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Pareto optimality is a cornerstone of economic theory, describing a state where resources are allocated so efficiently that improving one individual’s situation would inevitably worsen another. This principle holds significant importance in both conventional and Islamic economics. Essentially, an allocation is considered Pareto optimal if no person’s welfare can be improved without reducing the welfare of another.
In the realm of Islamic economics, a comparable principle exist known as Maslaha Mursala. This concept focuses on actions and policies based on their benefits and harms, striving for decisions that enhance societal welfare while minimizing detriment. According to Maslaha Mursala, an act or phenomenon is considered virtuous if it provides a benefit to one party without causing harm to another.
When benefits and harms conflict, Maslaha Mursala offers a nuanced framework for resolving these issues:
Minimizing harm for greater benefit: This guideline suggests that the action is deemed preferable if a slight harm can lead to a significantly greater benefit. For instance, minor financial sacrifices in the short term for a community project can yield substantial long-term benefits for society.
Prioritizing long-term gains over temporary benefits: Decisions should favor actions that provides enduring benefits rather than those offering immediate but fleeting advantages. For example, investing in education yields long-term societal gains compared to short-term financial incentives.
Ensuring certainty over uncertainty: Actions that provide certain and definite benefits are preferred when benefits are uncertain or speculative. This approach ensures stability and reduces risks associated with economic decisions, aligning with Islamic principles of justice and equity.
These guidelines reflect the broader objectives of Islamic economics, which integrate ethical considerations with economic efficiency. The synergy between Pareto optimality and
Maslaha Mursala underscores the importance of equitable resource allocation. While Pareto optimality focuses on efficiency, Maslaha Mursala emphasizes the moral dimensions of economic decisions, ensuring that actions lead to a net positive impact on society.
Moreover, Islamic economics extends the concept of welfare beyond material wealth to include social justice, moral well-being, and spiritual fulfillment. This holistic approach ensures that economic activities contribute to the overall betterment of the community, aligning with the principles of justice, fairness, and compassion central to Islamic teachings.
In practice, Islamic financial institutions often incorporate these principles into their operations. For instance, Islamic banking avoids speculative investments (gharar) and ensures profit-and-loss sharing (mudarabah) to align with Maslaha Mursala, promoting fair and equitable economic practices.
In conclusion, the integration of Pareto optimality and Maslaha Mursala in Islamic economics provides a robust framework for decision-making. It balances efficiency with ethical considerations, ensuring that economic activities contribute positively to societal welfare.
This approach not only optimizes resource allocation but also upholds the values of justice, equity, and communal well-being central to Islamic economic principles.
The author is the Managing Director & CEO of National Bank Limited. He is a fellow member of the Institute of Cost & Management Accountants of Bangladesh (ICMAB) and the first Certified Sustainability Reporting Assurer (CSRA) in Bangladesh. He is also a post- graduate diploma from the Institute of Islamic Banking & Insurance (IIBI), United Kingdom.
Messenger/Fameema
