and one having serious disagreement with him is also bound to respect him.
Dr Hamdani is very strict in his personal religious beliefs and he is a person who exposes his religious beliefs in the first meeting. This behavior is indication of his straight forwardness; however, it has frequently provided loss to Dr. Hamdani. But his overall personality is sufficient to overcome the difficulties created by his straight-forwardness.
Last month, Dr. Hamdani has organized an international conference in Muzaffarabad with the title ‘3rd International Divine Economics Conference, and the participants of this event included economist from entire Pakistan and abroad. Without help of an institution, organizing such a successful event indicates the popularly of Dr Hamdani in his social circles and we are happy that such an intellectual discussion was happening in Muzaffarabad.