The just economic system: a model and its simulations

Abstract

Purpose Macro models are being developed in Islamic economics literature. These models, in general, follow the program of Islamization of knowledge and combine the genuine characteristics of Islamic economics with the tools of mainstream economics. The founding leader of Millî Görüs movement in Turkey, Necmettin Erbakan, and a group of Islamic intellectuals, had developed an economic program known as the just system. This paper aims to attempt to model the just economic system (the JES) with appropriate econometric techniques. Design/methodology/approach This paper models the macroeconomics of the JES with linear equations and conducts a series of simulations to identify its outputs. Based on the closed economy assumption, this paper describes the production function with a government share, defines a charitable foundation sector, exclude the speculation motive in money demand. Savings are transferred into investments without interest. This paper also develops an econometric simultaneous-equation model of the JES. Findings According to the results obtained from the selected simulation scenarios, this paper concludes that the macroeconomic JES works well and produces desirable outputs as it was stated in the original program. Research limitations/implications In future studies, the econometric estimations of the JES can be made. By adding more equations to the simple model, a medium or large scale JES macroeconomic model can be developed. Practical implications The JES can now be a source of economic policy designs. Social implications The model can be used to address socioeconomic objectives. Originality/value It is the only Islamic economic model that has been ever developed in Turkey. The notion of the JES has not been subjected to enough economic analysis and as far as it is known, it has not yet been modeled and simulated.