The Theory of Consumer Behavior: Conventional vs. Islamic Asharaf Mohd Ramli and Azrul Azlan Iskandar Mirza Islamic Science University of Malaysia

Transcription

1 The Theory of Consumer Behavior: Conventional vs. Islamic Asharaf Mohd Ramli and Azrul Azlan Iskandar Mirza Islamic Science University of Malaysia Abstract This paper attempts to discover the theory of consumer behavior from Conventional and Islamic perspectives. The comparative approach is used to explain the principles and postulates of the two systems of economy namely; Islam and conventional. The Islamic worldview of belief in the oneness of God and life after death is totally different with conventional secularism. There are two methods that are being used in explaining economic phenomenon i.e. positive and normative. Islamic economists meanwhile refer to Islamic sources such as Quran, Sunnah, Ijma, Qiyas (normative) and refer to conventional theories that are not contradicting with Shariah in clarifying their economic issues (positive). 1. Introduction The theory of consumer behaviour between conventional and Islamic economic systems can be differentiated by looking into its principles and postulates. The study chooses comparative approach in which the worldview and the methodologies of both systems are discussed simultaneously. The first chapter will focus on the rationality in economics to clarify the difference worldview between Islamic and conventional economics. The second chapter briefly explains the concept of consumer behaviour. Conventional methodologies of positive and normative are discussed side by side with the Islamic methodologies in the chapter three. Finally, the fourth chapter gives details account of consumer behaviour base on Islamic perspective according to Fahim Khan, who is one of the renowned Muslim economic scholars.

2 2. Rationality in Economics Rationality is derived from the word rational which means based on or in accordance with reason or logic, able to think sensibly or logically and having the capacity to reason (Oxford Dictionary: 1193). Meanwhile, Rationalists refer to those who argue for a rational approach to human problems, suggest reasoned alternatives to religious dogmas, defend freedom of thought and civil liberties and strive for the secularization of politics, society and educational system. Rationalists counter superstition, aim to promote an open and just society, endorse scientific method and also recognize the importance of emotions and imagination ( In economics Hargreaves Heap introduced the theory of instrumental rationality which equates the rational action with the choice of the means most likely to satisfy a given set of ends (1989: 39). Being rational in the economic sense is thus able to think wisely and meticulously in doing economics activity so that can get benefit from it. The best way to discuss rationality between conventional and Islamic systems would be through comparing the worldview of the systems. According to Chapra (1992: 20) the worldview of capitalism has been greatly influenced by the enlightenment movement. The movement was stretching over approximately two centuries; between early 17 th century and the beginning of the 19 th century. This movement emerged because of wide spreading discontentment with the church institutions. The major implication of this movement was the separation of revelation postulates in the life of people. Secular paradigm proclaimed the separation of religious value in people life had been widely accepted. The Enlightenment movement considered all the revealed truth of religion as simply figments of the imagination, non-existent, indeed at the bottom priestly inventions designed to keep men ignorant of the ways of reason and nature (Chapra, 2000: 19). As a result, religious values and morality shunned away from economics realms and human intellectual become the only source in directing and determining economic postulates and principles.

3 The absent of religious values and morality in conventional economic has led to the need to fulfill self interest among the economic agents. Hence, the ideal of economic rationality is solely rooted in self interest, at best, in the context of social achievement (Khurshid Ahmad, 1992: 23). As a result maximizing self interest becomes the main objective people enter into economic exchanges. Besides of that, this phenomenon leading up to the hedonism where people are encouraged to accumulate wealth and pursue prestige. Rich people do not oblige to help the needy and the poor. The gap between wealthy people and underprivileged eventually results to imbalance in the society. Unlike mainstream economics, the worldview of Islamic system has centred on Tawhidic Paradigm that is believe in the oneness of Allah the Most Magnificent and Powerful and human beings are subjected to His judgment in the life hereafter. The Muslims believe that they are always monitored by Allah and have to take full responsibility for their actions in this world. Such faith has led the Muslims to behave in accordance to the Islamic Jurisprudence for fear of they would be punished in the Judgment Day. The Islamic concept of rationality according to Khursid Ahmad (1992: 7) does not deny either the internal consistency of axioms and postulates or self interest as one of the main determinants of human behaviour but it puts a restrain on self interest by linking it with individual and social responsibility and morality in general. Therefore Islamic jurisprudence or shariah serves as a moral and legal framework to control and shape self interest of the people in the society. The obligation of zakah, for example, creates the concept of brotherhood among Muslims society in which wealthy people pay specific amount of money or goods to the zakah institutions to be distributed to the poorer and the needy. Apart from that the concept of wasatiyyah, which means moderation, is emphasized to avoid people living beyond means while other section of society deprived. Wasatitiyyah in Islam gives each individual the freedom to have the resources and doing any activities that are permissible. But, human must aware that wealth not belongs to them, the truth owner is Allah. Human hired by Allah as His Caliph in this world to manage with what commanded by Allah. Allah mentions this phrase in Holy Quran,

4 Behold, thy Lord said to angles: I will create a vicegerent on earth (2:30) The differences of rationality between the conventional and Islamic systems could be summarized as shown in the table below: Rationality Elements Worldview Self Interest Conventional Secular, keeping away any religious and moral values Maximize self interest without limit Islam Belief in the Day of Reckoning Recognize self interest and limit it according to shariah compliance 3. Overview: The Theory of Consumer Behaviour The study of consumer behaviour in conventional economics can be traced back to the work of Jeremy Bentham s utility theory. Utility theory according to Bentham is based on assumption that what gives pleasure is good and causes pain is bad, thus good and bad or right or wrong were to be determined by the measurable criteria of pleasure and pain (Chapra, 1992: 25). Utility theory has been considered as the cornerstone of economic for hundred years. The desire to get pleasure and averting bad with the influence of hedonism has further spread this hypothesis in the western world. Chapra (1992:20) claims that the emergence of Bentham theory was due to the dissatisfaction feeling arouse among the people with the church and the unfairness in the British legal system. For that reason the theory has been governed by the Enlightenment movement or secularism in which it denies any interference of religious elements in human affairs. In other words secularism rejects belief in God, in Revelation and in

5 Hereafter (Altaf Gauhar, 1978: 300). Hence secularists perceive that human reason as the absolute sovereign of human affairs in place of faith and intuition (Chapra, 1992: 20). The marginal utility revolution in Europe has led to further blooming of the idea of utility. Three economists Menger, Jevon and Walras have developed the theory of marginal utility of value as a replacement of labour theory. According to Blaug (1985:299) marginal utility theory has presented the prime example of the general problem of allocating given resources with maximum effect. For example law of diminishing marginal utility created by Jevons that looking at two individuals engaging in exchange where it cannot take place unless the relative marginal significance of the commodity received exceeds that of the commodity given up for each party in the exchange (Blaug, 1985: 308). On the other hand the Islamic concept of utility is based on Islamic jurisprudence or shariah. Hence the accomplishment of utility or maslahah is subjected to a certain rules and limits that have been laid down by shariah. For instance, Muslims are not allowed to indulge themselves in miserliness and profligacy; rather, they are commanded to base their consumption in line with Islamic law. Thus the concept of utility in Islam differ from the utility theory proposes by Bentham, which people only concern to maximize utility without limit. More details about Islamic theory of consumer behaviour will be discussed in the fourth chapter. 4. The Methodologies of Consumer Behaviour: Conventional and Islam The impact of utility theory towards society in the conventional economy has been tremendous. This is because people only concern to maximize utility in order to fulfill their self desire without thinking about others. As a result moral or ethical values lost their significance in the secular society that rejects anything associated with religion. The influence of secularism in economics is undeniable. This is noted by Altaf Gauhar

6 (1978:300) who claims that secularisation is the hallmark of any modern economy which must operate without much concern for religion, ethics Thus non-muslim economists must have been influenced by secularism in developing methodologies of economic. There are two methodologies of economics developed by western scholars which is known as positive and normative. Positivism believes that economics should be free from any ethical and morality postulates. This theory has become an integral part of the economics paradigms since seventeenth century. What really matter in the view of positive economics is what is or the matter of fact which is value free, thus, disregard any ethical or value loaded moral judgment of what ought to be. An is-statement is simply one that is either materially true or false; it asserts something about the state of the world, that is such and such and not otherwise and we can employ interpersonally testable methods to discover whether it is true or false (Blaug, 1992, 113). Shifted away from any ethical and moral judgments, positive economic principle develop and widely accepted in the western world especially through the concepts of rational economic man and laisez faire. The concept of rational economic man is based on the principle that self interest is the main objective of the economic agents. Chapra in his book quotes what Edgeworth says that the first principle of economics is that every agent is activated only by self interest (2000: 22) Economic man in this sense is only concerned to maximize utility for it can fulfill their self interest, thus, the well being of others in society are totally ignored. Although the definitions of rationality are still debated among economists, what constitute as maximize self interest in rational economic man is well accepted. On the other hand, laisez faire is referred to the term free market. It is believed that the market will run perfectly without any interference particularly from government. Compare to the positive economics which concern with the matter of fact, true or false, normative on the other hand emphasize on giving value loaded judgments on certain economic activities. Blaug states that an ought statement expresses an evaluation of the state of the world, it approves or disapproves, it praises or condemns, it extols or deplores

7 and we can employ arguments to persuade others to accept it (1992: 113). These two methodologies have been used by western economic scholars for hundred years. The methodology of Islamic economics has been the critical issue in current literatures. Muslim scholars from different background of studies have been trying to propose their idea and thought to define Islamic economics. Hence the foundation of Islamic economics is based on their own methods. This development to some extent shows that Islamic economics has been recognized as one of the subjects that get serious attention by Muslim scholars throughout the world. There are two methodologies which are commonly used by scholars; firstly the elaboration of the Islamic economic system and secondly the revision of conventional economics theories. The elaboration of Islamic economic system required economists to explore basic sources of Islamic Jurisprudence, Quran and Sunnah, surveying several texts and rationality. This approach leads to the acknowledgment that Islamic economics is more concerned with normative statement of what ought to be rather that positive statement of what is. Monzer Kahf states that the approach to discovering the Islamic economic system is similar to the approach to discovering the theories and general rules of fiqh (2003: 40) The examples of rules that can be taken from Quran and Sunnah are the prohibiton of interest (riba)(2: 275) and the prescription of zakat (9: 60). The second methodology of studying Islamic economic is trough revision of conventional economics theories. This task requires Muslim economics scholars to identify incorrect concept of conventional economics that is not in line with Islamic teachings and adding the good values derive from its sources. Anas Zarqa forcefully argues that Islamic economics is not shy of using current methods of scientific enquiry because they are the result of centuries of intellectual effort and so constitute a part of a common human heritage (1992: 7) In so doing, Muslim scholars should realize that they are not influenced by some of conventional economic theories which contradict to Islamic teachings.

8 5. An Islamic Theory of Consumer Behaviour: Review of Fahim Khan s Article 1 The Islamic model of consumption according to Fahim Khan must be based on the concept of need compared to mainstream economics concept of wants. Both need and want are the tools used to measure consumption behaviour but the former is more practical because of the subjectivity of the latter. To satisfy want will be difficult because each individual might have different wants compare to fulfill need. The conventional theory of utility is replaced by an Islamic term of maslahah which is defined as a property or power of a good or service that promotes the basic elements and objective of the life of human beings (Fahim Khan, 1992: 12). Maslahah instead of utility introduced in shariah which is aimed at protect and improve the five basic elements of the existence of human being in this world such as life, property, faith, intellect and posterity. Consumer in an Islamic society is governed by Islamic norms which serve as a guidance in their daily life. The Muslims should spend their money for specific purposes only such as for living, education and health, for helping the poor and the needy and for spreading the message of Islam. Apart from that the Muslims is obliged to spend their money in the way of Allah for instance paying zakat and going to pilgrims. There are several Quranic verses and Hadith that emphasis the important of spend in the way of Allah by promise of good reward in this life and hereafter such as the parable of those who spend their substance in the way of Allah is that of a grain of corn, it groweth seven ears and each ear hath a hundred grains. Allah giveth manifold increase to whom He pleaseth: And Allah careth for all and He knoweth all things (2:261). 1 M. Fahim Khan s article on the Islamic theory of consumer behaviour gives details account on the concept of consumer behaviour according to Islamic perspective. For that reason, it is worth to review his article s title Theory of Consumer Behaviour in the Islamic Perspective. M. Fahim Khan is one of the renowned scholars in the field of Islamic economic as well as Islamic banking and finance. He has contributed papers to conferences and seminars and written numerous articles to books and journals. See Essays in Islamic Economy (1995) Islamic Foundation:UK.

9 The concept of wasatiyyah or moderation is encouraged and served as guidance for Muslim in spending money. Farhad Normani and Ali Rahnema also have similar idea with their statement Muslims are commanded to base their consumption on strict adherence to the practice of moderation or iqtisade (Farhad Nomani, 1994: 85). The importance of being moderate or wasatiyyah in spending money is explicitly mentioned in Quran, do not make your hand fastened to your neck nor stretch it out to its outmost reach, so that you become blameworthy and destitute (17:29). There are two important aspects that have been laid down by Islamic jurisprudence in order to guide Muslim to decide what to be consumed now and in the future: 1. Islam permits Muslim to save for the future consumption as Prophet s injunction that it is better to leave after death some resources for one s family than to leave them destitute", suggests that savings are desirable. The balancing rule is again at work in order to determine how much of the income to consume and how much to save (Fahim, 1992: 173). In the Quran Allah says those who, when they spend, are not extravagant and not niggardly but hold a just (balance) between those (extremes) (25:67). 2. The expected rate of return on savings, and not interest rate is the motivation for savings in the Islamic framework. As Muslims are obliged to pay zakat out of their savings per annum, they have to invest the money in order to get return or profit because zakat depleted savings. Prophet s injunction which allows Muslim to save for the future consumption shows the importance of managing household expenses properly for the benefit of all family members. The prohibition of interest rate where people save idle money to get some fixed income is replaced by the expected rate of return on savings which generates the savings to get profits. 6. Conclusion

10 As a conclusion the theory of consumer behaviour between conventional and Islamic economic systems can be distinguished by looking into its postulates and principles. The Islamic worldview of belief in the oneness of God and life after death is totally different with conventional secularism. The two methods of positive and normative in conventional has been used to explain economic phenomenon. Islamic economists meanwhile refer to Islamic sources such as Quran, Sunnah, ijma, qiyas and conventional theories that are not contradicted with shariah. While the former is known as the normative the latter is the positive methods of Islamic economy. The theory of consumer behaviour proposed by Fahim is based on Islamic Jurisprudence. He has highlighted the important of concept of wasathiyyah or moderation in using resources. The resources should be used meticulously as Muslims are not only obliged to care his own life but also to the others. Hence, the concept of want applied in conventional is considered not in line with Islamic religion as the concept aims to fulfill man s desire only. Fahim is found introducing the concept of need which he claims in accordance with the Islamic teachings.

11 Bibiliography Ahmad, Khurshid. (1992). Nature and Significance of Islamic Economics, in Lectures on Islamic Economics. Jeddah: : Islamic Research and Training Institute. Blaug, Mark. (1980). The Methodology of Economics: or How Economists Explain. Cambridge: Cambridge University Press.. (1985). Economic Theory in Retrospect. Cambridge: Cambridge University Press. Chapra, M.Umer. (2000). The Future of Economics: an Islamic Perspective. Leicester: Islamic Foundation.. (1992). Islam and The Economic Challenge. Leicester: Islamic Foundation. Gauhar, Altaf. (1978). The Challenge of Islam. London: Islamic Council of Europe. Heap, Shaun Hargreaves. (1989). Rationality in Economics. Oxford: Basil Blackwell Ltd. Kahf, M. (2003). Islamic Economics: Notes on Definitions and Methodology, in Review of Islamic Economics 3. Leicester: Islamic Foundation. Khan, M.Fahim. (1992). Theory of Consumer Behaviour in Islamic Perspective, in Lectures on Islamic Economics. Jeddah: Islamic Research and Training Institute. Nomani, Farhad and Rahmena, Ali. (1994). Islamic Economics Systems. New Jersey USA: Zed Books Ltd. Zarqa, Anas. (1992). Methodology of Islamic Economics, in Lectures on Islamic Economics. Jeddah: Islamic Research and Training Institute.