Economics of Sustainable Energy

By Jaan S. Islam, M.R. Islam, Meltem Islam and M. A. H. Mughal

Every year, as soon as reports on global economic inequality remind us about the direction our civilization is heading, there is a hysterical reaction, but hysteria dies down within weeks and we go back to the lifestyle that brought us here today. Often the blame is laid on the Millennial generation for their “apathy,” “lust for comfort,” and “bratty” attitude. Yet, business insider surveys indicate it’s the same Millennial generation that overwhelmingly cares for the state of the world and the direction in which our civilization is heading. Nearly 50% of them ranked climate change and destruction of nature as their primary concern. This is followed by concern for war and global conflict, and then global economic inequality. The vast majority of those surveyed are willing and eager to make lifestyle changes. This book breaks open the hypocrisy of our civilization and stops the blame game in its tracks and identifies the root causes of today’s world economy, ecology, and global politics.

The book demonstrates that changes in lifestyle are necessary but not sufficient. No economic policy or technology development mode has a chance to survive, let alone thrive unless supported by the political establishment. In this process, the government plays a pivotal role. The challenge is to change the attitude of the government from a ‘self-serving’ controlling mode to a representative philanthropic mode. This new system of economic development and political governance is inspired by a long-forgotten understanding of political economics: medieval Islamic economics. In reviewing the history of economics from trade, currencies, and interest, the strengths and weaknesses of various economic developments over our centuries are evaluated. Based on the historical analysis, a step by step procedure is outlined for this fundamental change in our society today. As a whole, this book is the first of modern era to offer such a comprehensive analysis, complete with solutions to the entire crisis of today’s civilization.

Whether for the student, engineer in the field, economist, or even layperson interested in the subject, this groundbreaking new work is a must-have.  Covering one of the most important subjects in our world today, it is a valiant attempt at solving one of the biggest problems facing all of us. 

• Language: English
• Publisher: Wiley
• Release date: Sep 14, 2018
• ISBN: 9781119525974

Book preview

Preface

The public confidence in the political, financial, and corporate media establishment is at its nadir. Economics – a subject that is uniquely concerned with optimum distribution of wealth in the society-has become a laughing stock in the face of unprecedented accumulation of wealth among the richest 1% and the spectacular failure of the Establishment to arrest the free-fall of social justice. Yet, the left cannot think of anything more than more taxation whereas the right cannot think of anything more than more tax breaks for the rich. The scientific community is equally clueless. What Nobel Laureate Chemist Robert Curl characterized as technological disaster is only supported by Nobel laureate economist, Robert J. Shiller, as a failure of the economic profession in contributing anything significant to society. The discipline of economics is already infamous for having the most number of paradoxes, but what could beat the paradox of the US economy growing stronger proportional to the national debt, that stands at a record high? This book offers hope and guides the readership to developing full understanding of the root causes of the current global crisis. It then shows how the spiralling down can be reversed and true sustainability restored.

Every year, as soon as the Oxfam report on global economic inequality reminds us about the direction our civilization is heading, there is a hysterical reaction, but hysteria dies down within weeks and we go back to the lifestyle that brought us here today. Often the blame is laid on the millennial generation for their apathy, lust for comfort and bratty attitude. Yet, business insider surveys indicate it’s the same millennial generation overwhelmingly cares for the state of the world and the direction that our civilization is heading. Nearly 50% of them ranked climate change and destruction of nature as their primary concern. This is followed by concern for war and global conflict, and then global economic inequality. The vast majority of those surveyed are willing and eager to make lifestyle changes. This book breaks open the hypocrisy of our civilization and stops the blame game at its tracks and identifies the root causes of today’s world economy, ecology, and global politics. Because economics is the driver of today’s civilization, the book starts with the delinearized history of economics, covering the entire span ranging from the ancient Greeks to the Information Age. Step by step all pieces of disinformation are exposed, making it clear to see the root causes of the spiralling down mode in global economy. In this, the top 10 economists of modern era (selected from both right and left) are deconstructed and their mistakes identified. The book shows that these mistakes are embedded in every economic policy that has driven modern economy. As part of this policy, climate change crisis, wars and conflicts, and overall economic extremism are but symptoms that lie in the core of modern civilization.

Just as the economics is the spiritual driver of our civilization, technology development is the mechanical driver of our civilization. This book deconstructs the technology development mode that has emerged from Newtonian mechanics and blossomed during the plastic era for over a century. Root causes of unsustainability of this technology development mode are exposed, laying the foundation for developing sustainable technology, with sustainable energy management as the prototype. The book makes it clear that changes in economic policies are a prerequisite to changes in energy management and technology development. Only then can one begin to talk about reversing the global spiralling down of economic welfare and the state of the environment.

The book demonstrates that changes in lifestyle are necessary but not sufficient. No economic policy or technology development mode has a chance to survive, let alone thrive unless supported by the political establishment. In this process, the government plays a pivotal role. The challenge is to change the attitude of the government from a self-serving controlling mode to a representative philanthropic mode. This new system of economic development and political governance is inspired by a long-forgotten understanding of political economics: medieval Islamic economics. In reviewing the history of economics from trade, currencies, and interest, the strengths and weaknesses of various economic developments over our centuries are evaluated. Based on the historical analysis, a step-by-step procedure is outlined for this fundamental change in our society today. As a whole, this book is the first of modern era to offer such a comprehensive analysis, complete with solutions to the entire crisis of today’s civilization.

Jaan S. Islam

M. R. Islam

Meltem Islam

M.A.H. Mughal

Chapter 1

Introduction

1.1 Opening Remarks

Nobel laureate economist, Robert J. Shiller, famously pointed out: Since the global financial crisis and recession of 2007–2009, criticism of the economics profession has intensified. The failure of all but a few professional economists to forecast the episode – the aftereffects of which still linger – has led many to question whether the economics profession contributes anything significant to society. There is no denying that there is a sentiment in today’s world that the economists with all their economic theories have largely disappointed the general public. While energy is the driver of modern civilization, the role played by the economy in the formation of modern culture is pivotal. An energy manager has to be redeemed by the economic appeal of the project, despite more recent concern about society and the environment. In this regard, the biggest challenge of a new book on this is to present an answer to the question that Shiller’s comment poses. Of course, the answer is not trivial and it is no exaggeration to state that the answer has eluded all researchers and pundits of modern era. Recent studies reveal another depressing fact. Recent findings of Islam (2017) reveal that liberal economies grow faster (for instance, Poland) than the other (for instance, Bulgaria) but also create inequality and can lead to political failure in the long-run. This finding resonates depressingly when one tries to explain the current state of the economy of the United States in particular and the world in general. Recently, Oxfam reported that 388 billionaires had the same amount of money as the bottom 50% of the Earth’s population in 2010. The charity’s report also said that the richest one percent of the population would own more than half the world’s wealth by 2016. Indeed, the Oxfam report turned out to be ‘prophetic’ as the number whose wealth is equal to that of the poorest half of the world’s population has declined steadily since 2010. Of course, the discipline of economics has long been disconnected from social justice, but how can the irony of the original definition of economy (the Greek origins, meaning οίκος – household and νέμoμαι – «manage») be lost on us?

Only recently, Facebook lost $100 billion in 10 days, yet there has been no earthquake, flood, or war (Financial Post, 2018). Bitcoin has oscillated between values assessed between $1000 and $13000 within days, without any connection to real wealth (Shane, 2017). Nearly 100 million dollars worth of Bitcoin has been stolen without physically removing any real property (The Guardian, 2017). What we have seen is Information turned into a safe haven of fraud and economic disaster. In the mean time, the leader of the free world admits that there is a steep learning curve await the U.S. presidency. However, as usual, ‘the state of the union remains strong’ – the time of global deception has arrived.

Occasionally, facts are spewed out in terms of statistics, national debt, etc. However, at no time were scientific explanations provided as to what these data stand for. For instance, the U.S. debt is reported to be $21 trillion, almost all in Treasury Bonds and Bills. Excluding some $7 trillion held by states and American citizens, $14 billion is in the hands of holders outside the U.S. Just over half of that, $7 billion is held by the Chinese (Wattles and Mullen, 2018). While listing these economic data, all news outlets ignore to point out none of these ‘debts’, ‘investments’, ‘securities’ have any meaning in Information age, for which the exceptionalism is the rule. Tomorrow, the U.S.A. can decide that access to U.S. satellite would require a certain tariff or any other hysteria and all of a sudden all deals will be off. Instead, it is stated that if the Chinese were to begin bleeding off some of that into the financial markets (to recover the costs of the tariffs), the value could begin to go down, quickening with any acceleration on the selling pressure. If that paper began declining rapidly, it could take the value of the U.S. dollar down with it.

Overall, there is a great deal of frustration and people do not feel they are a part of the economic system. The general public has lost confidence in the government and people feel helpless as everyone agrees that there is a rush toward economic inequality and the current economic development scheme cannot be sustained. The public mood was captured by Americn writer, Gore Vidal (1925–2012), who wrote, The genius of our ruling class is that it has kept a majority of the people from ever questioning the inequity of a system where most people drudge along paying heavy taxes for which they get nothing in return. In the mean time, there is no shortage of alarmists that continue to put out notices that perpetrate further fear and the public mood spirals down to a level of collective depression. For instance, only recently, former Greek Finance minister and economics professor, Yanis Varoufakis warned that Karl Marx ‘will have his revenge’ as capitalism is coming to an end because it is making itself obsolete (Embury-Dennis, 2017). The former economics professor correctly described how companies such as Google and Facebook, for the first time ever, are having their capital bought and produced by consumers. Based on that observation, Varoufakis concluded something that has no connection to the science of economics. What we have here is a conclusion that appeals to everyone but it has no scientific basis nor does it give any solution.

The energy management sector is equally hopeless. There are numerous studies and even more voluminous conclusions but all point to the same main conclusion: we agree to disagree and life must go on. After spending billions of dollars in research, scientists could not even agree on if we actually have global warming, let alone the cause of it. Considering the fact that today’s science is only a degenerated form of millennia old dogma, it is no surprise that we cannot explain why sunlight is different from fluorescent light, or microwave is different from open flame, or paraffin was is different from beeswax, or carbon dioxide from trees is different from the one guzzled out of engine exhausts. If we cannot even explain these fundamental facts, how could today’s engineering that starts off with denaturing then calculates everything based on New science can begin to offer a solution to what Nobel Chemistry Laureate Robert Curl characterized a technological disaster. Every day, headlines appear that show, as a human race, we have never had to deal with more unsustainable technologies.

How can this spiralling down path be changed? Who could possibly come to rescue? The government? In reality, it has long been recognized that politicians are the most toxic of liars. A New York Times (May 11, 2015) headline reads: All Politicians Lie. Some Lie More Than Others. When policy makers lie, there appears to be no recourse of escape from a process that has been severely corrupted. British poet, William Shenstone (1714–1763) famously pointed out, A liar begins with making falsehood appear like truth, and ends with making truth itself appear like falsehood. What we have is ubiquitous presence of falsehood in every sector. Money being the driver and energy being the vehicle of this civilization, the falsehood that prevail in economic and energy sectors are the most extreme and it alone can cause the economic extremism that the world is experiencing today.

This book exposes the falsehood of the past with objective scientific analysis for both economics and technology development. It then shows how these falsehoods have been hidden behind hidden hands in order to incapacitate the world from discovering the scheme that has created the current culture of obscene economic inequality.

1.2 Research Questions Asked

In this book a number of key research questions are asked. Every chapter answers at least one of these questions. This format has been particularly useful since our groundbreaking book on the science of global warming and energy management (Islam et al., 2010). It is important to understand the nature of these questions before embarking into reading the main text of the book. It is equally important to avoid trivializing these questions, let alone forming an answer to these research questions. These are carefully selected questions that are addressed in various chapters with in-depth research and forming an opinion prior to reading the text would create a mental block and obfuscate natural cognition.

1.2.1 What is the Natural State of an Economy?

It is often said that New science is full with paradoxes. In fact, a culture that is obsessed with tangibles and myopic vision, more knowledge amounts to more uncertainties, thereby creating the paradox of ‘increasing knowledge’, thus redeeming the Orwellian ‘ignorance is bliss’ mantra. It is so deeply rooted that the ‘increasing knowledge paradox’ has become a topic of psychology (Schreiner, 2018). Those looking for an answer are then directed to productivity paradox, which apparently can be solved with productivity, arguably without creating the increasing knowledge paradox (Kijek and Kijek, 2018). This would be comical if not pathetically true that says volumes about modern-day cognition. We sought to solve the causes of all paradoxes, by seeking out the answer to this question: What is true? It turned to be a pivotal question that needed over 70 pages of to answer. That document, in the form of a white paper, became a part of every book that we have written since 2006, the time we sought the answer to this question. The usefulness of that paper was that it revealed the source of any paradox and if ‘what is true’ is properly defined with 100% logic, no paradox can arise from subsequent cognition. When it comes to economics, we pose this research question: What is the natural state of an economy? This is because if this natural state is scientifically defined, there would be no paradox. It is extremely important to come to grips with the reality that economists never defined what is natural before going off to define every natural state involving economy. It is no surprise that Economics is the one discipline that has the most number of paradoxes. One notable one is the Arrow information paradox, named after named after Nobel Laureate economists, Kenneth Arrow. Information being the prelude to knowledge, what we have effectively created is a double paradox and every information we have has become a recipe of the implosive top-down model, called the ‘aphenomenal’ model by Zatzman and Islam (Figure 1.1). It is established in this book that modern economics models are all aphenomenal and belong to Figure 1.1b, in which decisions are made based on self interest, profit margin, and myopic quarterly gains rather than going through the abstraction process (Figure 1.1a). In order to answer the research question posed, all current models are deconstructed and their spurious nature unraveled. It is after that the scientifically correct definition of natural state is shown and the truly natural state of economy is presented. The readership is thus prepared to see all energy policies and see past such paradoxes as Jevon’s paradox to have a clear picture of what economics of sustainable energy should entail. Answer to this research question is given in Chapter 2 and part of Chapter 3. In Chapter 2, a delinearized history of money/wealth is provided in order to comprehend fundamental traits of natural state. Chapter 3 then shows how modern economic theories are incapable of tracking any natural state of economy, thereby remaining irrelevant in studying overall sustainability of any economic development project.

Figure 1.1 Knowledge model vs. aphenomenal model.

1.2.2 What is the Current State of Economy?

American journalist and author, Chris Hedges said, We now live in a nation where doctors destroy health, lawyers destroy justice, universities destroy knowledge, governments destroy freedom, the press destroys information, religion destroys morals, and our banks destroy the economy. We know for fact that there is very little confidence of general public in respective governments, who merely represent the same financial elites that control the media and the scientific community. Today, in thw U.S.A., Congress’ approval rate runs under 20% and often as long as 13%. It is also worth noting that the approval rate skyrocketed to over 80% only during the post 9/11 hype of war on terrorism, the same time the entire nation fell in unprecedented debt (Figure 1.2.). The question really becomes, what is really the true state of the economic status of the USA and the world that is led by USA.

Figure 1.2 Congressional approval rate for last 32 years (Gallup data).

The state of the economy of the modern world is depicted in Chapter 2 with a focus on historical degradation of the original meaning of the word ‘economics’ that once reflected real value of wealth and socio/environmental status of a community. We discover not only the current status of the economy but also how we got there. Chapter 3 presents the mindset of this socio/political degeneration or the philosophy that drove the world to such a state of obscene inequality in all sectors of the society, including the energy sector.

1.2.3 What are the Reasons Behind the Current State of Economy?

We live in a society that does not ask the ‘why’ questions. Lawyers obey the cardinal rule that a witness should not be asked any ‘why’ question, which might trigger a response that would be hard to control or give a spin toward desirable outcome. As Figure 1.1 indicated, pathological affinity toward a desired outcome is motivated by the fact that a decision has already been made prior to finding facts, let alone establishing the pathway of the truth. It is the same in the health industry: there is no shortage of medicines and vaccines for incurable diseases whereas there is no mention of the root causes of the diseases much less the path to cure the disease. It is no surprise that there is no cure for practically any disease as the world has settled in for ‘managing’ rather than curing an ailment (Islam et al., 2015; Islam et al., 2016; Islam et al., 2017). Nothing manifests the crisis better than culture of cancer in medical science. There are numerous studies are published every week that all suggest often-conflicting recommendations but always settling in for more studies and more research, none of which addresses the real cause of cancer. Similarly, every week numerous studies are published about economics and policies all offering some sort of cure for the social ailment that has gripped the world but none offering the cause of such ailment.

This research question is pivotal yet amazingly simple. As we begin to answer this question, we begin to discover the root cause of this social ‘cancer’ that would require a surgery in the short-term but more importantly must undergo a fundamental lifestyle change in order to change the course of global economic health. This question is addressed in Chapters 2 and 3, and followed up in Chapter 4 that also discusses overall state of the technology development. Then Chapter 5 is presented in order to link the answer to energy sustainability. Such prolonged discussion was necessary in order to offer the readership with a complete diagnosis of the social ‘cancer’ that has made the economic health untenable.

1.2.4 What is the Current State of Technology Development?

Economics is the driver of today’s technology development. So, after answering the economics questions, the natural question raised is about technology development. In answering this question, the starting point can be: What is the status of New science? Thankfully, this topic has been addressed elsewhere (e.g. Khan and Islam, 2016). Because technology development is entire based on New science, it becomes a review of the current practices. That review makes it clear how today’s technology development should not have any other consequence than a ‘technological disaster’ that only fuels economic implosion in a ‘spiraling down’ mode of thinking.

Chapter 4 addresses this research question. In answering that question, it becomes clear what needs to be done in order to render these technologies sustainable.

1.2.5 What is the Current Status of Energy Management?

In today’s culture of fear and greed, in which every fear is perpetrated in order to scheme off the scared population, there are many tactics that are in place. The most popular one is that we are in every war because it is about oil. Then, the scientific community, which is also another sellout to the grand scheme, rings another warning bell, we are soon to run out of oil, and there must be another resource put in place for an extra cost. The so-called peak oil theories pop out from all corners. It is the same hype that was concocted in last century about the world running out of coal. Then comes another round of apoplectic messiahs that warn us about global warming and vilifying carbon – of all things – as the enemy of life on earth. Before anyone can get out of gasping, the economists come out and ring another warning bell – all these have to be remedied for a fee and we simply do not have enough to go around.

Chapter 4 deconstructs modern-day hypes and propaganda and calls out the fraud that once Enron personified by calling itself the ‘most innovative energy management company’. This chapter puts the final nail on the coffin of disinformation that has gripped the entire world for decades.

1.2.6 Are Natural Resources Finite and Human Needs Infinite?

The fear mongering for increasing quarterly corporate profit has a long history. It started when the Roman Catholic Church terrorized ordinary people about their propensity to commit sin all because they were humans that are born with ‘original sin’. New science has merely changed the ‘sacred’ designation of this status and sold itself as secular while promoting the same notion of ‘selfish man’ whose only mission is to maximize pleasure and minimize pain. Scientists have been so fixated on this notion that they did not bother considering any other premise, let alone a correct and consistent premise. It was never challenged and thereby the conclusion always became, humans are so greedy that no matter what they will be needing even more. After all, greed has no limit. Once this is established, then the entire humanity is perceived as being engaged in a hunger game. No farther investigation can be allowed and all focus now has to concentrate on how to survive this hunger game.

By answering this research question, the book clarifies what is needed for sustainability and how to progress as a global community. This is a convoluted topic and as such needs to be addressed in multiple forums. As such, Chapter 4, 5, and 9 discusses the response to this research question. Chapter 9, which chalks out a clear path for positive government intervention, also addresses this question because the answer to this question pertains to policy changes that have profound implications on sustainability.

1.2.7 How Would a Model Economic System Look Like?

The history of the modern era vis a vis the general welfare of the society is bleak. Starting with philosophers and followed up by every scientist and economist, the modern era has promoted only negative side of humanity. It is as if no one could escape from the ‘original sin’ curse. What we have in modern history is both the political left and right basing their arguments with the same false fundamental premise. The goal here is not to demonize conventional theories and approaches, but to point out that the theoretical flaws in his model make it impossible to predict reality in economics, let alone model economics. While Chapter 2 has deconstructed all these theories and paradoxes, the question still remains as to what is the ideal in an economic system? We know from Chapter 2 Arisitotle had many of the ideals right and those ideals were later corrupted for various reasons, but we still do not have a model that captures all aspects of economic standardization.

Unfortunately, the current theories (both left and right) do not stop at predicting chaos or anarchy, it goes further and asserts that the chaos/anarchy model is the only model and there cannot be an alternative model. Zatzman and Islam (2007, p. 56) attributed this philosophy to Baroness Thatcher’s infamous statement, There Is No Alternative, calling it the TINA syndrome. This mindset has prevented scientists, philosophers and economists to even look anywhere. As pointed out by Jaan Islam (2018), there was an entirely different approach taken by Islamic philosophers, many of whom have been recognized by modern-day philosophers and scientists as the father of respective disciplines. Ibn Khaldun, who is recognized as the father of sociology, is one of them. Unlike any of modern day scholars, he made systematic observations of historical events and divided civilization in two categories – one is the Caliphate (that belonged to prophet Muhammad and his rightly guided caliphs) and the other is the Kingdom (or empire). Modern scholars characteristically have praised Khaldun’s Kingdom model and drew analogy with modern day events, including democratic reform while completely ignoring Khaldun’s Caliphate model. While attempting to answer the research question of this section, we brought back Khaldun Caliphate model and examined it vis a vis all the shortcomings of modern economic systems. Chapter 6 presents our findings and thus makes room for creating a truly sustainable economic system than can function today. It describes a model economy, complete with model financial structure and model governance.

1.2.8 Is Sustainable Petroleum Technology Possible?

For the longest time, ‘sustainable petroleum technology’ was considered to be an oxymoron. Even when we published our book titled Greening of Petroleum Operations, an 800+ page compendium in 2010, it was a concept many struggled to grasp. After all, we were told that carbon is the enemy (despite carbon being the essence of life) and no one was ready to partake in an intellectual endeavor that challenges core beliefs. However, ever since, we have published a series of books and now it is beginning to surface what was known from the beginning of civilization that is petroleum resources are natural and as such there is no reason for them to be unsustainable unless we have created a mess during the processing cycle. So, the problem is reduced to developing processing technologies that are sustainable. Chapters 7 discusses how it is not only possible but in fact necessary to render processing of petroleum technologies to be sustainable. As such, petroleum resources become infinitely sustainable. This implies two consequences: (1) there is no limit on availability of petroleum resources; (2) growth of the human population will not become a factor, both having very positive effect on global economy. In addition, energy and material characterization shows how energy sources should be valued and energy pricing made equitable. Petroleum therefore becomes an integral part of the natural cycle as envisioned in Figure 1.3.

Figure 1.3 Nature is inherently sustainable (From Khan and Islam, 2007).

1.2.9 What Role the Government Should Play

Criticism of the government has reached mainstream political discourse in the U.S. and other countries, with the rise of the likes of Bernie Sanders and Jesse Ventura calling out government ‘corruption’. However, with the rise of Donald Trump to presidency, cynicism of the government has reached feverish pitch. There is no shortage of quotations regarding government failing but this is not unexpected for a culture that has seen the government as an active colluder with financial establishment that everyone loves to hate and with the corporate media that everyone sees as the propaganda arm of the financial establishment. However, the following quote of former Minnesota Governor, Jesse Ventura sticks out as the most relevant in the context of this book. He said:

Government’s role should be only to keep the playing field level, and to work hand in hand with business on issues such as employment. But beyond this, to as great an extent as possible, it should get the hell out of the way.

Incidentally this was the role that was envisioned by Ibn Khaldun when he presented his model government that intervened only to correct injustices. In this process, a government must play a role of a benevolent arbitrator who is charged with striking a balance between nature and humans, between sellers and consumers, between the state and the external world. It also means, the government will help reversing the culture that historically benefited from war, denaturing of chemicals, and in general creating a ‘technological disaster’ in the past. Chapter 7 discusses the role of the government that is part of the overall sustainability of economics of sustainable energy. This is the only model that assures total sustainability as it fulfills are requirements of sustainability involving 1) Environment, 2) economics, 3) politics, and 4) culture (James et al., 2015).

Chapter 2

Delinearized History of Economics and Energy

2.1 Introduction

The history of economic thought has two distinct tracts. The so-called ‘Eurocentric’ tract deals with different thinkers and theories that considered monetary benefits as the driver of human society. This mindset emerges from a humanity model that is based on ‘original sin’ and various offshoots of the same concept, such as inherent selfishness, often packaged as a part of the ‘survival of the fittest’ doctrine (Islam et al., 2017). The other tract, often dubbed as the ‘Islamic’ or oriental one is akin to a holistic approach to social welfare (Islam, 2018). The Arabic word for economics is, iqtisād, which is derived from the root word, qsd, meaning dynamic intention. As such, Zatzman and Islam (2007) used the phrase ‘economics of intention’ in contrast with economics of profiteering in order to describe the Islamic tract of economics.

2.2 The European Tract of Economics History

In the Western world, economics was not a separate discipline, but part of philosophy until the 18th–19th century Industrial Revolution and the 19th century Great Divergence, which accelerated economic growth. Long before that, from the Renaissance at least, economics as an intellectual discipline or science was dominated by Western thinkers and their academic institutions, schooling economists from outside the West, although there are isolated instances in other societies.

The European tract of economic thoughts is claimed to have emerged from Ancient Greek philosophers, such as Aristotle, who allegedly examined ideas about the art of wealth acquisition, and questioned whether property is best left in private or public hands. In his work, Topics (Aristotle, 250 BC), Aristotle provides his philosophical analysis of human ends and means. He attached value to a product, based on its usefulness to people. While this is a logical premise, it is only later that the term ‘useful’ was conflated with ‘desirable’, thus asserting that whatever is desired is useful. As such, the more desirable a good is, the higher the value of the means of production is. This has been a useful axiom for both liberal and conservative philosophers of the European tradition. Conservatives find this axiom useful because it unleashes consumerism, whereas liberals like this axiom because it validates Pragmatism. Aristotle is further credited with a number of economic ideas such as the necessity of human action, the pursuit of ends by ordering and allocating scarce means, and the reality of human inequality and diversity. Once more, the conflating terms are ‘inequality’ and ‘diversity’. Similar to taking ‘light’ as opposite to ‘darkness’ and vice versa that implicitly assumes inherent symmetry and isotropy, the entire scholarship of modern Europe has interpreted diversity, which is an innate quality of nature, with inequality, which is a subjective term that has a false premise attached to it (Khan and Islam, 2016).

Another principle, also credited to Aristotle is that actions are necessarily and fundamentally singular (Younkins, 2005). From this position, various interpretations have emerged. Thomas Aquinas, followed by philosophers of Capitalist mindset have seen this statement as a reason to believe that individual human action of using wealth is what constitutes the economic dimension, and that the sole purpose of economic action is to use things that are necessary for maintaining life (i.e., survival), and for the ‘Good Life’ (i.e., flourishing). In this, ‘good’ remains undefined or at least a subjective notion (Islam et al., 2016). One notion of the ‘good life’ is the ‘moral life of virtue through which human beings attain happiness’ – this happiness eventually develops into Utilitarianism that thrives on maximizing pleasure and minimizing pain (Islam, 2018). Karl Marx’s ideal, on the other hand, hinges upon the premise that the economic value of a good or service is determined by the total amount of socially necessary labor required to produce it, rather than by the use or pleasure its owner gets from it. Each of these interpretations can be painted as ‘secular’ or doctrinal, depending on the fundamental premises used to interpret, but none provides for a logical explanation (Kenedy Darnoi, 2012).

Aristotle repeatedly refers to the underlying objective of all actions, the objective being ‘eudaimonia’ (Greek: εύδαιμονία). This word is commonly translated as happiness or welfare; however, human flourishing has been proposed as a more accurate translation. Etymologically, ‘eudaimonia’ consists of the words eu (good) and daimōn (spirit or soul). This objective is central to the concept of morality and ethics in Aristotelian work1 that uses this objective as the impetus aretē, most often translated as virtue or excellence, and phronesis, often translated as practical or ethical wisdom. In Aristotle’s works, eudaimonia was (based on older Greek tradition) used as the term for the highest human good, and so it is the aim of practical philosophy, including ethics and political philosophy, to consider (and also experience) what it really is, and how it can be achieved.

Furthermore, it is widely recognized that human nature has capacities pertaining to its dual material and spiritual character, and as such economics is an expression of that dual character. The economic sphere is the intersection between the corporeal and mental aspects of the human person. This fundamentally sound premise was transformed by European philosophers that turned the dual-nature theory upside down. The ‘Dual nature theory’ was concocted by both philosophers and new scientists that converged the fallacy of original sin with evolution theory of morality. The underlying false premise was humans are just another species of animals that are motivated by pleasure (eating, for instance) and avoiding pain. Furthermore, the premise that supported the ‘survival of the fittest’ was invoked, thus stating that no humans can avoid extinction if it is not motivated to reproduce. Pain and pleasure are opposite sides of the same coin. This is the selfish prime motivator of all life. The dogma of ‘original sin’ was merely regurgitated with a conclusion that is more toxic than the original falsehood with more sinister implications. As pointed out by Khan and Islam (2016) as well as Islam (2018), the Roman Catholic church’s ‘original sin’ and ‘salvation through Jesus’ were replaced in the ‘enlightenment’ era by notions of inalienable natural rights and the potentialities of reason, and universal ideals of love and compassion gave way to civic notions of freedom, equality, and citizenship.

There the definition of ‘natural’ and ‘universal’ remained arbitrary, devoid of any reasoning of logical thought. This has been the era of roller coaster ride of spiraling down of all values through a successive degradation through ever more illogical dogmas and false premises of the following philosophies:

Classical liberalism

Kantianism

Utilitarianism

Nihilism

Pragmatism

Theism

Existentialism

Absurdism

Secular humanism

Logical positivism

Postmodernism

Naturalistic pantheism

In reality, however, economics has become all about the tangible aspects of humanity and intangible analysis of economics has become an oxymoron, as pointed out by Zatzman and Islam (2007) in their book titled Economics of Intangibles. While Aristotle made a distinction between practical science and speculative science, European scholars, with the prejudice of pragmatism, took ‘practical science’ and turned that into ‘knowledge for the sake of controlling reality’. At this point science of reality or truth became science of ‘controlling reality’, commonly known as disinformation with an ulterior motive. While it is true that economics ought to study relationships that are dynamic, modern European scholarship ignored the need of having those dynamic relationships a static, universal, and logical grounding. For millennia prior, such grounding was synonymous with having a standard. Such standard has been removed from all branches of new science, including economics. That is, the notion of ‘survival of the fittest’ and most earlier concepts like ‘inalienable rights’ and the ‘divine right to rule’ in Christianity (with has no basis in the Bible) contributed to the notion that human life is to be lived according to the wishes of the person: one controls their own life purpose.

In terms of speculative science that was meant to encompass pure reasoning, ever since the introduction of dogmatic thinking, credited to Thomas Aquinas – the father of doctrinal philosophy, has turned into entirely illogical thinking (Islam et al., 2010). In absence of fundamentally sound/logical premise, new science is based on illogical and clearly false premises. Khan and Islam (2016) listed the fundamental premises behind each of the theories behind ‘hard science’ whereas Islam (2018) has provided one with a list of false premises behind each of these social scientific theories. It turns out that the fundamental premises of Plato and Aristotle were not illogical, but they were taken and transformed into illogical premises by first Thomas Aquinas and later by the likes of Kant and other European philosophers. Both supporters and detractors of Capitalism have not veered off these fundamental premises, but instead built on justifying their conclusions by changing the interpretation of the premises offered by Plato and Aristotle.

Aristotle explains that ontologically, the operation of the economic dimension of reality is inextricably related to the moral and political spheres. The reality has been changed into perception, based on fear and lust. In fact, reality has become subjective and it is promoted that reality is whatever one can perceive. Islam et al. (2010) rediscovered original definition of truth and reality. The following logic was used to define natural cognition or natural material or natural energy:

there must be a true basis or source;

the truth itself must remain non-refuted continuously over time (it must be absolute); and

any break in its continuity or a similar exception must be supported by a true criterion or bifurcation point.

The third-mentioned item in the above list sets scientific cognition apart from doctrinal or dogmatic cognition; namely, that logical discontinuities and observations in phenomena must and can be supported by other truths. Notwithstanding the longstanding general acceptance of the distinction that Thomas Aquinas is the father of doctrinal philosophy and Averroes2 (Ibn Rushd) the father of secular philosophy, our research uncovers the fact that, regardless of the claim to be operating on an entirely secular basis utterly disconnected from ‘religious bias’ of any kind, all aspects of scientific developments in modern Europe have been based on doctrinal philosophy. If the assumption that modern New science is based on non-dogmatic logic is set aside, it becomes clear that it is precisely because so many of its original premises are unreal/unprovable, unnatural or non-existent, that modern science is full of paradoxes and contradictions. Every civilization recounted in history other than post-Roman Catholic church’s Eurocentric era had a clear vision of what constitutes the truth. Plato understood it as synonymous with real that doesn’t change with time (the physical world being fleeting or a function of time is not ‘real’). Aristotle understood it as what really ‘is’. It was all fine until came Thomas Aquinas. He had access to Avicenna, Averröes, as well as Aristotle (through Muslim scholars’ translations). However, none of Thomas Aquinas’ writings contained any logical interpretation of Aristotle’s or any other scholar’s work. This trend continued throughout the New science era.

Aristotle explains that practical science recognizes the inexact nature of its conclusions as a consequence of human action which arises from each person’s freedom and uniqueness. Uncertainty emanates from the nature of the world and the free human person and is a necessary aspect of economic actions that will always be in attendance. Aristotle observes that a practical science such as economics must be intimately connected to the concrete circumstances and that it is proper to begin with what is known to us.

For Aristotle, the primary meaning of economics is the action of using things required for the good life. This definition of ‘good life’ has been transformed from long-term to short-term,3 thereby changing the meaning from broader good to self-interest. Aristotle also saw economics as a practical science and as a capacity that fosters habits that expedite the action. European philosophers disconnected this ‘action’ from conscience or intention and firmly committed to the outcome, which is then attached to outcomes that serve the best interest of the Establishment that controls the society. As such, Economics became of a tactic that aids the financial establishment in creating a perception conducive to the selection of goods that maximize profit out of self-satisfaction and redemption. The real impetus or the speculative science becomes fear and lust, as opposed to Aristotle’s original love of the real good. Figure 2.1. shows how in absence of adhering to truth criteria will increase ignorance. It turns out all theories in modern science, including Economics, start off with a false premise. In addition, all phenomenological models, while acceptable with limited scope, are susceptible to the same set of errors if analyzed with an ulterior motive. Note that the knowledge graph (attributed to Averröes or Ibn Rushd) is a monotouns graph with increasingly greater slope with time. Such shape arises from the fact that once known, the knowledge of facts cannot be unlearned. This is contrary to the ignorance graph that constantly fluctuates due to the fact that even with false first premise, it tries to weave through conclusions that at times are closure to the truth.

Figure 2.1 If truth criteria are not met, time only increases ignorance and false confidence.

The definition of truth and reality was what is Absolute, External, and Unique. Dogmatic thinking turned that definition into whatever the Papal authority says, and then Pragmatism turned that definition into whatever the Establishment says, and today Utilitarianism stipulates that truth is whatever can be perceived. This perception, of course, is an inherently subjective one, and therefore truth has been tweaked from being unique to multiple. This definition has served up the Establishment an opportunity on a silver platter because the establishment has the media branch that can create disinformation and popular culture, thus creating perception that will maximize profit. Then, the financial establishment can make it easy to cash in, following by the political establishment to make sure perception of fear-driven reality is perpetual, thus continuing the economic cycle to benefit the small group that controls the existing establishment.

The Thomas Aquinas model (Figure 2.1) has become the icon of New science. This aspect needs some elaboration. We used the term, ‘New science’ innumerable times in our books. The word ‘New science’ refers to post-Newtonian era that is marked by a focus on tangibles and short-term. In essence, new science promotes a myopic vision for which the historical background of any event is ignored in favour of a time slot that fits the desired outcome of a scientific process. Even though not readily recognized, new science is actually rooted in Dogma science – the ones the likes of Thomas Aquinas introduced. We have demonstrated in our recent books (e.g. Islam et al., 2013, 2015, 2016, 2016a; Islam and Khan, 2012, 2016) how dogmatic notions were preserved by Newton, who claimed to have answers to all research questions. First premises of Newton were not more logical than first premises of Thomas Aquinas, yet Newton as well as post-Newton Newtonian fanatics considered Newton’s work as the standard of real science and proceeded to claim the ultimate knowledge has been achieved for everything. As we will see in latter chapters, each of Newton’s premises upon which he built ‘laws’ is spurious and inconsistent with the reality of nature, yet those premises were not challenged even by the critiques, including George Berkeley (1685–1753) who despised Newtonian mechanics. With such spurious fundamental premises, falsehood rather than knowledge of the truth was established as true knowledge. In essence, New science added only ignorance and arrogance of the so-called scientists who were no closer to scientific facts and true knowledge than the likes of Thomas Aquinas.

Figure 2.2 demonstrates how the process worked in the Eurocentric culture. In this transition, Albert Einstein and his notion of Quantum mechanics added another level of hubris. Whatever couldn’t be explained by Newtonian ‘laws’ now was claimed to be crystal clear with the arrival of the concept of Quanta. Yet, none of the claims of quantum mechanics could be verified with experiments or even logical discourse. Instead, a great deal of false confidence is added in order to create an illusion that we are climbing the knowledge ladder, while in fact we only thing we are climbing is the arrogance/ignorance curve at a ever increasing faster rate.

In the Politics, Aristotle views labor as a commodity that has value but does not give value. Aristotle did not formulate the labor theory of value but instead held a theory of the value of labor. Aristotle observed that labor skill is not a determinant of exchange value, but rather that the value of labor skills is given by the goods they command in the market. He maintained that value is not created solely by the expenditure of labor in the production process. Noting that labor skill is a necessary, but not a sufficient, determinant of value, he explains that both utility and labor skills are pertinent to the determination of exchange values and exchange ratios. This is the first known effort to quantify the value of labor. He says that, in the end, the basic requirement of value is utility or usefulness. Once again, it comes down to the words ‘good’ and ‘useful’, which determine the value. New science defines ‘value’ as the ability to satisfy wants. Wants are, however, a function of desire and perception. Demand is thus governed by the desirability of a good, which is equated with ‘value’. According to Aristotle, exchange value is derived from use value as communicated through market demand. This market demand, once again, is a function of public perception. That’s where mass media and government play a role.

Figure 2.2 New science only added more arrogance, blended with ignorance to Dogma science.

In Book I of the Politics, Aristotle distinguishes between use value and exchange value. It was Aristotle who created the concept of value in use. The use value or utility of a good or service depends upon its being productive of an individual person’s good. He explains that the use value of a given article can vary among individuals and that the demand for the item is a function of its use value. Aristotle correctly observes that, as the quantity of the good possessed increases, the use value of that good will begin to decline at some threshold point. This saturation point is reached because human needs are limited due to tangible limitations. Aristotle also states that the use value of a good or service will be increased if it can be consumed conspicuously; that demand will fluctuate as the extent of the use of the item is limited or wide-ranging; and that exchange value and demand are affected by the circumstances of rarity or scarcity. In essence, Aristotle describes the nature of natural supply and demand. In addition, Aristotle distinguished between one’s possessions (i.e., final goods) and instruments (i.e., factors) of production and noted that the need of means to an end will vary in accordance with the need of the end itself. In the Topics and in the Rhetoric, he notes that the instruments of production derive their value from the instruments of action (i.e., the final products). As long as the word need is not conflated with desire or obsession or addiction, there is no inaccuracy in this statement. However, whenever need is interpreted as ‘desire-driven’, it becomes susceptible to disinformation that can actively promote obsession and addiction to any product that in itself can be deliberately contaminated to enhance ‘desire’ (Islam et al., 2016).

Observing that economic goods derive their value from individual utility or usefulness, Aristotle glimpsed the role of diminishing marginal utility in price formation. He recognized that the value of something could be established by discovering what its addition to (or subtraction from) a group of commodities did to the total value of the group. In the Topics, he stated that the value of one good could be determined by evaluating the impact on the group by adding or subtracting the particular good. The more is gain by the addition of one good, the higher its value and the greater the loss from the absence of the good, the more useful the commodity is assessed to be. Various goods thus can be compared by looking at their impact of addition and subtraction. According to Aristotle, the quantity of a good reaches its saturation point when the use value plunges and becomes immaterial. In Book I of the Politics, he points out that natural pressures of diminishing utility for goods direct remaining human energy toward moral self-improvement. The implicit assumption is humans have an inherent desire to morally self-improve. Morality is an intangible quality and as such has been rendered, as a concept with practical effects, non-existent by New science.

In the European tract of economics, Aristotle is credited to have discovered, formulated, and analyzed the problem of commensurability. Commensurability is an important aspect of economics and forms the core of any trading policy. This is a difficult problem that has been trivialized in post RCC Europe. The complexity of the problem arises from that fact that any analysis has to quantify (render into tangible) intangible qualities in order to be able to rank various products according to their usefulness, which is both intangible and subjective. His challenge was to discover how diverse products can be commensurable and thus have an exchange value or price. The presence of tangible correlation makes it easier to compare goods, thus calling it a ‘strong commensurability’, it is always a complex science when it involves intangibles, including cases of future values that might fluctuate depending on numerous other factors. New science designates such goods as ‘weak commensurate’, mainly because a cardinal value cannot be assigned to the goods (O’Neill, 1993). Aristotle’s objective was to prove that every exchange of goods has to be an exchange of equivalents. Aristotle clearly stated that goods must be equalized somehow by some common measure that must be both universal and time-honored. If we are faced with two goods that are incommensurable or at least whose commensurability is not clear, there is a temptation of finding a common dimension and then compare them based on that dimension. This temptation of finding a common dimension doesn’t belong to Aristotle but has become a hallmark of New science. Khan and Islam (2012, 2016) offers a detailed discussion on how such mindset has prompted scientists to introduce numerous ranking systems that are all illogical and scientifically absurd. One particular example cited by them is the comparison of various sweeteners with honey, based on one dimension, i.e., sweetness. Aristotle’s premise was that there will be no exchange without equivalency and that there can be no equality without commensurability. This word ‘equivalency’ was conflated with ‘equality’, thus New Science interpreted Aristotle’s premise as: when people associate for the exchange of goods each must be satisfied that both utilities and costs are equalized before exchange takes place. Persons stand as equals in exchange as soon as their commodities are equalized. As such, there can be an exchange of honey with Aspartame as long as both parties agree. That agreement itself creates equality between honey and Aspartame, although one is a ‘cure to humanity’ and the other is a neurotoxin. This paradox comes from the false interpretation of Aristotle’s premise.

Aristotle stated that a common standard can render any good amenable to comparison as long as the common standard, such as gold, is constant and universal. As such, Aristotle did not invoke any inconsistency and in fact made a significant contribution to economic theories of monetization. For instance, a distance measured in miles and a volume of water measured in gallons are incommensurable. However, if the distance can be reduced to a cost of transport and the water volume also reduced to cost of production, the two can be compared solely because of the fact that a common paradigm is created. Philosophically, the word ‘incommensurable’ means there is no common theoretical language that can be used to compare them. If two scientific theories or deductive logic are incommensurable, there is no way in which one can compare them to each other in order to determine which is better. In ethics, two values (or norms, reasons, or goods) are incommensurable when they do not share a common standard of measurement. In legal terms, there can be no legal term if there is not a set of facts that are recognized as facts by both parties. Even though some authors, such as Thomas Kuhn (1962) recognized that forcing incommensurate entities to be commensurate is equivalent to a paradigm shift, which is radical shift rather than a continuous change and as such is something like a religion or cult rather than a logical discourse, few if any have considered fundamental premises of any theory, thereby advancing false premises without critical analysis. The idea that scientific paradigms are incommensurable was popularized by the philosopher and historian of science, Thomas Kuhn (1962). He wrote that when paradigms change, the world itself changes with them. According to Kuhn, the proponents of different scientific paradigms cannot make full contact with each other’s point of view because they are, as a way of speaking, living in different worlds. Kuhn gave three reasons for this inability:

Proponents of competing paradigms have different ideas about the importance of solving various scientific problems, and about the standards that a solution should satisfy.

The vocabulary and problem-solving methods that the paradigms use can be different: the proponents of competing paradigms utilize a different conceptual network.

The proponents of different paradigms see the world in a different way because of their scientific training and prior experience in research.

Although Aristotle maintains that everything can be expressed in the universal equivalent of a standard, that standard was set to ‘money’ in the modern age of New science, which itself has gone through numerous transformations during the modern era. This standard that is supposed to be constant and universal has become subjective and dynamic. As we’ll see in latter chapters of this book, the definition of money has been manipulated in such a way that it is disconnected from real wealth and the entire economics has become artificial, devoid of proper grounding.

Aristotle realized that the possibility of a measure presumes prior commensurability with respect to the dimension by which measurement is possible. He therefore sees his idea as deficient. He did not offer a remedy. However, modern philosophers ‘solved’ that problem by forcing commensurability through selection of a dimension that would lead to desired solution (Khan and Islam, 2016), which is discussed later in this volume.

Aristotle next says that goods become commensurable in relation to need – the unit of value is need or demand. Need, rather than something in the innate of goods, is what makes them epistemically commensurable. Aristotle observes, however, that although need is capable of variable magnitudes, it lacks a unit of measure until a standard is introduced to provide it. Ultimately, he concludes that it may be impossible for different goods and services to be strictly commensurable. In his idea of commensurability Aristotle was the first to identify a serious and authentic problem of economics.

In Book V of the Nicomachean Ethics and Book I of Politics, Aristotle distinguishes between universal justice and particular justice. European scholarship did not consider universal justice as to playing a role in economics. In fact, morality being disconnected from a universal standard that would require the invocation of a creator, who is truly external to the humanity, bore little resemblance to the original time-honored concept of morality. Islam (2018), in his seminal work, discusses the need of restoring the concept of external and universal – i.e., logical – standard before starting any discourse on justice including justice in economic dealings. One misconception that has remained unchallenged until recently is that economic dealings are subject to the rules of particular justice, meaning one can formulate an economic system without consideration of long-term, i.e., moral consequences, i.e., as discussed above, the vindicator of the notion that pragmatics ought to drive economic [and also political] aspects of human life. This has been convenient because particular justice involves quantitative relationships that are readily amenable to mathematical, hence, tangible expressions. Such expression is necessary for linearization of any complex process. While European scholars have debated over whether Aristotle only includes distributive and corrective (i.e., rectificatory) or he also means to include commutative (i.e., reciprocal) justice under this classification in the category of particular justice, the notion that particular justice becomes arbitrary in absence of grounding with universal justice is missed by everyone.

Aristotle says that distributive justice is natural justice and involves balancing shares with worth. In turn, rectificatory justice involves straightening out by removing unjust gain, restoring unjust losses, and other forms of retribution for loss and/or damages. Reciprocity involves the interchange of goods and services and does not coincide with either distributive or corrective justice. Reciprocal justice involves comparative advantages and is concerned with particularized mutual benefits derived from specialization of function.

In the Nicomachean Ethics, Aristotle states that exchange depends on equality of both persons and commodities. It is in this work that he concentrates on the problem of commensurability. Aristotle used artisans as examples for his general and abstract discussions found in this work. In Book V of the Nicomachean Ethics he deals with justice – which is concerned with determining proper shares in various relationships – analyzes the subjective interactions between trading partners looking for mutual benefit from commercial transactions, develops the concept of mutual subjective utility as the basis of exchange, and develops the concept of reciprocity in accordance with proportion. In the Nicomachean Ethics, Aristotle, in his treatment of justice, applied the concepts of ratio and proportion to explain just distribution. Aristotle’s vision about justice could have triggered a paradigm shift in dealing and trading with morality-driven justice. However, European philosophers missed this work altogether.

According to Aristotle, value is assigned by man and is not inherent in the goods themselves. Implicit to this argument is the fact that the standard that retains its value irrespective of its demand or usefulness. For general commodities, according to Aristotle, any