Consumption Function in Islamic Economics

Abstract

M. Fahim Khan, “Macro Consumption Function in an Islamic
Framework,” Journal of Research in Islamic Economics (JRIE), Vol. 1,
No. 2, Winter 1404/1984, pp. 1-24.
Prof. M. Fahim Khan’s paper suffers from a number of deficiencies
which may be grouped under the following categories:
1. Inaccuracies in the description of positions relating to modern
secular economics.
2. Questionable interpretation of Islamic positions.
3. Technical and logical errors in model construction.
I shall take up these points in turn.
To begin with, Prof. Khan’s description of the premises of modern
economic theory of consumer behavior and its subsequent critique is
inaccurate. According to him, “Modern economic theory studies
consumer behavior under the following premises: i) It is assumed that a
consumer will decide what to consume and how much to consume only to
gain the material benefits and satisfaction. ii) It is generally assumed
that all his consumption is geared to satisfy his own needs. He is not
bothered to satisfy anyone else’s needs. iii) It is assumed that a consumer
behaves rationally. This among other things, means:
(a) the consumer will neither be a miser nor an unnecesssry spendthrift.
(b) he will not hoard his wealth.” (p. 2)
Modern economic theory of consumer behavior do&e not assume any of
the said premises given by Prof. Khan. What modern theory msumes is
that a consumer with given income allocates his spending on different
goods and services in such a way that he maximizes his utility or
satisfaction. According to modern theory, it does not matter whether a
consumer is a miser, spendthrift or a hoarder. Also it does not matter ...