PROGRESS IN DIVINE ECONOMICS

1999-2013
ABSTRACT
Religion plays a significant role in shaping the human behavior. Studying religion and other social phenomenon
within the domain of economics originated in 18 thcentury (Kumar 2008). But a sustained interest emerged in late
20th century, when researchers found it hard to explain income differential in developed and developing
countries (Schlicht 1997). A lot of work was produced by integrating the faith patterns of respective religions
into economics which is available as Christian economics, Islamic economics, Jewish economics etc. The efforts
of economists to incorporate religion in the domain of economics are notable. By using tools of Economic
theory, they are exploring the impact of religions, nature of religious markets, institutions and socioeconomic
impact of religions. A remarkable growth in economics of religion has been observed due to the thought
provoking contribution of Iannaconne and others, which covers a number of dimensions neglected by
conventional economics. This paper reviews the existing literature on the stream of work being gradually
developed as Divine Economics since 1999 by Hamdani and others. This review supports proponents of
economics of religion that that religious beliefs and practices affect the economic behavior. Since the dichotomy
between religion and economics has resulted in reducing the scope of real understanding of human
behavior, this humble work is presented with the hope to create further grounds for the extension of faith-based
economics.
The present study is a survey of available literature on the stream of work known as Divine Economics, initiated
in 1999. This review of literature shows that religious beliefs and practices affect the economic behavior. Since
the dichotomy between religion and economics has resulted in reducing the scope of real understanding of
human behavior, this humble work is presented with the hope to create further grounds for the extension of
faith-based economics.
Keywords:

Religion, Economics of Religion, Islamic Economics, Christian Economics, Jewish Economics, Divine
Economics, Economics of the future.

Introduction

A great deal of ground breaking work done by Iannoccone (1994 to 2012) paved the
way for a variety of studies that are now available in the literature.

The ever rising importance to study of religion has persuaded the researchers to
observe the effects of religion on different aspects of human behavior.

The faith-based work in economics was given different titles such as Christian
economics, Islamic economics, Jewish economics etc. which genrally revolved
around the faith pattern of some specific religion.

A general model of economic faith-based behavior was presented by Hamdani (1999)

that was constructed on rational choice theory but it accommodated the shared beliefs
among three Divine religions i.e. Islam, Christianity and Judaism.

Above that, the model could explain the behavior of agents who do not follow any
faith pattern.

This work generated further interest among economists and researchers that resulted
in a series of studies conducted during last 13 years.

The present study is a brief survey of available literature on this stream of economics
known as Divine Economics

the paper is organized; presents need and importance of Dinvine Economics, - a brief review
of the work available on economics of religion - a brief overview of work done in Divine
Economics methodology -- key concepts of Divine Economics - some innovative ideas
developed during last decade including the concept of faith based Overlapping generation
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model, the 5-ways to do things [Ahkaame Khamsa], some testable propositions and a glimpse
of various studies/abstracts - an introduction of Divine Economics Survey series [from 2000
to 2013 rounds] - on-going works for M. Phil and PhD degree a thought provoking work
on Divine Capital Model - - offshoots of Divine Economics is its Universal Values Survey
Another important work titled as Individuals are firms
Why study economics and religion together?
No need to emphaise
Progress in economics of religion
No need to emphaise
What is Divine Economics?
Divine economics is the title of a faith-based analytical framework within the
discipline of economics defined as
the scientific study of economics and religion in each others perspective.
Although started in 1999, the first-ever detailed work tilted and patented as Divine Economics

was done by Hamdani [2004] that included

-

a full framework including theoretical

econometric and empirical models which evolves from divine revelations

some testable economic propositions

This framework offers many advantages;

i) it provides opportunity to analyze income, substitution, and cross effects for
resource allocation between religious and other activities
ii) it does not dichotomize Islamic economics and rational choice theory iii) it
provides thought provoking propositions which may be focused by economists for
further empirical testing in future
iv) the resource allocation pattern is the same as desired by the Divine religions.
Using cross sectional Pakistani data on 302 households, this study explored the
relationship between religion and other variables including those which were yet
not recognized in contemporary economic of religion.
The Divine Model of Time Allocation Bahavior
Benefiting from Islamic faith, a time allocation model was initially developed on the basis of a Hadith
narrated by imam Moosa Kazim bin Jaffar (745 AD 799 AD)1 that describes how an individual
should allocate his daily time among different activities, which is applicable to follower of any of the
three divine religions.

U = ( W, A)
Where
W= Conventional goods, services or activities
A= Faith-based or afterlife-oriented goods, services or activities
general form of Utility function
1

Imam Moosa Kazim is the 7th of 12 Imams who are descendents and constitute the progeny of the Holly Prophet Mohammed
(SAWA). They are also referred in history as Imams of Ahle Bayt and the infallibles. Born in 128 Hijrah he was declared as
Imam in 148 Hijrah. He is renowned for his great scholarly contribution, piety, spiritual strength and sublime personality.
His words are considered an authority in Islamic literature, particularly among the followers of Shiites school of thought
and other lovers of AhleBayt.

U U (C, D, L,V , R)
to be maximized subject to income and time constraint,
where
U = the utility from accomplishments of goals relating to both body and soul.
U u(C, D, L, V , R)

the consumer problem is to choose the amounts of time to devote to ;

C= consumption
D= charitable donations
L = personal care, leisure and home activities
V= societal activities
R= religious activities
From this utility function, we derive the Demand functions of the following which contain
conventional as well as Divine variables on the right hand side.
1- Consumption
2- Charity and Donations
3. Personal Leisure
5. Social or Voluntary Work
5. Religious Activities
6. Intented Bequests Bnt at the time of Death
7. Intentended Donations Dnt at the time of Death
Is Divine Economics Something New?
It seems pertinent to answer this question here whether Divine Economics is a new discipline in
economics or not?
The answer is that the
Divine Economics is not new if we take the simple meaning of the two words divine and
economics. It means economics that is Godly.
As a science, Divine Economics is certainly a new framework
SOME KEY CONCEPTS IN DIVINE ECONOMICS

The length of planning horizon

Propsition: Any perception of an individual, which takes into account a divine religion, will
alter the individual's planning horizon. When other things are held constant, a more religious
individual will have a wider planning horizon spread over life here and life hereafter as
compared to a less religious individual's horizon having life here only and that both will
display a systematically different economic behavior.

Table: The Time Horizon of a Man under the Conventional and the Divine Model
Pe
ri
od
(0
to
T
+)

0
1
Before life on earth
NonSoul
existence

2
3
Life on earth
Child
Young

4
Old

5
6
Life after death
Dead &
Facing the
Living in
Day of
Barzakh
Judgment

Life In
Heaven Or
Hell

3
4
5
6
.
.
T1
T
T
+1
T
+2
T
+3

INDIVIDUAL

A,
N
B,
N
C,
N
D,
N
E,
N
E+1,
N
.
.
N

A
B

.
.
N-1

.
.
N-2

.
.
N-3

CN-5
N-4

N-1

N-2

N-3
N-2, N-1, N
A, N
A, N

Time horizon for individual in

conventional economic models
Infinite time horizon for individual in the proposed model

Infinite time horizon for generations in the proposed

Faith-model

None

GENERATIONS

(This table has been developed on the basis of insights from the Holly Quran, Hadith, and the traditions of the Prophets companions/infallibles). 2

Infinite time horizon for generations

in conventional economic models

0
1

STAGES OF MANS EXISTENCE

Source: Hamdani (2004 Chapter 03)

See the underlying concepts and corresponding references in Section 3.2 and footnotes in Hamdani (s2004).

Who is more religious?

Proposition: When other things are held constant, if a Muslim chooses to perform more
activities out of obligatory (Wajib) and meritorious but not obligatory (Mustahab), reflects high
level of religiosity, hence he/she will perform economic activities in more religious manner. In
contrast, if a Muslim chooses to perform more activities out of prohibited (Haraam) and
undesirable but not prohibited (Makrooh), reflects low level of religiosity, hence he/she will
perform economic activities in more secular manner.
Classification of Individuals According to Religiosity Levels
IN ALL SOCIETIES

IN MUSLIM SOCIETY#

Believer

Muttaqi

More
Religious

Muslim

Exoterically (in zahir) and esoterically (in

batin) very pious
Good/ pious enough. His goods overshadows
his bads
Everyone who verbally accepts Islam

Fasiq/aasi

Bad/Sinner. His bads dominate his goods

Faajir

Exoterically (zahir) and esoterically (batin)

very bad.

Hypocrite

Munafiq

Opportunist/ Who can pose either way3

Non-believer

Kafir

Non-believer

Momin/saleh
Moderately
Religious
Less Religious

# For details on characteristics of individuals under such categories as defined by Quran, see among others Qadri
(1993), Hakeem (1997) and Cooper (1991). For how believers should spend life in order to remain more religious,
see Moudoodis interpretation in Appendix 4.1.
Source: Hamdani (2004; Chapter 03)

Implication: Individuals depending on their religiosity levels would display systematically different
socioeconomic behaviors. Therefore, economic science needs to identify the differences across these
groups of people by using some yardstick of religiosity levels.

Some Propositions
Hamdani (2004) put forward 14 propositions for insights and empirical testing. Some of these
propositions are reproduced below;
Religious motives of consumption: Other things held constant, the non-committed consumption
of more religious people is mostly determined by religious motives rather than social,
demonstrative, and other motives. Hence the response to change in commodity prices will be less
than that among less religious people.

Cooper (1991) defines Nifaq i.e. a characteristic of hypocrites (Munafiq) as the outward display of adherence to Islam while
harboring anti-Islamic feelings in the heart.

Intentional bequests: Other things held constant, a more religious individual will accumulate
assets in an ordained manner. And, he/she is likely to leave behind more 'intentional bequests'
and 'donations' as compared to a less religious person.
Self-interest vs. Selfish Interest: Among truly religious people, others' welfare is an argument in
their own utility function. Hence other things constant, less religious person will serve his/her
self-interest in each market in less altruistic manner and a more religious person will serve
his/her self-interest in each market in a less selfish manner.
Religious donations are less elastic: Other things held constant, a more religious person will
forego his/her own consumption to give proportionately more donations for enhancing others'
consumption, as compared to a less religious person. Moreover, the effects of a change in
commodity prices and wage/income level on the monetary donations will be systematically
different between more religious and less religious persons.
Normative consumption basket: Other things held constant, a more religious individual will
prefer consuming, producing or trading normatively desirable goods and services as compared
to a less religious individual because the former assigns more importance to normative aspects
of goods and services.
Faith in Afterlife is a source of wellbeing: Other things held constant, a more religious
individual allocating due share of resources for activities of both current and afterlife will enjoy
more wellbeing and self-satisfaction than the individual allocating his/her resources only for the
current life.
Faith-driven needs and wants will lead to global wellbeing: Other things held constant, a more
religious individual will have more number of faith-driven needs and wants, hence, shall have a
social utility function containing a vector of legitimate goods and services related to 'self' and
also for 'others'. Optimizing such a utility function by individuals will lead to both material and
spiritual wellbeing at large, and also inherently promote social justice, peace, equity and human
dignity.
Balanced time allocation to life Activities

Religious people have more leisure: Other things constant, a more religious person will more
regularly allocate due time to personal leisure and more regular home care as compared to a
less religious person.
Religious people offer more voluntary services: Other things held constant, a more religious
person will allocate relatively more time to family/home activities, social interaction and
voluntary services as compared to a less religious person. Moreover, the effect of a change in
wage rate on the paid and voluntary labor supply will be systematically different between more
religious and less religious persons.
Religious individual allocates more time for religious activities: Other things held constant, a more

religious individual will allocate more time for religious activities as compared to a less
religious individual. This implies that more religious individuals will have less time left for other
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activities including paid work. Moreover, the effect of changes in the wage rate on labor supply
will be systematically different between more religious and less religious persons.
Time Allocation Comparison By Type And Religiosity Indicator

Mean Time allocated to activities:

Religious
Mean
Market
Mean
Leisure
Mean
Voluntary
Mean
Home
Mean
Number of respondents

RELIGIOSITY INDEX-1
Low
Moderate
High
345
662
1109
1925
1740
1626
3304
3267
3129
187
277
328
636
823
1052
78
144
80

Total
698
1758
3240
267
835
302

Source: Hamdani (2004)

The key finding of the above table is that individuals with high religiosity allocate their time in a
more balanced manner as is ordained by God so that the individual may perform duties relating
to different stakeholders in a just manner. It can be seen from the table that the mean time of
more religious individuals is relatively higher towards religious, voluntary and home activities
as compared to moderate and less religious person. They allocate lesser time to market and
leisure activities. This descriptive result gives insight for future research that may explore how
far such a balanced time allocation pattern affects conflict resolution, divorce rates, family
wellbeing, community problem solving and national duties of the individuals.
Extension Studies
Due to DE syevey series, many studiesoriginated from Hamdani (1999 and 2004)

The Divine Capital Model (2012)

A recent study on The Divine Capital and Sustainable Economic Growth [Hamdani, 2012]
pointed out that the conventional economics has identified a number of determinants of economic
growth such as education, health, the legal system, terms of trade changes, government spending as a
fraction of GDP, political freedom etc. However, non-economic factors are generally ignored that also
affects the process of economic growth. For example in conventional economics, efficiency wage is
considered to induce workers honesty, dignity, loyalty and efficiency. The Divine Economics Model,
however claims that the objective which is achieved through the 'efficiency wage' may also be achieved
with increasing Divine attributes among workers. The Divinely desirable attributes e.g. spirituality,
divinity morality, and related physical infrastructure which we call Reinforcing Capital. All that
combined makes the workers systematically different in behaviors as compared to their counterparts.
Hence, it is quite likely to systematically affect the workers output as well and in turn economic growth.
Abidi (2013) extended the Divine Capital Model 2012 and empirically tested the hypothisis that

Whether or not ethical attributes affect teacher performance?

Implications of Divine Capital Model: One of the important implication of the DC Model is its
relevance to economic growth.

Proposition: Other things held constant, the nature, type and magnitude of Divine Capital shall
systematically affect the initiative, process and outcome of economic growth at local, national and global
levels.
Divine Model and Economics of the Future
Since Divine Econmoics Model is applicable to various faith based perceptions and behaviors, in last 10
years, some studies have been conducted in economics of the future where future as perceived on the
basis of respective beliefs of the followers of a faith. These studies are based on predicitions about the
future of globe, its people, trends, and ultimate outcomes for the humanity as predicted by different
religions and sects. Some studies of economics are now available which are based on predictions and
prophecies about the second coming of Jesus [Christain and Islamic shared faith], appearance of Imam
Mahdi [Islamic faith shared by all Islamic sects; however highly emphasized by Shiites] and emergence
of Anti-Christ [Christain and Islamic shared faith].
Why to base economic models on religious predictions?
The answer to this question is simple; peoples economic behaviors are shaped by their perceptions.
Hence any perception [right or wrong] emerging from religious or spiritual prophecies and beliefs is
likely to affect the behavior same way as any economic perception of future prices on current demand and
supply decisions. Abstracts of some of the studies revolving around this idea are reproduced below after
reducing their length;
a. Fiscal Policy in a Divine Economy; The Saviors ERA by Mahmood Khalid and Dr. Syed Nisar
Hussain Hamdani
b. Economics and Spiritual Human Capital: The perspective of Mahdism Doctrine by Imran Haq Nawaz
and Dr Syed Nisar Hussain Hamdani
c. Re-writing Islamic Economics for an Era of Global Justice and Prosperity, by Dr Syed Nisar Hussain
Hamdani and Imran Haqnawaz

d. The Individuals are firms: By Syed Nisar Hssain Hamdani

One potential future area of research emerged from the the recent works in Divine Economics is
Individuals are firms
consuming and producing both material and non-material commodities
[Hamdani 2013]
This model is based on the already mentioned Divine Capital Model (Hamdani 2012 and
Hamdani and Miraj 2013). The Divine Capital is defined as prevailing level or set of religiosity,
spirituality, ethical values, and positively reinforcing mechanism that playes important role in
consumption and production process the same way as financial capital, human capital and
physical capital. According to this model, the individual employs financial, physical, human and
Divine capital to produce conventionally mentioned commodities and also produce Divinely
desired commodities such as values, religiosity, spirituality and reinforcing assets. This model is
generalized and applicable to any rational utility maximizing individual but also equally applies
to individual who follows some faith pattern or believes in a life cycle that has two phases [here
and hereafter]. For this production process, not only his choice of inputs, but also quantity,
quality and nature of outputs shall be detrmined in a systematic manner. The system either
already contains some divine attributes [honesty, care, commitment, respect, tolerance etc; a long
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list] in one form or the other or it acquires them through investment in Divine Capital. The
system essentially requires at each time and place the presence of at least some Divine attributes
without which it cannot survive or grow. Hence, the role of Divine Capital in the firms known as
individuals consuming and producing commodities and diverse values cannot not be ignored by
any non-prejudiced economic analysts who want to see early establishment of justice, peace and
prosperity on earth.
Divine Economics Surveys
One contribution of Divine Economics team towards economics of religion to conceive, develop,
test and run the Divine Economics Survey Series. Under this, the following syrveys have been
conducted so far;
1. Divine Economics Survey 2000; Quaid-i-Azam University, Islamabad; 302 households from
selected cities in Pakistan and Azad Kashmir; the first-ever survey of its kind that covered
social, economic, religious, and other aspects considered relevant for economic analysis.
Richard B. Freeman of Harvard University wrote that this is the largest dataset of the world
on economics of religion that we have today [Letter to Quaid-iAzam University, October
2004]. Later, this survey proved to be a spring of insights and data for further studies
including some recognized articles and PhD dissertations.
2. 2006: major theme was the role of religiosity in rehabilitation patterns of victims and relief
providers of earthquake 2005 in Pakistan; Labor and Workilfe Program, Harvard University
USA[June September 2006].
3. 2008: Key informant interviews and case studies of respondants belonging to different
religions and sects; New York, Boston, New Jersy USA
4. 2009: Including all other modules, the main module was spiritual human capital; conducted
by Kashmir Institute of Economics with a partial assistance from Pakistan Institute of
Development Economics.
5. 2011:. In addition to Spiritual Capital and other modules, a socail capital module was added
to measure social capital indicators which are interlinked with religious, spiritual and other
aspects of life. However, no actual survey was conducted in 2011 except field-testing of
instruments and some case studies relating to social/spiritual capital.
6. 2012: The main theme was Divine Capital Model and Performance. It also included
modules on consumption and time allocation behaviors in Ramazan and post-Ramazan [the
fasting month in Ilsam].
7. 2013: In addition to spiritual and socail capital modules, many new aspects are covered in
2013 survey. Various quantitative and qualitative indicators and indices have been included
to explore interrelationships among religiosity, spirituality, ethics, workplace outcomes,
savings, water use behavior, and sleep poverty etc.
Universal Values Survey
The Divine Economics Survey Series [2000 to 2013] included some questions relating to ethics
and values. In 2008, a review of relative as well as universal values was completed at Labor &
Worklife Program, Harvard university [Hamdani, 2008] which paved the way for initiating a
universal values survey. This is a unique work that will enable economists to correlate economic
behaviors with the values that prevail worldwide regardless of religion, sect, ethnicity and other
affiliations.

Criticism on Divine Economics

Statistical Issues in Divine Economics: Religiosity is a subjective thing and no hard and fast rule
exists to measure it. Since the public circulation of Divine Economics Survey's first formal dataset
(QAU 2000), and especially after the survey of disaster victims of Pakistan earthquake (Labor & Worklife
Program Harvard University, 2006), and the latest round [2013], economists and social scientists have
raised questions on some of the methodological aspects of this newly devloped framewok. These
questions relate to the composition of religiosity indices, construction of survey questionnaires, and
limitations in measurement of religisity or spirituality particularly in Islam (e.g. Siddique, 2006).

However, Hamdani (2002) developed various quantitative and qualitative indicators, which may
be used to measure relative religious strength of the religion-followers.
Data Reduction: Prof. Richard B. Freeman (Harvard, 2008) suggests that the analysis of the religosity
questions in Divine Economic Surveys should be dealt much as people do questions about mathematics,
spatial reasoning, etc in which the analyst uses responses to questions to see which ones are closely
related and then to test the sub-indices. Peroforming factor analysis on these datasets, to get the
subindices and identify few factors, which may be interpreted with reference to certain behaviors. Some
issues in measurement of religiosity have been dealt in a number of poineering papers by Laurance
Iannacconne, and some other work such as Barro and McCleary (2003).

Subjectivism in construction of religiosity indices: Zahid Siddique (2009), published a critique of

Divine Economics.
He agreed that the conventional economic theory does not portray the complete choice range of
an individual by ignoring the social aspect of his life and the two dimensions of economic theory
that are central to their Divine Economics i.e. utility maximization through choice of
commodities and activities worldly or after-worldly satisfaction.
Construction of religiosity indices , if not impossible, is, at least, very difficult due to large
subjectivism involved in the treatment of different religious activities.
He observed problem in measuring religiosity
These and other issues invite the attention of economists, psychologists, religious scholars and
other researchers to collborate on minimizing the issues in measurement of religiosity,
spirituality and wellbeing.
Summay and Future Areas of Research
According to the authors of Divine Economics, no empirical results of their studies should be
taken as final results or strong conclusions.
They admit that although the work in this field is successful in provoking thoughts and extension
studies, yet it is at initial stage of development and is subject to improvement.
They afurther admit that most of the works are produced by Muslim economists who use datsets
from Islamic communities, therefore, they mostly use Islamic terminologies, whereas to make it
Divine Economics, it needs a terminology that is commonly used by all divine and other
religions.
The methodology, questionnaires and survey techniques so far used need to be refined.
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A decades work by inter-disciplinary scholars is required to further develop and refine the
economic models adopted, modified or developed in Divine perspective.
Particularly the religiosity indices presented in various studies should be refined in the light of
deep knowledge of religions and sects without which, drawing religious conclusions may be
misleading and, if so, will be a sin.
conclude that any form of economics of religion [Islamic, Christian, Jewish, or others] would help
in understanding and promoting the faith-based decision process in economics and ulitimately converge
to an overall Divine Economics that is capable of incorporating religiosity, spirituality, and

morality into economic models.

Such Divinely desired characteristics play role of inputs to individuals who are like firms
producing material commodities and also producing further religiosity, spirituality, morality and
noble values like equity, human dignity, peace, justice and a higher lever of well-being.

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