Capital and capital budgeting : an Islamic view on selected issues

Abstract

In view of the vastness of the subject, and the limitation of me and ability, I have selected for consideration few issues which, an Islamic viewpoint, are particularly important in theory or in I deal first with the question of uncertainty in capital theory because of its importance in understanding the Islamic position on intimately connected, in many minds, to the interest rate. The last addresses the question of discounting in capital budgeting, which is project evaluation. It is shown there how to empirically estimate an part presents some Islamic criteria that can aid in the process of Islamic social welfare function, then how to use it in project evaluation. I have drawn freely, in writing this paper, on my previous relevant papers which are included among the references, and which deal further technical details. 1. Uncertainty and Capital Theory Because economic and social reality is so complex and full of distracting details, we need to abstract from much the detail and deliberately ignore parts of reality in order to understand the remaining parts. This is the usual way to understand reality and to be able to discover its main underlying patterns and relationships, e., to be able to theorise about it. Economist do this abstracting by assuming away what they consider to be the less important details of reality. The process of "assuming away" parts of reality is value loaded. This process is the biggest door through which a researcher's world View, value judgement, and yes, biases enter into his "positive" economic as it is in journalism and news coverage. The main analysis. What to highlight and what to ignore is as value loaded in is presumably a science. Journalists more readily concede the impact difference is that journalism is admittedly an art whereas economics of value judgements on what they report, whereas economists are less Ware of this problem, and less forthcoming in examining its implications for many of the results of "positive" economic analysis