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Challenges in Economic and Financial Policy Formulation pdf

book-icon-openmaktabaBook Title: Challenges in Economic and Financial Policy Formulation
author-icon-openmaktabaBook Author: Hossein Askari
number-of-pages-icon-openmaktabaTotal Pages: 314
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  Hossein Askari, Zamir Iqbal, Abbas Mirakhor (auth.)-Challenges in Economic and Financial Policy Formulation_ An Islamic Perspective-Palgra.pdf

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Significance of Public Policy7between individual and public interests do arise, but only public interestmatters. The state does what it can to bring about a convergence betweenindividual public interests. In this structure, future generations and envi-ronmental factors take on great importance—the state comes to their rescueand incorporates their interest into its objective functions and policy goals. hile in the individualistic structure, individual interests are summed upto arrive at the public interest, in the paternalistic structure, it is the oppo-site, with society’s interests overriding individual interests. We should notconfuse the paternalistic with the dictatorial structure, as the freedom ofindividual choice exists only in the former system. n Islamic system structured on the basis of the Qur’an and the Traditionof the Prophet (sawa) doesn’t fit neatly into anyone of these three categories.The paternalistic system is the closet to the Islamic structure. In Islam, thepaternal figure is the Creator—Allah. In an Islamic system, individuals arefirst and foremost concerned with the collective interest. The individuallives to serve the interests of all, because therein lies her/his own interests. ssentially, in an Islamic society, public interest is broader than that inthe paternalistic structure. Islam, as we will see throughout this book, is arules-based system to guide humanity in their every action. Muslims are,by definition, those who have submitted their own will freely to that oftheir Creator, meaning that they are rule compliant. Incentive structures areneeded to encourage rule compliance. Regulation is not an absolute neces-sity in an Islamic economy, but supervision is always needed in every eco-nomic structure, including one that is based on Islamic teachings.Each of the systems—the three just discussed and the Islamic—can usethe market system; but the market may be used very differently in each.The market is a place for exchange. It is an institution. The marketmechanism operates to bring supply and demand into balance efficiently. n a pure market system, markets make all the decisions. That is why allmarkets—labor, resource, goods and services (that include the exchange ofproperty rights), money (short-term instruments), and capital (long-terminstruments)—play an overriding role in a pure market system.The principal strength of the market system is its assumed efficiency—putting in the minimum resources for the maximum output. However,production or technical efficiency does not necessarily mean economicefficiency. For example, the result may be the maximum output, but whatif there is no demand for the good that is produced in such abundance?Economic efficiency is the value of output in relation to the value of input.Is market mechanism efficient? Yes and no. For example, alcohol is pro-duced efficiently through the market but it may cause deaths. Furthermore,markets can increase or reduce inequalities. Markets take things as they are

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