Sunday, February 07, 2010

Profit from an Islamic perspectives: Catholic Response to Zubair Hasan

This snowy weekend I was reading essays on profit when I stumbled upon Zubair Hasan’s Theory of profit from Islamic perspective.

It is a quick informative read that finished with a conclusion I do not agree with.

“In sum, for formulating an integrated operational profit theory let profit be defined as a
surplus over cost, the firm not the entrepreneur be made the focal point of its study, all
rudiments of dynamic change be regarded as its source, and scheme for its sharing
between capital and labor be devised to promote equity, growth, and peace in society.
Such a profit theory will impart realism to economics: both mainstream and Islamic”

My main disagreement with his conclusion is “let profit be defined as a surplus over cost”.

The late Spanish Scholastics had reached a different conclusion. Namely Saravia de la Calle, who said, “If we had to consider labor and risk in order to assess the just price no merchants would ever suffer a loss nor would abundance or scarcity of goods and money enter into the question.”

For Hasan’s search for a real definition of profit, he wanted numbers that could be measured. Yet by turning to “surplus over cost”, Hasan had prescribed the downfall to his theory of profit. For de la Calle correctly points out that “otherwise we would never find a case where merchants justly lose; they would always win.”

For de la Calle and other Scholastics, my source is Faith and Liberty: The Economic Thought of the Late Scholastics by Alejandro Chafuen.