Understanding the Economics of Ibn e Khaldun

Understanding the Economics of Ibn e Khaldun
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By Binish Qadri

Ibn e Khaldun is undoubtedly one of the greatest economists of the world. His economic thought has practical implications and therefore very relevant. Ibn e Khaldun was the first to examine the operational working of an economy scientifically, logically and methodically. It was he who first made the realization of the importance of technology, knowledge, specialization and international trade in economic surplus which is caused by demand differences between two different countries.
Khaldun systematically analyzed the role of government and its stabilization policies to increase income, output and employment levels in the economy. For him state should maintain law and order conducive for economic activities (Karatas, 2006). There are many countries which follow his guidelines as far as the expenditure pattern is concerned. More expenditure on education and less expenditure on mercenary military is chased like anything by developed economies of the world. Furthermore, Khaldun dealt with the problem of most favorable taxation which he called optimum taxation, occurring when government don’t discourage trade and production through taxation, inducements, least government services, institutional outline or structure, law and order, theory of expectations, theory of value and production (Khaldun, 1958).
Stabilization policies keep economic growth stable and government plays a role in such policies so as to generate to extra demand in the economy. This was five centuries before Keynes highlighted the importance of fiscal policy in income, output and employment in an economy.
All National Income aggregates like GDP, GNP, NDP, NNPand so on have their derivations from Khaldun’s thought. He , being centuries ahead of his time, stated that prices are determined by the forces of demand and supply. Factors affecting demand and supply at the macro level too are dependent upon his thought. Two fundamental economic facts are that wants are unlimited but resources are scarce having alternative uses (Robins, 1935). Wants and desires of the people and public spending are the factors affecting aggregate demand, while scarce good and cost of production are the factors affecting aggregate supply. It was Khaldun who identified the causality among different sectors of the economy and was thereby able to draw price interdependence among different sectors in the economy. National Income accounting and Social Accounting have their roots in his thought.
In the Muqaddimah, “the greatest work of its kind”(As cited by Irwin, 1997) Ibn Khaldun considerately and conscientiously discusses historical events of his time. He recognized agriculture as a main and natural source of living and was prior to all the other means of living by its very nature, as it is inherently natural and simple. (It needs no assumption or theory). Crafts and commerce are the other means of living. Agriculture is different from crafts and considered posterior to them because crafts are compound and scientific which is based on Rationality and Speculation. Consequently, as a rule, crafts are common among people who have conspicuous consumption (luxury goods and services), while agriculture is practiced by those who are characterized by inconspicuous consumption, humbleness and self-effacement.
It was Khaldun who laid stress on skill and crafts and the ways to achieve specialization. He correlated the achievements and accomplishments of a society with the level of skills and crafts. Higher the skill and crafts, higher will be the achievement of society and vice versa. Khaldun explains the stages of development of a society. In the initial stages, a society is primitive and nomadic whose basic concern is survival, but as the society grows, it becomes active, with greater accomplishment in art and crafts.
According to the great man, there is improvement in art and crafts when the demand for their products increases because man will not work free of cost. Accordingly , he will direct his efforts towards those things which have value so that he will make profit. Crafts are valued and therefore, demanded in the society which is why they fetch income. For that reason, people try to learn the necessary skills for crafts in order to make their living. Had there been no demand for crafts, people would not have attempted to learn the necessary skills needed for it. Regarding trade and commerce, Ibn Khaldun observed that most of the trade practices and ways are tricky and intended to obtain the profit margin between selling price and purchasing price. Higher the gap between the two, higher is the profit and vice versa. He fascinatingly talked about the supply side of agriculture, the cost of which also has its bearing upon the value of crops and determines their price.
Too much government interference is the reason behind the fall of civilizations because such intrusions and meddling hamper the development of more specialized labour. Bureaucrats maximize their own budgets (Niskanen, 1968; André & Stephane, 1991). Similarly, Ibn Khaldun too believed that too much of bureaucracy in the form of taxes is very bad as bureaucrats are incapable of understanding the world of business as it doesn’t have same zeal as tradesmen. At the commencement of a dynasty, taxation yields large revenues from small taxations. However, at the end of the dynasty, taxation yields small revenues from large taxations.
Political Economy refers to the distribution of political and economic power in a given society that influences the growth and development prospects of that very society (Bardhan, 1984).According to Khaldun, a society with a stable political economy would be expected to have greater successes in art, crafts, skills and technology. He always tried to build a link between the economic and political happenings through careful examination of historical events. Khaldun realized the importance of education in the improvement in science and technology on one hand, and development of culture on the other hand. He argued that it would be very difficult for the new generations to uphold the accomplishments of the previous generations without the strong foundation of an educational tradition.
The development of language is the most important part of development of a civilization for words are the best inputs to express ideas and establish understanding between cultures and civilizations. Language is the way through which we can assess the success of a society. Progressions, innovations and developments in literary works such as poems and prose are another way to differentiate the accomplishment of a civilization, but Ibn Khaldun held that whenever the literary aspect of a society reaches its optimal level it ceases to specify social accomplishments any longer, but is just an exaggeration of life. For rational sciences like economics he recognized knowledge at its highest level as a flow of scholars and the quality of skills and knowledge. The uppermost level of literary productions would be the expression of poems, prose writing and the creative development of a society.
The important contributions of Ibn Khaldun to economics should place him in the history of economic thought as a chief forerunner, if not the “father,” of economics because he not only laid real foundations for classical economics but modern economic theory as well. Nevertheless, in the mainstream literature of economics, his contributions are often ignored which is why the present article attempted to highlight his contributions so as to re-dig Islamic legacy in economics. From times immemorial, Islamic scholars have played a vital role in the growth and development of modern sciences including economics. Individuals, scholars, think tanks, institution of higher education and entrepreneurs can influence government policies if markets are allowed to work and flourish freely.
Finally, according to Khaldun, the government should be a facilitator rather than a regulator in growth process. A country where the state is a regulator managing huge army witness fall of economic surplus and rise of economic crisis.

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Bardhan, Pranab (1984). The political economy of development in India. Oxford, New Delhi, ISBN 9780195647709
Ibn Khaldun. 1958. ‘The Muqaddimah’ (translated by Franz Rosenthal). Vol. 3 (43). Patheon Press, New York, United States.
Joseph J. Spengler. (1964). “Economic Thought of Islam: Ibn Khaldun”, Comparative Studies in Society and History, 6(3), pp. 268-306.
Karatas, C, S. (2006). The Economic Theory of Ibn Khaldun and the Rise and Fall of Nations. Foundation for Science Technology and Civilization. Retrieved from http: // www muslim heritage .com /uploads/The%20Economic%20Theory%20of%20Ibn%20Khaldun.pdf
Niskanen, William A. (1968). Non-market Decision Making: The Peculiar Economics of Bureaucracy. The American Economic Review. Vol. 58 (2): 293-305.
Robbins, L. (1935). An Essay on the Nature and Significance of Economic Science. 2d ed. London: Macmillan.

The author is a Research Scholar at the Department of Economics, Central University of Kashmir, an Academic Counselor at the IGNOU STUDY CENTRE 1209,S.P. College, Srinagar, Editor in EPH – International Journal of Business and Management Science & Asian Journal of Managerial Science and the IJRULA title awards, 2018 winner (Best Researcher, 2018). She can be reached at: qadribinish@gmail.com