Epistemology And Methodology Of Islamic Economics

1. Proceeding - Kuala Lumpur International Business, Economics and Law Conference Vol. 2.
November 29 - 30, 2014. Hotel Putra, Kuala Lumpur, Malaysia. ISBN 978-967-11350-4-4
84
EPISTEMOLOGY AND METHODOLOGY OF ISLAMIC ECONOMICS
Nurul Ashirah Othman
Institut of Islam Hadhari
Universiti Kebangsaan Malaysia
Bangi, 43600 Selangor Darul Ehsan, Malaysia
Email : alliasallia@gmail.com
Abdul Ghafar Ismail
Research Center for Islamic Economics and Finance
School of Economics
Universiti Kebangsaan Malaysia
Bangi, 43600 Selangor Darul Ehsan, Malaysia
E-mail: agibab@ukm.my/agibab62@gmail.com
Bayu Taufiq Possumah
Institut of Islam Hadhari
Universiti Kebangsaan Malaysia
Bangi, 43600 Selangor Darul Ehsan, Malaysia
E-mail: btaufiq@gmail.com
Abstract
In recognizing and understanding the basis concept of science required an epistemology. An epistemology is also very indispensable to understand the rules and principles of a science. Then the epistemology is closely related to methodology of science it-self. In analyzing the epistemology dealing with the methodology of science especially economic science, this paper tries to explore some basic concept of epistemology to explain that economic science substantively is not value laden. Economic sciences developed by some worldview which are formalize its body and principle.
Keyword: Epistemology, Methodology, Economy, Philosophy, Islamic Economics
JEL: A13-B41-P5- P51-Z12
1. INTRODUCTION
Discussing on economic methodology, will not escape from discussing on epistemology and worldview of science, because economics as a science built on epistemology and worldview then transform the human mind. Eventhought the question of how they work in the human’s mind is not easy to disentangle. In the simple context it can be said that the accumulation of knowledge within human mind will shape his worldview, the worldview will establish a scientific tradition further that if done collectively in society will bear a discipline of knowledge. The development of these disciplines requires a right scientific theory and methodology. Theory of science (theory of knowledge) is then referred to an epistemology. Thus it appears that the three elements of knowledge have subtle interrelations.
The theory of knowledge or epistemology specifically examines the nature of a science or scientific knowledge. Discusssing on the nature of science in the treasures of the modern field of philosophy in general has its foundations laid down by Rene Descartes with his method of deduction and Francis Bacon with his method of induction in the nineteenth century. But only in the beginning of the twentieth century people has began to notice the philosophy of science. Most of the philosopher, scientists, and theologians argue that the advancement of science and technology could threaten the existence of mankind, even the nature and its contents. Especially the philosophers saw the threat arises because of the development of science and technology goes regardless of basic philosophical assumptions such ontology, epistemology, axiology who tend to walk alone whereas the presence of philosopical science is a laid back role and function of science and technology accordance to its original purpose, the happiness of mankind.
Etimologically, epistemology is derived from the Greek word; epiteme and logos. Episteme means knowledge, while logos mean theory, explanation or reason. So epistemology can be interpreted as a theory of knowledge. In terminology, Dagobert D Renes (1971:94) in his book Dictionary of Philosophy explains that epistemology is the branch of philosophy in which investigates the origin, structure, methods and validity of

2. Proceeding - Kuala Lumpur International Business, Economics and Law Conference Vol. 2.
November 29 - 30, 2014. Hotel Putra, Kuala Lumpur, Malaysia. ISBN 978-967-11350-4-4
85
knowledge. Thus, epistemology is a branch of philosophy that examines in depth and radical knowledge about the origin, structure, methods, and validity of knowledge. The epistemology is generally called the philosophy of knowledge or theory of knowledge. The term epistemology emerged for the first time and used by JF Ferrier in 1854. In this terminological sense, Miska Muhammad Amin (1983 ), said that the epistemology associated with matters: i) philosophy, which is a branch of philosophy which seeks the essence and truth of knowledge, ii) method, as a method, aiming to deliver human acquire knowledge, and iii) system, as a system aimed to gaining a reality of knowledge truth itself.
2. EPISTEMOLOGY AND EMPIRICAL SCIENCE
Philosophy plays a important role as a torch of explanation, while the duty of science is scientific discoveries or in other words, the duty of philosophy is a "contemplation", and science in charge of "reality", or reveals the reality of this universe. With the contemplation, philosophy initially contains tools that eventually become rational contemplation in reaching his point. Rational tools already exist in the human body since was born. The tools are called "nature" and the ability of the rational form of logic, mathematics and statistics. Everything is abstract, and the presence of only in our minds as Plato calls "innate ideas". This ability is innate ideas, ideas to make someone transformed without observation. Because the nature is neutral and the other hand, people develop empirical science. Empirical science is real discoveries of the universe, or called also "external reality". This external reality could not be determined correctly. So far it cannot be determined whether the external reality revealed by the man or exist independently from the mind, or "external reality is created by the mind. It is difficult to solve, which are actually. Based on these matters philosophy of science is a study in philosophy that wants to answer some questions about the nature of empirical science:
a. What object studied by science? What is the ultimate existence of the object? How the relationship between the object and human perception (such as thinking, feeling and sensing) to produce knowledge? These questions - is called the ontological foundation of knowledge.
b. What is the process that allows obtaining knowledge in the form of science? What is the procedure? What things should be taken to ensure that we get the right knowledge? What is called the truth? What are the criteria? How / techniques / means which helped us in getting the knowledge in the form of science? These questions are called epistemological foundation of knowledge.
c. For what the knowledge in the form of science was used? How was the link between the way the use and the moral rules? How to determine which objects are reviewed based on moral choices? How the link between procedural technique which is the operationalization of the scientific method to the moral norms /professional? These questions are the cornerstone of axiological foundation of knowledge.
In term of epistemology linked to empirical science there is approach called Naturalistic epistemology is an approach to the theory of knowledge that emphasizes the application of methods, results, and theories from the empirical sciences. It contrasts with approaches that emphasize a priori conceptual analysis or insist on a theory of knowledge that is independent of the particular scientific details of how mind-brains work. Varieties of naturalistic epistemology differ in terms of how they conceive the relationship between empirical science and epistemology, how much they rely on empirical science in theorizing about knowledge, and which sciences they take to be particularly relevant to epistemological questions. Naturalistic epistemologists such as W.V. Quine regard epistemology as part of psychology while others such as Alvin Goldman think it merely needs aid from the empirical sciences. On the other hand, Thomas Kuhn thinks that the social sciences should be applied to epistemology. Regardless, the importance of the sciences to epistemology is undisputed among naturalistic epistemologists. Among the topics within this discipline, the debate on the internal and external theories for the justification of beliefs is one of the main issues. Donald Davidson and John Pollock are major naturalistic epistemologists that support Internalism. Alvin Goldman, on the other hand, supports externalism. The issue of a priori knowledge and the problem of induction are also topics for debate within naturalistic epistemology.
Lastly, naturalistic epistemology is not without criticism. Among the problems for naturalistic epistemology are the circularity problem and the problem of normativity. With regard to the aims of unifying science and philosophy, solutions to these problems are of crucial importance for naturalistic epistemologists. Therefor the impact of epistemology to empirical statistic; First, as a means of testing scientific reasoning and the people may become critical of scientific activity. Thus a scientist must have a critical attitude towards the field of science itself, in order to avoid the solipsistic attitude which assumes that only the truest own opinion. Second, an effort to reflect, examines, and criticizes the assumptions and methods of science. There is a tendency among modern scientists who apply scientific method regardless of the structure of science itself. Attitudes required by a scientist are to apply the scientific method in accordance with the structure of science, not vice versa. The method is only a means of thinking, not the nature of science. Third, to provide the logical foundation of the scientific method, because every scientific method developed must be accounted for in a logical and rational in order to be able to understand and use in general. The more widespread acceptance and use of the scientific methods, the more valid the method.

3. Proceeding - Kuala Lumpur International Business, Economics and Law Conference Vol. 2.
November 29 - 30, 2014. Hotel Putra, Kuala Lumpur, Malaysia. ISBN 978-967-11350-4-4
86
3. LINKING EPISTEMIC BETWEEN RELIGION AND ECONOMIC
Generally, religion defined as perceptions and beliefs related to human existence, the universe, and the role of the Lord of the universe and human life that led to the pattern of that religion determines the behavior and purpose of human life. Religion is a social system that has been institutionalized in every society. Basically religion transformed into a binding norm in everyday life and into the guidelines of the most ideal concept. Religious teachings that have been understood driving the lives in individual interaction as a reference to God, between human beings and between human and culture (Nasir, 1999: 45-47). History has proven that religious thinking is very influential to the development of aspects of the material life, political, economic, social, and natural surroundings. That doctrine could be applied in encouraging economic behavior, social culture. Or in other words, there was a significant relationship between progress in the field of thought (immaterial) and advances in the field of materials. Understanding the relationship between religion and economic behavior has been described by Max Weber (1905) in his book The Protestant Ethic and the Spirit of Capitalism (German: Die protestantische Ethik und der Geist des Kapitalismus) that there is a major role of religious values in the process of modernization premodern; In that essay Weber studied many world religions and found out the interaction between various religious ideas and economic behavior Weber stated that religion was one of the primary reasons for the different ways the cultures have developed. Weber tried to find out why the capitalism first emerged in the Western Europe. He was convinced about the high correlation between the Protestantism and successful European capitalists. Weber also believed that many religions have in themselves values that could lead to the economic development, but the Protestants’ believes were already developed at such a high, extreme level, that they allow the Protestants to start this transformation earlier than the other societies started.
Weber (1905:20) also said "Cavinisme ", especially sect puritanism see work as “beruf” or “calling”. Work is not merely the fulfillment of the purpose, but a sacred duty. The attitude of religious life according to this doctrine is innerweltliche ascetic (innerwordly ascesticism), which is an intensification of religious devotion that is run in the excitement of working as a description and statement of the man who was elected. Within the framework of theological thinking like this, the "spirit of capitalism" that rests on the ideals of perseverance, thrift, reckoning, rational, and able to help myself, find a mate. Success of life generated by the hard work could also be considered as justification that he, the followers, is the chosen ones. Weber analyzes that Western society changes towards economic progress are not only caused by business groups and investors. In his research, the majority of Protestant religious values have aspects of economic rationality and the values shown in the religious spirit
Economic studies should not proceed only from the principle of capitalism and the principles of Marxism, but also on the contrary should be thinking more reliable economics in maintaining the safety of all human beings and nature, that has truth values, logical, goodness (ethical) and beauty (aesthetic). Economy to free mankind from the repression, suppression, poverty, squalor, and all forms of backwardness, and can straighten the economic action of the characters that are not human, injustice, greed, and inequality. Economy the historically-empirically has proven its superiority in this world, value laden or not to free themselves from the values derived from religion (value committed).
Islam as a way of life has been providing a wide range of devices complete rules for human life, including in the economic field. Islamic economy is built on the basis of the religion of Islam, so that an integral part of Islamic economics of Islam. As a derivation of Islam, Islamic economics will follow the Islam in its various aspects. The hallmark of Islamic economics is not split between norms and facts, as well as a rational concept. Therefore, study of human economic behavior in Islamic economic system is the worshipness of God or Tawhid. Economic wealth is a instrument to meet the livelihood satisfaction in order to improve its ability to be able to better serve the God. Seek and gain better wealth for the enjoyment of all it is not recognized as a cursed of God. The property is damned if it is used and become a god in his life. Faith and fear of Allah gives a pattern for the world economy in all its aspects. This pattern displays the direction and development model that brings together economic development with the development of religion as a source of value. Thus, economic activities such as production, distribution, and consumption should use religion and not a value judgment by the mechanistic economic determinism as in capitalism and Marxism.
Chapra (2001) gives a general explanation of the reasons that used to deny the possibility of science e.g.economy built upon the paradigm of religion, such :
 Science and religion are different in levels of reality. Science deals with the physical universe that can be recognized by the senses, while religion includes a higher level of reality, transcendental, and exceeds the range of the five senses, including aspects of life after death (afterlife).
 In term of reference, source of religion and science are different. science relying on the sense and religion comes from God's revelation
By using the scientific method, science seeks to describe, analyze, and then predict the empirical facts of human life for various purposes. It contains an implicit assumption that man knows with certainty for all aspects of life so that they can decide what is best for them. Meanwhile, base on the revelation of God and all its derivations

4. Proceeding - Kuala Lumpur International Business, Economics and Law Conference Vol. 2.
November 29 - 30, 2014. Hotel Putra, Kuala Lumpur, Malaysia. ISBN 978-967-11350-4-4
87
thereof source of religious, the religion also attempted to describe, analyze, and predict all events in human life. It contains the implicit assumption that only God who knows all truth, whereas humans only have a little knowledge. The possibility of science built on the basis of religion as described by Kahf (1992) because religion is defined as a set of beliefs and definite rules to guide man in his actions to God, others and to itself . Economics is defined as the study of human behavior in relation to the utilization of economic resources to produce goods and services and distribute them for consumption. So that economics can be covered by a religion, because it is a form of human life behavior.
4. ECONOMIC METHODOLOGY: AN EPISTEMOLOGICAL OUTCOME
Epistemology is a part of the study of philosophy. The developments were in line with the development of philosophy itself. In addition to the ontology, which is part of philosophy that examines the "existing" or "true reality", epistemology is part of the philosophy that examines the origins, assumptions, basic properties, and how to acquire knowledge, and as a critical determinant for the model philosophy. With the understanding, of course, very decisive epistemological character of knowledge, even determine the "consideration" what is acceptable and what should be rejected.
Some philosophers are specialist epistemologists who study the components, sources, and limits of knowledge and of the justification of knowledge (Moser, 2002). Philosophers of science study the nature of scientific knowledge, that is, the claims made by various empirical disciplines and the way in which researchers’ beliefs are formed and sustained (Kitcher, 2002). Formal theories1 of knowledge can enrich but are not the sole determinant of research epistemologies, and the praxis of social inquiry is an important means by which theories of knowledge can be constructed (Mauthner &Doucet, 2003; Schwandt, 2000). Accordingly, we will discuss epistemic questions, questions regarding research practice as knowledge creation and the status of the knowledge created, as academic researchers informed by the qualitative research literature.
Wiersma, (2000) concurs with Delanty and Strydom (2003) and define epistemology as the study which investigates the possibility, limits, origin, structure, methods and truthfulness of knowledge and how knowledge can be acquired, validated and applied. Walker and Evers (1988) put it simply that, epistemology is concerned with how phenomena can be made known to the researcher. According to Brewerton & Millward (2001), the term refers to the inquiry of what differentiates defensible belief from opinion. Epistemology can sometimes also have a major impact on the data collection choices as well as on the methodology in a research process (Hitchcock & Hughes, 1995; 19). In summary too, epistemology tries to answer the following questions:
- What is the source of knowledge? (Delanty and Strydom, 2003)
- Can knowledge of the world be gained? (Delanty and Strydom, 2003)
- Can knowledge of reality be established by some empirical evidence? (Delanty and Strydom, 2003)
- Can knowledge of reality be deduced from premises? (Maykut and Morehouse, 1989; Gall et al, 2003)
- What are the presuppositions of knowledge? (Delanty and Strydom, 2003)
- What are the methodological problems of knowledge? (Delanty and Strydom, 2003)
- What are the problems of validating truth? (Delanty and Strydom, 2003)
- How can knowledge be communicated to other human beings? (Burrell and Morgan, 1979).
All disciplines of scientific knowledge must necessarily have an epistemological foundation. In other words, a science can be used as a new discipline if he meets the requirements of scientific matter. Therefor, one of the requisite in the study of philosophy is epistemology. Epistemology is the branch of philosophy that discusses in depth the whole process to acquire knowledge. Epistemology is essentially discusses the philosophy of knowledge that deals with the origin (source) of knowledge, how to acquire such knowledge (methodology) and validity of such knowledge.
For the framework of modern epistemology, the philosophy of Immanuel Kant is very influential. This is because according to Kant, acceptable science is knowledge that can provide new universal information. Such knowledge is called synthetic a priori. Rationalism as the source of knowledge is reason; emphasizes the importance of mathematics in scientific knowledge. [Representatives include Descartes (1596-1650), Spinoza (1632-77), and Leibniz (1646-1716)]. Knowledge is to be understood in terms both of Intuition, which is immediately before us through perception and Reason which is the way the mind organizes perception so that it becomes the object of experience. With this restriction then metaphysics is something that is not scientific because it is not possible, which can not be traced to the five senses. Metaphysics does not contain synthetic a priori statements as in mathematics, physics, chemistry and other sciences that rely on the facts.1
A methodology is defined as “a theory and analysis of how research should proceed” (Harding, 1987, p. 2), “analysis of the assumptions, principles, and procedures in a particular approach to inquiry” (Schwandt, 2001, p. 161), or “the study—the description, the explanation, and the justification—of methods, and not the methods themselves”
1 See Kant’s Methaphisic at http://users.wfu.edu/hhardgra/kantmet.html

5. Proceeding - Kuala Lumpur International Business, Economics and Law Conference Vol. 2.
November 29 - 30, 2014. Hotel Putra, Kuala Lumpur, Malaysia. ISBN 978-967-11350-4-4
88
(Kaplan, 1964, p. 18). In short, methodology provides justification for the methods of a research project. Methods are
“techniques for gathering evidence” (Harding, 1987, p. 2) or “procedures, tools and techniques” of research
(Schwandt, 2001, p. 158). Methods can be thought of as research action. In the simplest terms, methodology justifies
method, which produces data and analyses. Knowledge is created from data and analyses. Epistemology modifies
methodology and justifies the knowledge produced (Figure 1).
Figure 1
The Simple Relationship between Epistemology, Methodology, and Method
5. TAWHIDIC EPISTEMOLOGY OF ISLAMIC ECONOMIC
Epistemology of economics in conventional thinking generally discusses the origin or source, structure, methods and
the validity of the science of economics. The issue raised in the epistemology of economics is how humans can know
economics, where economics comes from and how to know the truth about economics. Epistemologically, economics
starts from thinking about economic problems.
While the central idea that restrict Islamic economics, and that put the science in contrast to positive
economics (conventional) is hit insistence to explicitly incorporate ethical values based on religion in an integrated
analytical framework. It can be understood from the various definitions of Islamic economics forward by the Islamic
scholars such as MA Mannan (1986: 18),
“Islamic economics is a social science which studies the economic problems of a people imbued with the
values of Islam.”
Khurshid Ahmad (1980) also proposes the definition of Islamic economic that is not differs,
“a systematic effort to understand the economic problem and man‟s behavior in relation to that problem
from an Islamic perspective.”
A more practical definition is expressed by Nejatullah Siddiqi (1980),
“Islamic economics is “the Muslim thinkers” response to the economic challenges of their time.”
More forcefully Naqvi (1981: 18) states that the difference between Islamic economic to the conventional
Islamic economics is the internalization of ethical values (religion) in Islamic economics. Limitations noted above
suggest that in broad outline, Islamic economics is distinguished from conventional economic viewpoint in the
presence of adhesions (worldview) of Islam. Although different terms are used frequently, such as worldview, way of
life, values, visions, perspectives and so on, but not all have a different sense, namely as a fundamental perspective on
the problem. Islamic economic boundaries as defined above also suggest that the conventional economic paradigm
will continue to the function in shaping the economic paradigm of Islamic praxis. In other words, conventional
economic theories will remain the Islamic economics discourse.
Worldview must in special attention in the discipline of Islamic economics. Before determining step further
on Islamic economics, we must formulate first, the term of "Islamic worldview." Furthermore, this paper also want to
see what and how the relationship between epistemology, worldview with the methodology of Islamic economics. In
other words, how the main sources of economic principles drawn from the Islamic worldview epistemologically
forming the Islamic Economics science methodology. However, it should be noted that further discussion of the
methodology and the modeling of Islamic economics is not a concern in this paper.
Islamic epistemology teaches that the human mind is bound and limited by the three laws of reason. First,
what is mandatory for the senses? The second what is impossible for the mind, and the third what might be for the

6. Proceeding - Kuala Lumpur International Business, Economics and Law Conference Vol. 2.
November 29 - 30, 2014. Hotel Putra, Kuala Lumpur, Malaysia. ISBN 978-967-11350-4-4
89
reason? (Suharto, 2005:6). What is mandatory for the sense is a must for that reason to admit a certain proposition without having to look for the arguments or evidence of its truth. So in this sense can not reject the truth. The impossible for the reason is the opposite of the first, namely, that reason would reject certain propositions and can not accept it at all, while the latter is what is possible for the mind to accept or reject it. In this sense rationalism is not much help to achieve certainty the nature or in certain things. Intellect can only accept the possibility of truth based on empirical facts.
Meanwhile economic Capitalism, according to Spengler (1980), is essentially “a product of European civilisation with some of its origin dating back to the Greco-Roman and medieval worlds.”2 Furthermore, Heilbroner in his classic book The Worldly Philosophers argues that contemporary economics is not a science. of society (void of any ideological underpinnings, parenthesis added), its purpose is to help us better understand the capitalist setting in which we will most likely have to shape our collective destiny for the foreseeable future.3
Hence, we can say that “nature and behaviour of the economic agent” and the subject matter of economics is very foundation of economics. 4 Mainstream economics has established “homo economicus” or “economic man” as the ideal type of economic agent who will apply all assumptions of economics in real life. Homo economicus is a term used for an approximation or model of homo sapiens who act to obtain the highest possible well-being for himself given available information about opportunities and other constraints, both natural and institutional, on his ability to achieve his predetermined goals Homo economicus is conceived as an individual who acts rationally by pursuing his own self interest and maximising his own utility. A person is seen as maximising his utility function, which depends only on his own consumption, and which determines all his choices. He is characterised by an individualistic self- interested, utility-maximising, “rational” characterisation, while any ethical consideration is an exogenous variable in his preference. This notion of individual behaviour constitutes the ethical foundation as well as micro-foundations of economics as a discipline where all economic theories and analyses are based on this concept of man. Amartya Sen describes this complex structure of “self-interested behaviour” as having three distinct and essentially independent features:5
- Self-centred welfare: A person’s welfare depends only on his or her own consumption (and in particular it does not involve any sympathy or antipathy towards others). Formally, this is known as the assumption of independent individual utility functions.
- Self-welfare goals: A person’s goal is to maximise his or her own welfare, and – given uncertainty – the probability weighted expected value of that welfare (and in particular, it does not involve indirectly attaching importance to the welfare of others).
- Self-goal choice: Each act of choice of a person is guided immediately by the pursuit of one’s own goal (and in particular, it is not restrained or adapted by the recognition of mutual interdependence of respective successes, given other people’s pursuit of their goals).
2 J. Joseph Spengler, The Origin of Economic Thought and Justice, xii, this is not surprising since science and scientific activities are the result of specific ontology which relates the scientific endeavour of the individual to environment and furnishes their motivational basis. Therefore, knowledge in Islam is not neutral, a position commonly argued in Western epistemology. As Al-Attas observes: “It seems to be important to emphasise that knowledge is not neutral, and can indeed be infused with a nature and content that masquerades as knowledge. Yet it is in fact, taken as a whole, not true knowledge but its interpretation through the prism, as it were, the world-view, the intellectual vision and psychological perception of the civilisation (Western) 2 that now plays the key role in its formulation and dissemination. What is formulated and disseminated is knowledge infused with the character and personality of that civilisation (Western).” Syed Muhammad Naquib Al-Attas, Islam and Secularism (Kuala Lumpur: ISTAC, 1993), p.133
3 Robert Heilbroner, The Worldly Philosophers, 7th ed. (New York: Simon and Schuster, 1999), 310. The statement reflects aspirations underlying the theories put together over nearly 200 years by the great economic thinkers that he reviews: Adam Smith, David Ricardo, Thomas Malthus, John Stuart Mill, Karl Marx, Alfred Marshall, Thorstein Veblen, John Maynard Keynes,
and Joseph Schumpeter. Their legacy is a quest for “socially as well as economically successful capitalisms.” See Baghirathan et al., “Structuralist Economics: Worldly Philosophers, Models, and Methodology,” Social Research, 71, no. 2 (2004): 305-326
4 Economics as defined by Lionel Robbins is the science which studies human behaviour as a relationship between ends and scarce means which have alternative uses. Economics according to Robbins is not concerned with production, exchange, distribution or consumption as such, see: Lionel Robbins, An Essay on the Nature and Significance of Economic Science, 2nded. (London: Macmillan, 1945), pp.16 It is instead concerned with an aspect of
all human actions in those activities, see M. Daniel Hausman, The Inexact and Separate Science of Economics (Cambridge: Cambrige University Press, 1992), pp.3. But, in studying human behaviour, Robbins clarifies his position that “it does not seem logically possible to associate the two studies [ethics and economics] in any form but mere juxtaposition,” see: Robbins, An Essay on the Nature and Significance of Economic Science, pp. 148
5 Amartya Sen, On Ethics and Economics (Oxford: Basil Blackwell, 1990), pp.80

7. Proceeding - Kuala Lumpur International Business, Economics and Law Conference Vol. 2.
November 29 - 30, 2014. Hotel Putra, Kuala Lumpur, Malaysia. ISBN 978-967-11350-4-4
90
The nature of human being in this regard is reduced to an autonomous/atomistic individual in all his activities where he measures value at the level of personal impulses, desires and preferences.6 He is independent of any external elements of society, environment, even God. This notion of an “anthropomorphic” nature of science comes from the principle of secularism and materialism that is at the base of modern Western worldview, where the human being is the centre of everything, and the measure of all things. The human being is considered as a purely earthly creature, divorced and cut off from the Divine source, master of nature and responsible to no one but himself.7 In addition, religious/spiritual insight is considered irrelevant. The materialist and secular view of the ultimate nature of the human being sees human action as being motivated merely by the materialistic side of man. Increasing or maximising utility and satisfaction of all desires becomes a supreme goal in mainstream economics on which all economic theories, policies, regulations, and institutions are based, and should patronise. The concept of ethics sine qua non is also developed based on this notion.8
The Islamic concept of economic, however, is significantly different to conventional economics. The latter, influenced by the process of secularization, sees economics and other “worldly” activities as being devoid of the presence of God. In Islamic economics, the concept of tawhid being fundamental “vertical” relation between God (the Creator) and man (the created), Allah and insan, as well as the “horizontal” man-man relationship defines and guides human behaviour that will be applied in various economic related concepts. Two fundamental concepts in the Islamic worldview that would have significant implications on economic behaviour of the agent in Islamic economics are the concept of man as khalifah (vicegerent) and abd (servant/slave).
Akram (1986) argues that each discipline in social science include economics should be founded on the belief in Tawhid, risalah and akhirah. Linked to this statement according to Izutsu (2002), Man as khalifah-al abd is seen as a focus-word in economics. We explored related terms in various ayah that could explain the concept of khalifah or istikhlaf such as: ilm, taskhir, amanah, isti’mar, Islah, ifsad, ibadah, and ummah that could meaningfully explain the Tawhed epistemology as relationship between man and God, man and nature as well as man and man. The word khalifah itself means roughly “one who comes after,” “successor,” “deputy,” or “vicegerent.” However, this concept of khalifah and why human kind was chosen to be khalifah, and the tasks and destiny of the khalifah have implications that are not clearly understood by ordinary believers.9
All earthly blessings, and also all that is in the heavens, have also been created for the sake of human beings in managing their role as khalifah.
“He it is who created for you all that is on earth...”10
“He has subjected to you all that is in the heavens and all that is in the earth…”11
Human beings are free to use the bounties and blessings conferred upon them (taskhir), but at the same time, they must carry out their duty towards God mainly as an abd (who serve and worship Him) and khalifah (who holds amanah as God’s representative on the earth) to isti’mar, i.e., to prosper the earth and to create a moral social order on earth. The role of khalifah (vicegerent) is essentially a trust (amanah). God has invested man His trust, a trust which the heavens and the earth were incapable of carrying out. 12As a khalifah (God’s vicegerent), man is entrusted with an amanah to establish responsibility on earth by means of virtues and bounties endowed to him by God, his initiative, creativity and labour (isti’mar). “He brought You forth from the earth and settled You therein”13 to fulfill God’s creative work in the universe (isti’mar). Nature has been created for human beings but man is also required to establish a moral social order on earth. The concept of amÉnah implies that in all his actions, man should choose to prosper the earth (islah) by making the best use of resources and to fully utilise the virtues inherent in him to isti’mar the earth. Ifsad (fasad) or adversity or corruption, is to be avoided in managing one’s role as a khalifah. The acceptance, as implied, is not by any force, but a voluntary choice and based on man’s own will. 14 This will to accept and do or to choose not to do is another “virtue” and superiority that man has over all other beings in the universe.
6 X. Frank Ryan “Values as of Transaction: Commentary on Reconciling Homo Economicus and John Dewey’s Ethics,” Journal of Economic Methodology, 10, no. 2 (2003): 249
7 Seyyed Hossein Nasr, “Reflections on Islam and Modern Thought,” in Islamika II, eds. Lutpi Ibrahim, et al. (Kuala Lumpur: Jabatan Pengajian Islam University Malaya, 1982), p. 97-113
8 Here, one should note that homo economicus is an ideological construction that comes in a package with a whole set of values that imposed on economic man although the proponents of positive economics claimed it as value-free.
Homo Islamicus, on the other hand, is also an ideological construction of the Islamic economic system. Homo Islamicus is created based on the ideals of the nature of human behaviour that is envisaged in Islamic teachings. Both, homo economicus and homo Islamicus are conscious of the worldview/ideology in their actual economic behaviour
9 Toshihiko Izutsu, The Concept of Belief in Islamic Theology: A Semantic Analysis of Iman and Islam, p.2
10 QS.2:29
11 QS.45:13
12 QS.33:72
13 QS.11:61
14 QS.76:2-3

8. Proceeding - Kuala Lumpur International Business, Economics and Law Conference Vol. 2.
November 29 - 30, 2014. Hotel Putra, Kuala Lumpur, Malaysia. ISBN 978-967-11350-4-4
91
In this perspective, we could say that the mission of khalifah on earth is actually part of a grand raison d’etre of his creation, namely, ibadah, i.e., the mission to serve God and to realize the divine will and patterns by being an abd. “I (Allah) have not created jins and humans, but they should worship (serve) me (alone)” 15 The very purpose of man’s creation, as well as the whole creation, is to serve God (ibadah), both inwardly and outwardly. Internally by acknowledging God’s magnificence and supremacy and by awareness of His presence, His magnificence, and His call for human progress and righteousness; externally by compliance with God’s teachings pertaining to ritual and non- ritual activities.16 All man’s actions, including his economic activities, should be viewed in this complete commitment to God by obeying the prescribed framework. His success in life on earth is also valued based on his level of commitment to God17. This means that being a khalifah is not an easy task. Humans must strive for it to be successful (falah) as there is also possibility of failure (khusrin). The successful khalifah will be granted heaven (al-jannah) while the failed khalifah will be in hell (al-nar).
The discipline of Islamic economics itself will have a “theomorphic” characteristic rather than an “antrohomorphic” discipline as in conventional economics. In the former, God becomes the centre, the measure of all things, and any theories developed should reflect this principle as the basis, instead of making the individual man as the centre (i.e., self-centred welfare, self-welfare goals, self-goal choice). Islamic economics bases its principles on tawhid (unity of Allah).Tawhid is the fundamental core of Islam, the foundation of its ethics and philosophy of life, and the basis of its system and institutions. It is the primary determinant of one’s relationship to the natural and social order. Applications of tawhid embrace every facet of human activities at the individual and collective levels from both the natural and social perspectives that reflect unification. Economic action as well as decision or choices made fully reflect the ethical principles of Islam in his unique relationship to God and society in the consciousness of his intimate relationship to God. The nature of the human will be broadened in the Islamic perspective as not merely limited to the physical being with the goal of materialism per se. The human being is a physical-intellectual spiritual being. 18
6. THE CONTRIBUTION OF TAWHID EPISTEMOLOGY TO ISLAMIC ECONOMIC RESEARCH
The epistemological contribution to research is essentially theoretical: It has to do with theories of knowledge. Epistemology is inescapable. A reflexive researcher actively adopts a theory of knowledge. A less reflexive researcher implicitly adopts a theory of knowledge, as it is impossible to engage in knowledge creation without at least tacit assumptions about what knowledge is and how it is constructed.
Methodologi, as Machlup (1978) explained is,
“The study of the principles that guide the students of any branch of knowledge, and especially of any higher learning (science) in deciding whether to accept or to reject certain propositions as a part of the body of ordered knowledge in general or of their own discipline (science)”19
The later come into conventional economics after the economics itself is relatively well established and has significant growth. Thus, the presence of the methodology is to justify or legitimize the existence of economics at once with empirical practices. Based on this premise it can be understood that the situation is constantly changing, the basis of the conventional economics establishment. Consequently, in the future fundamental changes to the practice of the global economy, it will search for a new instrument and appropriate justification, or otherwise experienced by a tragic and difficult situation to imagine. So for the conventional economy no one absolute methodology that always right and beneficial. Perhaps even before the economic methodology is correct, but in the other place and the future is un- correct methodology, even useless. Following to the changes of human behavior and thinking in performing the economy. So that is a reasonable if methodologically conventional economic theories was always contradict each other while searching the answer of economic problems
Methodologically, Islamic economics is formed from a "system", and also by something called as "science". The word "system" is defined as a "complex whole, an arrangement of things or parts which are interconnected each others", when "science" is "knowledge formulated systematically". Similarly, the word "science" can be defined as "a organized knowledge about the physical world, animate and inanimate”. Harmoniously to the definition of "systems" we can easily say Islamic economic is part of a complete system of life, based on four pieces of knowledge, "the revealed knowledge" (Al -Qur'an), the way of life and pithy remarks exemplified by the Prophet Muhammad (Al
15 QS.51:56
16 Muhammad Abdul-Rauf, Ummah and the Muslim Nation (Kuala Lumpur, Malaysia: Dewan Bahasa dan Pustaka, 1991), p. 91
17 QS. 63:9
18 QS.32:6-9
19 Machlup, Firtz, (1978), Methodology of Economics and Other Social Sciences, (New York: Academic Press, hlm 5-56, see also Daniel M. Hausman, (2008), Essays on Philosophy and Economic Methodology, Cambridge University Press

9. Proceeding - Kuala Lumpur International Business, Economics and Law Conference Vol. 2.
November 29 - 30, 2014. Hotel Putra, Kuala Lumpur, Malaysia. ISBN 978-967-11350-4-4
92
Sunnah). Both upwards and onwards interpretation bring to the consensus of society or by the scholars (ijma'). It is the flow of "methodology" leads to a built-in mechanism for clear thinking (ijtihad) on various economic to solving issues and economic problems. This is allowed as long as not contrary to the basic components of the system itself, Al - Quran and Al- Sunnah. Thus, it seems that a "system" of economic in Islam loads principles and methodologies to the entire system of life.
Posssumah (2013) explain that the principles of Islamic economic methodology based on Islamic worldview and Tawhid epistemology, as below:
a. Economic System in Islam is built upon the Aqidah which believe that Islam is the only true religion or system. Then the methodology of Islamic economics should also stems from the belief in the truth of IslamAllah berfirman:
“Indeed, the religion in the sight of Allah is Islam. And those who were given the Scripture did not differ except after knowledge had come to them - out of jealous animosity between them-selves. And whoever disbelieves in the verses of Allah, then indeed, Allah is swift in [taking] account”20 “And whoever desires other than Islam as religion - never will it be accepted from him, and he, in the Hereafter, will be among the losers.”21 As the consequences of this worldview are: - Methodology and procedures of economy in Islam already exist and had been thaught by Islam: - Islamic Economics must be applied in order to resolve the economic problems. If not, then reverse the economic problems will never be completed. This case is significant that methodology of Islamic economics is a practical methodology not only theoretical prediction and perception, because its objective is human welfare not just an assumption Allah Said: “It is not for a believing man or a believing woman, when Allah and His Messenger have decided a matter, that they should [thereafter] have any choice about their affair. And whoever disobeys Allah and His Messenger has certainly strayed into clear error.”22
b. The methodology of Islamic economics as a science is a methodology that linked to the relationship between humans or human with the nature. Both of these relationships in the category of Muamalat attached to the principle "the legal origin of everything is permissible so it comes proof that prohibits" (al-ashlu fil asy-yaa’i al ibaahah) based on:
“It is He who created for you all of that which is on the earth. Then He directed Himself to the heaven, [His being above all creation], and made them seven heavens, and He is Knowing of all things”23
“And He has subjected to you whatever is in the heavens and whatever is on the earth - all from Him. Indeed in that are signs for a people who give thought"24
c. Methodology and theory of Islamic economics as part of Islam must always be appropriate and evolve with the development of human and economics behvaior itself as Islam was always in line with the times and places (salihun likulli zaman wa likulli makan). Allah berfirman: “And We send down of the Qur'an that which is healing and mercy for the believers, but it does not increase the wrongdoers except in loss."25 “Then do they not reflect upon the Qur'an? If it had been from [any] other than Allah, they would have found within it much contradiction.”26
d. The methodology of Islamic economics in the solution of problems of human economic activity following the rules “al-hukmu yadhuru ma’a ‘illatihi wujudan wa ‘adaman”, ( the law follows the causes, presence and absence); “al-hukmu yataghayyaru bi taghayyuri al-azminah wa al-amkinah wa al-ahwal wa al-‘adah”, (The law can be changed with the changes of time, place, circumstances and customs). In the simple meaning despite economic or Muamalat between humans and between humans and nature has been stipulated in general, but the economy is a human being behavior which always changed as well as the development of human life itself, then the methodology of Islamic economics will always explorative while not contradict with Shari'a. This then makes the analysis of Islamic economics may combine induction and deduction, or blends between the legal texts (naqliyah) with the analysis of human social reality. Thus for the purpose of analysis, methodology arranged by several assumptions which separated into two categories, permanent based on Syari’ah such Zakat in investment, gharar, etc; and changeable taken from empiriccal observation such competition form, investment, Profit sharing sistem, etc. in Islamic history, induction-deduction method was
20 Al Qur’an, Ali Imran 3:19
21 Al Qur’an, Ali Imran 3:85
22 Al Qur’an, Al Ahzab 33:36
23 Al Qur’an, Al Baqarah 2:29
24 Al Qur’an, Al Jaathiyah 45:13
25 Al Qur’an, Al Isra 17:82
26 Al Qur’an, Al Nisaa 4:82

10. Proceeding - Kuala Lumpur International Business, Economics and Law Conference Vol. 2.
November 29 - 30, 2014. Hotel Putra, Kuala Lumpur, Malaysia. ISBN 978-967-11350-4-4
93
practiced by Imam Syafi’i when he launch his new ijtihad (qaul jaded) to change his old ijtihad (qaul qadim). The amendment of fatwa according to geographical differences of Basrah and Egypt. The geographical differences then adapted to deductive rule in principle of jurisprudence “taghayyur al-ahkam bi al-taghayur al- azminah wa al-amkinah” (the law may changed by time and places)
e. Methodology of Islamic Economics is a methodology that combines between ratio and the revelation in its analysis and does not polarize both. Both are also considered as a source of Islamic economics. Revelation as a general principle of economic and ratio as an analytical tool. So that as the result, theory of Islamic economics is a theory that should not be contradict between positive and normative27, between qualitative and quantitative, and physic and methaphyisical. About reason or logik, Al Qur’an say, “And He has subjected for you the night and day and the sun and moon, and the stars are subjected by His command. Indeed in that are signs for a people who reason”28
7. CONCLUSION
Epistemology generally called philosophy of knowledge or theory of knowledge. It is a branch of philosophy that studies the radical about the methods, knowledge of the origin, structure and validity. Some basic concepts of epistemology that explains the substantive economic science is not value laden has been discussed in this paper. Relevances and impact of science and epistemology emparikal, where the terms of epistemology associated with empirical science is called epistemology naturalistic approach is an approach to the theory of knowledge, which emphasizes the use of methods, results, and theories of empirical science. Relationship religion and economics as substance or matter in epistemology developed on the basis of Islamic Economics. Islamic economy will be in accordance with all aspects of Islam. Then there was a correlation between the methodologies of epistemology, the whole discipline of scientific knowledge must have epistemological foundation. One of the conditions in the study of philosophy is epistemology. Thus epistemology is essential in determining the economic methodology. Epistemology and worldview are closely related in the form of economic methodology. What is the difference between conventional and Islamic economics economy is the view of life (worldview). Islamic economics bases its optimum principles on tawhid (unity of God) .Tawhid is the fundamental core of Islam, the foundation of its ethics and philosophy of life, and the basis of its system and Institutions. Epistemological contribution to research on the theoretical basis: It has to do with the theories of knowledge. Epistemology is inevitable in the study. Therefore, to determine a methodology that must be seen to epistemological.
REFERENCES
Abdul-Rauf, Muhammad, (1991), Ummah and the Muslim Nation (Kuala Lumpur, Malaysia: Dewan Bahasa dan Pustaka, p. 91
Al-Attas, Muhammad Naquib, Islam and Secularism (Kuala Lumpur: ISTAC, 1993), p.133 Amin, Miska Muhammad, (1983), Epistemologi Islam: Pengantar Filsafat Pengetahuan Islam,. (Jakarta: UI Press)
Baghirathan et al., (2004), “Structuralist Economics: Worldly Philosophers, Models, and Methodology,” Social Research, 71, no. 2 305-326 Delanty, G., & Strydon, P., (2003), Philosophies of Social Science: The Classic and contemporary Readings.England, Open University Press
Dewey, John, (2003), “Ethics,” Journal of Economic Methodology, 10, no. 2 249
Hausman, Daniel M., The Inexact and Separate Science of Economics (Cambridge: Cambrige University Press, 1992)
Hausman, Daniel M., (2008), Essays on Philosophy and Economic Methodology, Cambridge University Press
Heilbroner, Robert, “The Worldly Philosophers”, 7th ed. (New York: Simon and Schuster, 1999)
Ibrahim, Lutpi, et. al Kuala Lumpur: Jabatan Pengajian Islam University Malaya. pp. 97-113
Izutsu, Toshihiko, “The Concept of Belief in Islamic Theology: A Semantic Analysis of Iman and
Islam”, p.2
Machlup, Firtz, (1978), Methodology of Economics and Other Social Sciences, (New York: Academic Press, p.5-56
Mannan, Muhammad Abdul, (1986), Islamic Economic, Theories and Practices, Kent: Hoddar Stoughton
27 Mannan, 1986, Islamic Economic, Theories and Practices, Kent: Hoddar Stoughton, hlm.9
28 Al Qur’an, Al Nahl 16:12

11. Proceeding - Kuala Lumpur International Business, Economics and Law Conference Vol. 2.
November 29 - 30, 2014. Hotel Putra, Kuala Lumpur, Malaysia. ISBN 978-967-11350-4-4
94
Nasir, Nanat Fatah., (1999), Etos Kerja Wirausahawan Muslim, cet. I Bandung: Gunung Jati Press.
Nasr, Seyyed Hossein, (1982), “Reflections on Islam and Modern Thought,” in Islamika II, eds.
Nejatullah Siddiqi, Muhammad, (2001), Economics – An Islamic Approach, Islamabad, Pakistan: Institute of Policy Studies and Leicester, UK: The Islamic Foundation Renes, Dagobert D., (1971), The Dictionary of Philosophy, Philosophical Library: Concise Dictionaries: Citadel Press)
Robbins, Lionel, (1945), An Essay on the Nature and Significance of Economic Science, 2nded. (London: Macmillan)
Ryan, X. Frank, “Values as of Transaction: Commentary on Reconciling Homo Economicus and Spengler, J. Joseph, (1980), The Origin of Economic Thought and Justice, Southern Illinois University Press
Sen, Amartya, (1990), On Ethics and Economics. Oxford: Basil Blackwell, pp.80