Back Issues Economics Featured Magazine

Misery in Economic Thought


One economist most talked about in recent years is undoubtedly Joseph Alois Schumpeter (1883-1950). His books Capitalism, Socialism and Democracy and History of Economic Analysis are such that their influence can still be felt to this day. Indeed, most historians of economic thought who have followed him have only repeated Schumpeter’s analysis, excising with the stroke of their quills more than five centuries of economic thought in Islam. It is high time Schumpeter’s myth of the ‘Great Gap’ be dismantled and forgotten, once and for all.

There is a ‘Great Gap’ in economic thought.1 Despite some efforts in recent years by historians, a large section of the history of economic thought has been left in the shadows: Arab-Muslim economic thought has been one of these forgotten areas.

J.A Schumpeter’s ‘Great Gap’

When we read Schumpeter’s History of Economic Analysis, published by his wife after his death in 1954, he stated that there was a ‘leap’ of five hundred years, from Greek economic thought to the scholastic thought of Thomas Aquinas, and that no significant scholarship or advancement in economic thought had taken place in the intervening centuries. Schumpeter’s main mistake was to forget a golden principle in the verification of the historical theory. That is, to study world events as though they formed a chain, and to examine this chain to see whether the link can be threaded into its proper place or not, so as to verify the authenticity of one’s theories. Without keeping in mind the sequence of events, one cannot learn about the history of any era, especially the one we are about to examine.2

Ibn Khaldun is one of the Muslim scholars who wrote on economics and has been ignored by Schumpeter’s ‘Great Gap.’

The first question that comes to mind is whether this ‘Great Gap’ is a result of a trivial breach or a failure of transmission of economic thought from Arab and Muslim scholars and writers. While it is true that it was only in the 1960s that texts of Islam relating to economic theory had been gathered and presented to a western audience, it is an exaggeration to advance the thesis that Schumpeter had no knowledge of Arabic texts. He mentions very explicitly Semitic-language meditations of Arabs such as Ibn Sina (Avicenna) and Ibn Rushd (Averroes), as well as the Jewish thought of Maimonides, all of which western scholasticism clearly benefitted from.

Schumpeter stated that there was a ‘leap’ of five hundred years from Greek economic thought to the scholastic thought of Thomas Aquinas, and that no significant scholarship or advancement in economic thought had taken place in
the intervening  centuries.

Similarly, it is incorrect to invoke the explanation of the lack of transmission of the Arab-Islamic writings into the Christian west. Two such transmission channels were the Crusades and the Spanish Reconquista, which greatly accelerated contacts between the cultural centres of Byzantium and the East on the one hand, and Andalusia on the other.3

The most well-known transmission channel, however, was the great Arabic- translation movement, starting from the 10th century. Gerard of Cremona was its figurehead, with over seventy translations under his belt, including those of Ibn Sina. In addition, several cultural travelers, such as Constantine the African or Abelard of Bath, learned Arabic and contributed hugely to the spread of Islamic thought in the West.

What was the result of such translations? Did all these translations create reverence and curiosity about the thinking of the Arab world? Initially in some educated circles, yes. However, there is evidence of western scholars appropriating these works for personal purposes. For example, we note that Gerard of Cremona, who died in 1187, deliberately ignored the works of his contemporaries, including Ibn Rushd, who died in 1198. And Ibn Abdun of Seville, recommended in his Risala fi-l-qada wa-l-muhtasib not to sell books to Jews or Christians, since according to him, they had the habit of translating them and then taking credit for them as original works.

Finally, the last argument of the historians is to say that economic thought in Islam is not an autonomous science (meaning dissociated from history and theology), and therefore, economic thought in Islam is nothing more than a mere copy of Greek economic thought, especially when it comes to Aristotle’s prohibition of interest.

Such a characterization ignores the fact that economic structures and trade relations between different groups are factors that strongly influence economic theory. Ancient Greek society had few trade relations with the rest of the world, but this was not the case for Islamic countries, who witnessed huge trade flows. And even though the contribution of Islam confined itself to stating the ideas already developed by the Greeks, would the later economic schools of thought (scholastic, classic mercantilist, etc.) have experienced the growth that they did without Islamic advances?

However, the main point of friction is that this ‘Great Gap’ in economic thought expressed by Schumpeter lays precisely across the period of Muslim thought and civilization. For a long time, we have become accustomed to believing that all progress and modernity is only from Greece, Rome, and Christian Europe. This form of European ethnocentrism is still anchored in our collective unconscious.4 We must realize that developments elsewhere were just as important and significant.

Some Islamic Economic Thinkers

So who are these thinkers who have been ignored? Although the list that follows is not exhaustive, the goal is simply to highlight some of them in order to demonstrate that economic thought in Islam has its place in history and is significant in its own right.

The Precursors

Among the precursors, it is interesting to stress the thought of Abu Yusuf (731-798). Through his position of qadi (judge) and his knowledge of law, religion and history, he was often consulted concerning administrative and public finance issues. In a treaty called The Kitab al-Kharaj, written at the request of the fifth Abbasid caliph, Harun al-Rashid, Abu Yusuf stipulated that the Kharaj tax, which related to agricultural produce, must be used cautiously, both for the benefit of the taxpayer and the ruler. According to Abu Yusuf, if the tax system overloaded the taxpayer, it would lead to the abandonment of land and a fall in tax revenues. In effect, he cautioned that ‘too much tax kills tax’.5  In fact, his concern was for justice for taxpayers, and not for a social optimum. Hence, he argued that it was imperative for tax to be levied at rates proportional to the average wealth of the individual. We find the same ideas espoused by other authors such as Al-Dimashqi, who wrote one of the first books dedicated to solving economic problems.

Al-Ghazali elaborates his argument by using the example of a needle, analogous to Adam Smith’s pin-factory example seven centuries later!

During this period of rapid intellectual thought among Muslim societies, what was happening in Europe? The central public authority was practically ineffective and hardly recognized. The economic theory developed in the sphere of agricultural produce, but thoughts on the economic effects of hoarding or excessive taxation came centuries later. While Islam initiated a tremendous period of ‘cultural Renaissance’, Europe plunged into the Dark Ages.

The Theorists and Practitioners

In the tenth and eleventh centuries, Islam was experiencing a period of transformation. On the one hand, the Abbasid caliphate was declining and the empire was gradually breaking. On the other hand, these major political changes did not have any significant effect on the intellectual ferment of Islam. This was the case for both the religious sciences as well as the rational sciences, like medicine or philosophy. This era actually marked the intellectual pinnacle of Islam, where the different city-states competed for splendor and dynamism.

Also overlooked was Miskawayh (932- 1030). He did not attempt to reconcile religion and philosophy, unlike other authors of the same time, but he was very interested in ethical problems. It is in this area that we detect a contribution in the field of economics. He argued that man cannot himself attain material happiness without others. Instead, people are compelled to live with others and to work to meet their needs. For this it was vital to acquire an income. There was a limit to acquisition: it was necessary to follow a ‘middle ground’ between generosity and miserliness, in full compliance with the Holy Qur’an.6 Indeed, had we heeded and incorporated a more ethical approach to economics, many of the economic woes we face may have been staved off. Is it normal that we had to wait for the most severe general economic crisis of the 21st  century in 2008 to see that it was also a moral and ethical crisis? A fundamental value that has been forgotten and which seems intimately related to the last economic recession was just moderation (also called the rule of reason) in the frantic search for profitability and incredible remuneration.

Considered the greatest by some, we must also mention Al-Ghazali (1058- 1111) and investigate his contribution to economics. Among his writings, one widely recognized as the most significant is his four-volume Ihya Ulum al-Din (The Revival of Religious Sciences). Among the many issues he addressed, Al-Ghazali devoted considerable attention to various kinds of production-activities in society, focusing especially on their hierarchy and nature. By classifying production activities in terms of their social importance, and emphasizing the need for cooperation and coordination, Al-Ghazali drew attention to the various production stages preceding a product’s sale. Further, he was conscious of the ‘linkages’ that often exist in the production chain. Al-Ghazali elaborated his argument by using the example of a needle, analogous to Adam Smith’s pin- factory example seven centuries later! Thus, he argued that the various production stages required a division of labor as well as coordination and cooperation within manufacturing strands.

Less known to the general public, it is necessary to put forward the economic thought of Al-Dimashqi, mentioned above. He is the first author to have written a book entirely dedicated to economic issues. Characterized by pragmatism and an absence of dogmatism, his thought was influenced by the Greek thought of Plato and Aristotle, but also by the neo-Pythagorean Bryson. His masterpiece was a little work bearing the title of Al-Isharah fi Mahasin al-Tijara (A Guide to the Merits of Commerce). Among other issues, Al-Dimashqi was interested in the question of the value of a good. According to him, this value depended on three main factors: its cost, the amount of work crystallized in it and its demand. Aware of the costs involved in the manufacturing or in the selling of a good, Al-Dimashqi talked about the consideration of transportation costs and the associated customs duties. The consequence of the demand on the price of the good also did not escape him when he advised his compatriots not to buy the goods for which the demand decreases. The relationship between demand, supply and price seems to have been clear in the mind of Al-Dimashqi, especially when he stated that the price of a good may increase because of ‘delay in delivery, the increase in demand or the quantity (offered) diminishes as a result of some calamity, celestial or terrestrial’. Clearly, Al-Dimashqi formulated what modern economists call ‘price theory’. Although a practicing Muslim, Al-Dimashqi avoided the pitfall of the traditional Islamic debate about price determination by God or man. By refraining from theological explanations of price determination, Al-Dimashqi asserted that some ‘forces’ determine prices that a merchant must understand and manipulate if he wants to prosper.

A little later, a theologian named Ibn Taimiyya (1263-1323) gave a good definition of what an economic system must be. According to him, an economy refers to the system by which individuals may benefit from God’s material gifts, in a manner that does not harm the wider community. Indeed, we have seen in our own time how total freedom leads to injustice, characterized either by large inequalities of the income distribution (as in the case of capitalism) or abusive state intervention in economic life (as in the case of communism). Ibn Taymiyya argued that the Islamic solution is to reconcile individual freedom with communal interest and thus to harmonize the interests of the producer with the consumer in the economic field. He further argued that cooperation and solidarity solutions are preferable to individual freedom when the latter does not achieve collective interests.

‘[T]he strength of Ibn Khaldun’s analysis lies in its multidisciplinary and dynamic character. It is multidisciplinary because it links all important socio- economic and political variables, including the sovereign or political authority, beliefs and rules of behaviour (the Shariah), people, wealth, development and justice, in a circular and interdependent manner, each influencing the others and in turn
being influenced by  them.’

Ibn Taymiyya, as well as others such as Al-Maqrizi (1363-1442), were also very interested in how inflation (increasing prices of goods and services) affected the wider community. This led them to write on monetary theory. Ibn Taymiyya and Al-Maqrizi both argued that a proportional relationship between money supply and trading volume must be established, to prevent inflation and subsequently decreased spending by the average con- sumer. These authors, therefore, propose a first expression of the ‘quantity theory of money’ by linking prices to the circulation of money, making them distant precursors of Jean Bodin.7 Even though a substantial part of what Ibn Taymiyya wrote regarding this subject has become a part of conventional wisdom by now, all economists agree that inflation has a non-neutral impact on the  distribution of income. The inequalities resulting from inflation will persist due to imperfect indexation of wage incomes and to the extent that cash constraints and/or high transaction costs prevent low-income agents from transferring their savings to inflation-linked assets. In other words, by pushing the value of assets up and devaluing cash, the rich who hold assets get richer, while the poor, who live on cash from their incomes, have rising interest-driven debts to pay with a currency that is increasingly devalued.

Ibn Khaldun

Finally, how can we forget Ibn Khaldun (1332-1406) and his analysis of the economic difficulties faced by the Muslim world in the fourteenth century?

In fact, Muslim civilization was in the process of decline during his lifetime. The Abbasid Caliphate (750-1258) had come to an end around three-quarters of a century before his birth, after the near destruction of Baghdad and its surrounding areas by the Mongols. A number of other historical events, including the Crusades (1095–1396), the Black Death (1340s), and the corrupted Circassian Mamluks (1382-1517) had also weakened most of the central Muslim lands.

Under these circumstances, it would be strange if a man of Ibn Khaldun’s caliber would not be in search of an effective strategy to bring about a reversal of the tide. He, therefore, constructed a model that could help explain the rise and fall of civilizations or the development and decline of economies, both of which are interdependent phenomena in his model. Ibn Khaldun tried to address all these questions in his book Muqaddima by explaining the different events in history through a cause and effect relationship and to derive scientifically the principles that lie behind the rise and fall of a ruling dynasty, state or civilization. Muhammad Chapra states that the Muqaddima is ‘extremely rich in a great deal of his own original and penetrating analysis. His entire model is condensed to a substantial extent, even though not fully,’ into ‘“eight wise principles (kalimat hikamiyyah) of political wisdom, each one dovetailed with the other for mutual strength, in such a circular manner that the beginning of the end is indistinguishable’”.8

As Chapra says,

‘the strength of Ibn Khaldun’s analysis lies in its multidisciplinary and dynamic character. It is multidisciplinary because it links all important socio-economic and political variables, including the sovereign or political authority, beliefs and rules of behavior (the Shariah), people, wealth, development and justice, in a circular and interdependent manner, each influencing the others and in turn being influenced by them. Since the operation of this cycle takes place in his model through a chain reaction over a long period of several generations, a dimension of dynamism gets introduced into the whole analysis and helps explain how political moral, institutional, social, demographic and economic factors interact with each other over time to lead to the development and decline, or the rise and fall, of an economy or civilization. In a long-term analysis of this kind, there is no ceteris paribus [all other things being equal] clause because none of the variables is assumed to remain constant. One of the variables acts as the trigger mechanism. If the other sectors react in the same direction as the trigger mechanism, the decay will gain momentum through an interrelated chain reaction such that it becomes difficult over time to identify the cause from the effect. If the other sectors do not react in the same direction, then the decay in one sector may not spread to the others and either the decaying sector may be reformed overtime or the decline of the civilization may be much slower.’9

It is true that Plato first described the idea of cities first developing before suffering decline. Ibn Khaldun took up this theme but deepened it considerably. The theory of cycles Ibn Khaldun developed at the end of the fourteenth century is a far cry from Plato’s meditations.


These numerous advances in the economic field illustrate how difficult it is to believe in the ‘Great Gap’ of economic thought, bridging the Greek civilization directly to western Christian Europe, as described by Schumpeter. The contributions of Islam in economic thought are numerous but have been overlooked. As a result, the hallmarks of Islamic economics such as capital taxation over income taxation, and a non-interest, non-debt- based system in which capital is invested rather than loaned into circulation, have been entirely ignored by western capitalism, to its own peril.

What happened to Islamic economic thinkers after this period? History tells us of how Islamic economic thought began to fade from the thirteenth century, to gradually extinguish in the beginning of the fifteenth. A ‘Great Sleep’ would set in, after the ‘Great Gap’ that never existed.


About the Author:

Ahmed Danyal Arif is a French economist by education and currently working in London. He has a Masters degree in Economics and Politics. After working for the French tax administration system, he published two books in French: Islam & Capitalism: For an Economic Justice (2016), and Economic History of the Islamic World: From Pre-Islamic Arabia to the Umayyad Dynasty (2019).


  1. S. M. Ghazanfar, Medieval Islamic Economic Thought. Filling the ‘Great Gap’ in European Economics (London, Routledge Curzon, 2003).
  2. M. B. M Ahmadra, The Outset of Dissension in Islam (Tilford, Surrey: Islam International Publications, 2013).
  3. R. Verrier, Introduction à la pensée économique en Islam du VIIIe au XVe siècle (Paris: L’Harmattan, 2009).
  4. O. Akalay, Le grand vide de Joseph Schumpeter (Brève histoire de la pen- sée économique en Islam) (Casablanca: Wallada, 1991).
  5. R. Verrier, Introduction à la pensée économique en Islam du VIIIe au XVe siè- cle (Paris: L’Harmattan, 2009).
  6. ‘And those who, when they spend, are neither extravagant nor niggardly but adopt a moderate position in the middle.’ (The Holy Qur’an, 25:68).
  7. A. A. Islahi, Economic Concepts of Ibn Taimiyah (Leicester: The Islamic Foundation, 1988).
  8. M. U. Chapra, ‘Ibn Khaldun’s Theory of Development: Does It Help Explain the Low Performance of the Present-Day Muslim World?’ The Journal of Socio-Economics 37, no. 2 (2008): 839.
  9. Ibid., 839-840.

Add Comment

Click here to post a comment

Other Posts of Interest