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File: Islamic Economics Pdf 127312 | The Scarcity Assumption Economic Problem And The Definition Of Economics Revisited
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                                                                                     Research C  enter for Islamic Economics and Finance 
                                                                                      Islamic Economics and Finance Research Group, 
                                                                                                     Universiti Kebangsaan Malaysia 
                                                                                                    Universiti Kebangsaan Malaysia,  
                                                                                                     Bangi 43600, Selangor, Malaysia 
                                                                                                    Bangi 43600, Selangor, Malaysia 
                                                                                                              Fax: +603-89215789 
                                                                                                               Fax: 603-89215789 
                                                                                                         http://www.ekonis-ukm.my 
                                                                                                         http://www.ukm.my/ekonis 
                                                                                                           E-mail: ekonis@ukm.my 
                                                                                                   E-mail: ekonis@pkrisc.cc.ukm.my 
                                                                                                     
                                                                                                     
                                                 Working Paper in Islamic Economics and Finance No. 1225 
                                                                                                     
                               The Scarcity 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: btaufiq@gmail.com 
                                                                                                        
                                                                                        Abdul Ghafar Ismail  
                                         School of Economic, Universiti Kebangsaan Malaysia, 43000 Bangi, Selangor, 
                                                                                             Malaysia 
                                                               Tel: +601-36214133 E-mail: agibab62@gmail.com 
                                                                                                         
                               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 
                                                                                                                                                              
                  goods. 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                                          th
                    Samuelson, P. A.and P. Temin. 1976. Economics, 10  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 limitations8. 
                   
                  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 
                  7
                   Roger 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 
                                  12
                  opportunity cost.  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 
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