The Causes and Consequences of Interest Theory: Analyzing Interest through Conventional and Islamic Economics

Description

Interest has always been a part of humans' daily economic life, and the concept of interest has attracted intense attention from economists, philosophers, religious scholars and lawmakers.  This book analyses the issue of prohibition of interest through the lens of conventional economics and then makes a comparison with the position of Islamic economists.  It evaluates the theory of interest presented by Böhm-Bawerk, which is the most respected and applicable theory at present.  It provides an in-depth analysis of the current literature, and it is the first book to scrutinize the interpretation of Islamic economists on the concepts of time preference and interest rate control. This book will be of interest to academics and students of economics and Islamic economics. Preface Contents List of Figures List of Tables 1 Some Introductory Remarks 1.1 The Legitimacy Problem 1.2 The Causes of Interest 1.3 Is Control of Interest a Good Idea? 1.4 Overview of the Content References 2 The Concept of Interest: Meaning and History 2.1 What Is Interest? 2.2 The History of Interest 2.2.1 Mesopotamia 2.2.2 Ancient India 2.2.3 Ancient Greece 2.2.4 Ancient Rome 2.2.5 Byzantium 2.2.6 Interest in the Abrahamic Religions and Medieval Europe References 3 Theoretical Development and the Time Preference Theory 3.1 The Theories of Interest 3.1.1 Turgot’s Theory of Interest 3.1.2 Productivity and Use Theories 3.1.3 Abstinence Theories 3.1.4 Labor Theories 3.1.5 Exploitation Theories 3.1.6 Impatience Theory 3.1.7 Loanable Funds Theory 3.1.8 Liquidity Preference Theory 3.1.9 Pure Time Preference Theory 3.2 Böhm-Bawerk’s Time Preference Theory 3.2.1 The Theoretical, Social and Political Aspects of Interest 3.2.2 Superiority of Present Goods to Future Goods 3.2.2.1 Expectation of a Lower Marginal Utility in the Future 3.2.2.2 Underestimation of the Future 3.2.2.3 Technical Superiority of Present Goods in Production 3.2.3 Time Preference and Interest 3.3 Critiques of Böhm-Bawerk’s Theory of Interest 3.4 The Validity of Böhm-Bawerk’s Theory in Present Economic System References 4 The Motivation for Controlling Interest and Its Instruments 4.1 The Motivation for Prohibiting and Limiting Interest 4.1.1 An Income Without Working 4.1.2 Benefiting from the Poor People 4.1.3 Enhancing the Inequality in Distribution of Wealth 4.1.4 Causing Economic Instability 4.1.5 Discounting the Future 4.1.6 High Cost on Investment and Development 4.1.7 Causing Slavery 4.2 The Instruments of Regulating Interest Rates 4.2.1 Religious Beliefs 4.2.2 Social Norms 4.2.3 Legal arrangements 4.2.4 Financial Instruments References 5 Interest Rate Control 5.1 The Price Control and Cheung’s Model 5.1.1 The Mechanism and Consequences of Price Control 5.1.1.1 Price Ceiling 5.1.1.2 Price Floor 5.1.1.3 Signaling Role of Price 5.1.2 Cheung’s Price Control Model 5.2 The Consequences of Interest Rate Control References 6 Basics of Islamic Economics and the Prohibition of Riba 6.1 The Basics of Islamic Economic System 6.2 Prohibition of Interest 6.2.1 The Pre-Islamic Riba 6.2.2 Riba in Quran 6.2.3 Riba in Sunnah 6.2.4 Riba in Fiqh (Islamic Jurisprudence) and the Traditional Perspective 6.3 Contrarians of the Traditional Perspective on Interest 6.4 The Alternative Instruments to Interest and Devious Ways 6.4.1 Profit-Loss Sharing Instruments 6.4.2 Sale with a Promise to Repurchase 6.4.3 Sale of the Right of Use 6.4.4 Instruments Based on Forward Sale 6.4.5 Cash Waqfs 6.4.6 Instruments in Christianity and Judaism Appendix 6.1: A Chronological Bibliography of Islamic Economics on Interest Appendix 6.2: The Translation of the Term Riba into English References 7 Time Preference and Price Control in Islamic Economics 7.1 Time Preference in Islamic Economics Literature 7.1.1 Time Value of Money 7.1.1.1 The Rejecters 7.1.1.2 The Conditional Acceptors 7.1.1.3 The Acceptors 7.1.2 Time Preference in Islamic Economics 7.1.2.1 The Rejecters of the Generality of Positive Time Preference 7.1.2.2 The Deniers of the Relation of Positive Time Preference with Interest 7.1.2.3 The Acceptors of Positive Time Preference as a Common Attitude 7.1.3 Islamic Economists, Böhm-Bawerk’s Theory, and the Time Value of Money 7.2 Consideration of Interest Rate Control in Islamic Economics Literature References 8 Conclusion References Index