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Acknowledgments xi About the Authors xiii CHAPTER 1 Economic Systems 1 What Is an Economic System? 2 Current State of the Global Economic System 9 Islamic Economics Paradigm 19 Short History of Economic Thought in Islam 20 Summary 26 Key Terms 27 Questions 27 CHAPTER 2 Foundation of the Islamic Economic Paradigm 29 Meta-Framework and Archetype of Economic Rules 31 Implications of the Agent-Trustee Relationship 33 Significance of Rule Compliance 34 Impact of Scarcity 35 Rationality and Freedom of Choice 38 Individual Obligations, Rights, and Self-Interest 39 Central Notion of Justice 41 Shariah: The Law 44 Summary 47 Key Terms 47 Questions 48 CHAPTER 3 Institutional Framework and Key Institutions 49 Key Institutions 53 Summary 72 Key Terms 72 Questions 73 CHAPTER 4 The Islamic Economic System 75 Social and Economic Justice 76 Prohibition of Interest (Al-Riba) 81 Risk-Sharing Economic System 84 Role of the State 91 Summary 93 Key Terms 94 Questions 94 CHAPTER 5 Key Microeconomic Concepts 95 Defining Microeconomics 97 Issue of Needs versus Wants 100 Consumer Behavior 102 Theory of the Firm 105 Dynamics of Demand and Supply 112 Efficiency versus Equity 116 Market Models 117 Role of the State 121 Summary 123 Key Terms 124 Questions 124 CHAPTER 6 Key Macroeconomics Concepts 125 Principal Economic Agents 126 National Income 127 Consumption, Savings, Investment, and National Incomec Determination 135 National Income and Output Determination 143 Inflation 148 Unemployment 152 Open Economy: Trade in Goods and Services with Other Countries 154 Why International Trade Is So Central to Islam 156 Summary 162 Key Terms 163 Questions 164 CHAPTER 7 Macroeconomic Equilibrium: Characteristics of an Islamic Economy 165 Models of an Interest-Free Economy 166 Summary 184 Key Terms 185 Questions 185 CHAPTER 8 The Financial System 187 Notion of Risk Sharing 190 Building Blocks of the Islamic Financial System 191 Takaful (Islamic Insurance) 210 Summary 216 Key Terms 217 Questions 217 CHAPTER 9 Role of the State and Public Policy 219 Basic Roles of the State in All Economic Systems 220 Role of the State in the Islamic Economic System 224 Policy Instruments of the State in Islam 228 Economic Justice and Public Policy 230 Role of Public Policy 232 Summary 243 Key Terms 244 Questions 244 CHAPTER 10 Fiscal Policy 247 Role of Fiscal Policy 250 Fiscal Policy in an Islamic Economy 254 Public Finance 259 Summary 267 Key Terms 268 Questions 268 CHAPTER 11 Monetary Policy 271 Role of Monetary Policy 272 Monetary Policy in an Islamic Economy 277 Summary 303 Key Terms 304 Questions 305 CHAPTER 12 Economic Development and Growth 307 Evolution ofWestern Economic Thought: From Smith to North and Sen 307 Foundation and Framework of Development and Growth in Islam 312 Islamic Perspective on Financial Inclusion 322 Summary 330 Key Terms 331 Questions 331 CHAPTER 13 Economic and Social Welfare 333 Social Safety Net Provisions 335 Concept of Safety Net and Welfare 337 Empirical Evidence on SocialWelfare from Select Muslim Countries 339 Summary 359 Key Terms 360 Questions 360 CHAPTER 14 Economic State of Affairs in OIC Countries 361 Public Policy in the Islamic Economic System 362 Dimensions of Economic and Social Achievements in Muslim Countries 364 Summary 372 Key Terms 373 Questions 373 Glossary of Arabic Terms 375 Bibliography 381 Index 393

Hossein Askari is the Iran Professor of International Business and International Affairs at the George Washington University. Before coming to GW, he was a professor of Business and Middle Studies at the University of Texas at Austin and assistant professor of Economics at Tufts University. He has also served on the executive board of the International Monetary Fund and as consultant to a number of governments, institutions, and multinational corporations. He received all his university education at the Massachusetts Institute of Technology, where he earned a BS in civil engineering and a PhD in economics. Zamir Iqbal is a lead specialist at Finance and Markets (F&M) Global Practice of the World Bank. He heads the World Bank Global Center for Islamic Finance Development in Istanbul. He has more than 20 years of experience in risk management, capital markets, and asset management at the World Bank Treasury. Islamic finance is his research focus, and he has coauthored several books on Islamic finance topics such as banking risk, financial stability, and risk sharing. His most recent coedited book, Economic Development and Islamic Finance, was published by the World Bank in 2013. He earned his PhD in international finance from the George Washington University and serves on the professional faculty at the Carey Business School of Johns Hopkins University. Abbas Mirakhor is currently the first holder of the chair of Islamic Finance at the International Center for Education in Islamic Finance (INCEIF). He served as the dean of the executive board of the International Monetary Fund from 1997 to 2008 and as the executive director representing Afghanistan, Algeria, Ghana, Iran, Morocco, Pakistan, and Tunisia from 1990 to 2008. He has authored numerous publications and research papers on Islamic finance; among them are Introduction to Islamic Finance (Wiley 2011), Risk Sharing in Islamic Finance (Wiley 2011), and The Stability of Islamic Finance (Wiley 2010).