The nature of goods is much more than a neoclassical distinction between private and public goods. In neoclassical economics this difference is brought about by means of the degrees to which consumption and production of goods are intervened with by means of regulations to improve social welfare in the case of public goods or economic welfare in the case of private goods. Yet the nature of ethics that impacts upon goods and gives them consumptional value is a function of the perception on the goods by the individual or the society at large. Here preference formation defines the nature of the goods. The same preferences define the role of a certain form of ethics, which we will call utilitarian ethics in mapping preferences to the realization of demand, and hence generating bundles of the goods in demand. Beyond this private demand for goods and the individual preferences so formulated is the social demand as well. But in neoclassical economics social preferences are merely aggregates of individual (household) preferences. Hence public goods are the result of a mapping of aggregate individual preferences on demand space. The consequences of such a nature of public goods are obviated in the literature on welfare economics, where first order conditions of optimal resource allocation in public goods is still a consequence of utility (social welfare) maximization subject to constraints on the production and consumption of the public goods. Optimality and second-best efficient allocative conditions are yet again upheld.

Consider once again how goods are considered in a neoclassical concept of sustainability. Goods have market determined prices or prices are reducible to reflect market values (Coase) even though human ecological conditions that must necessarily reflect upon sustainability, cannot guarantee such reductionism to exist in reality. Necessarily then, in the attempt to record market determined values for all prices, neoclassical economics must dissociate market phenomena from social phenomena and treat all goods as hedonic goods for satisfaction of purely economic criteria, either expressed by means of utility or social welfare. Contrarily, when distributive justice, say, must be treated, then marginalism leaves this to be determined efficiently in a market venue and thus be marginalized in the long-run, or distributive justice is determined by policies, which when implemented, must distort market process. In fact now, it is not simply that market prices are unattainable and second-best solution in resource allocation exists, but also that there is impossibility for an optimal point to occur at all. The intensity of such an impossibility increases as system-wide interactions increase in the midst of the interrelationships between values and markets.

Hence, concepts such as social goods (determined by moral values), commons, sustainability and social well-being, become substantively different in the endogeously ethical sense, which is fundamental to Islamic political economy, from their concepts in neoclassicism. The same conclusion is extended to goods in all of mainstream economics, including Marxist economic and macroeconomic theories. Why is this generalization?

The fact of the matter is that a general equilibrium framework as a circular flow of goods and services must assume a continuous transformation of produced goods into consumer bundles and vice versa. Thus, what is produced reflects the primacy of values in the demand for such goods (that is consumer and investment final demand).

In Marxist economics, labour theory of value imputes primacy to the value of labour time. But the episteme of labour theory of value arises from alienation theory, which ignores the fact that in the state of nature, value imputed in goods is not by virtue of any effort of the labour but due to Divine Providence. This primal value creates the useability of the good, which subsequently, labour discovers. Hence labour theory by ignoring this primal value, inflates the reward to labour. Alienation theory of labour built in surplus value is as unacceptable. It is of course a big question whether surplus theory is at all a logical theory whatsoever in all systems of political economy. In Islamic political economy, embued by its intrinsically systemic interactions-integration-evolutionary that transform hedonic preferences into socially consensual preferences on the basis of the moral law (Shari'ah), negates both the possibility of primacy of labour in production and hence in the demand for consumer or capital goods on the one hand, and the absence of cooperation between capital and labour in this same kind of interactive, consensual and dyanmic process of diversifications and growth (the Shuratic Process). The net reflection of this argument is that Marxist epistemology is premised on the concept of economism, which is a hedonic concept marginalizing the fundamental role of moral values and the real possibility of the latter in market transformation (ethicized markets).

Macroeconomics is governed by similar general equilibrium concepts of flows of goods and services. The absence of any ethical perceptor to explain preferences, microeconomic prices, moral relevance of policies as they arise from social processes and institutional behaviour in decisionastic systems, and the nature of goods being produced and consumed, make macroeconomic methodology to be irrelevant in answering the question on the nature of goods. There is the old economic adage, that GNP taken in any of its forms (real, per capita, real per capita) is not a measure of social welfare, and indeed much farther off to social well-being. The latter concept for this chapter reflects the well-being of consumers and producers determined by the Shuratic Process applied to this field and subject matter of study.

If then the question of the nature of good is primarily a matter of defining preferences and integrating them with the demand and production (supply) space, its moral relevance is to be found in the dynamics of generting the preferences and then mapping them to the latter spaces. It is within this dynamics that resource allocation, prices, concepts of efficiency and productivity, are to be established.

A quick examination on the question at hand suggests that in order for a difference to exist between needs and wants, the social and private valuation of needs must turn out to be higher than the private valuation of wants and the social valuation of wants. While it is obvious that if social valuation promotes needs, that social valuation of needs must exceed social valuation of wants. But to explain the fact that social valuation of needs must exceed the social valuation of wants, we must show that preferences must be so formed that describes the demand and production spaces to be governed by needs as opposed to wants. Such a transformation can never be possible either in a hedonic orientation of preferences, production and markets, or in a command economy that forces social valuation and stiffles sustainability of moral values through choices. Markets must continue to value goods whatever they are. The difference is simply in the nature of markets and how such a market is realized through preference functions. In Islamic political economy it is the interactions between knowledge-induced preference formation under the Shuratic Process and the consequential transformation of markets into ethicized markets, that makes the substantive difference.

In the context of the Shuratic Process we now define a good as follows:

Tawhidi Unification Epistemology (Qur'an and Sunnah) -> Shari'ah Ahkam through discursions among decision-makers (consumers, producers, buyers, sellers, institutions) -> interactive preference formation leading to consensus on issues among a range of diversities premised on the Tawhidi Unification Epistemology and the attributes that reflect in Ahkam formation -> transforms consumption, production, technological, insitutional preferences and distributional menus in accordance with the interactive-integrative dynamics (Shuratic Process) -> Circular causation and continuity of the process defines higher emergence of knowledge, hence preferences etc.

Thus the nature of goods denoted by Gi, is defined by the mapping:

{T->K(i,j)(A)} -> Xi -> Gi, where, i denotes the specific category of goods (needs, wants, education, medical, hedonic etc.). j denotes the Shuratic interactions. K(.) denotes knowledge or Ahkam formation on the basis of (i,j) given the attributes A derived from T. Xi denotes the system of relations governed by K(i,j) pertaining to the specific category of goods under consideration. Hence, Gi=f2(Xi)=(f2 o f1)(Xi(T->K(i,j))[A] are functional relations that define the nature of the goods, not the demand or supply (production) spaces. The above relations can be written together as the compounded mapping f2 o f1. Gi are thus formed under interactive and consensual preferences evolving continuously in this order. Such interactive preferences are made possible by the foundational premise of Tawhidi Unification Epistemology as it takes roots in T and then externalizes the self- same Shari'ah dynamics in the market order to determine the complementary of forms in goods. Marginalism is thus rejected pervasively by complementarity among `goods', preferences and wider system of relations. The pervasiveness of interlinked strings of Shuras in all consumer and producer, buyer and seller units as in higher echelons of public authority including the government, makes the process of decision-making in such an interactive-integrative and evolutionary knowledge-based system to be automatic and continuous. In this way an imposed transformation of the market order is fully supplanted by freedom of choice in a fully participatory nature of deicision making for the common social well-being. The nature of all goods in Islamic political economy so evolving by the anthropic moral presence in a market reality, is that of social goods. Such goods are encouraged to be produced and consumed privately but public goods are also included. The Qur'an majestically establishes this aspect of the Islamic market order: Eat and drink but be not prodigal, for Allah loves not the prodigal.

Our next step is to determine the demand-supply space emanating from the nature of the goods Gi. For this purpose we note that in the interactive-integrative-evolutionary framework of the knowledge-based centricity of Tawhidi Unification Epistemology the following circular causation and continuity methodology must exist: T->K(i,j)->G->X=(C,P,D,p,p^,E,L,I,w,W,other)->K'(i,j)->G'->X'->etc. Here, X=(....) denotes the socioeconomic, policy and other variables, such as, C=consumption, P=production, D=distribution, p=price level, p^ price stability, E=entitlement, L=labour/employment, I=investment, w=wealth, W=social well-being, which again is a function of the other variables as mentioned here and more (determined as the process of discursions in the Shuratic Process continues. K'(i,j) is the recursed level of knowledge resulting from circular causation and continuity. Similarly are the recursed values of G', X' alongwith the including variables as shown earlier. The arrows point out the direction of the recursions in the circular causation and continuity methodology of unified reality (based on the Tawhidi Unification Epistemology).

We can now write,

f3(G)=X; (f3 o f2 o f1)[T] = X. Hence each of the X- variables is a function of K(i,j), the flow of knowledge that emanates from the Stock of Knowledge (T=QUS, Q=Qur'an, S=Sunnah. See homepage diagram and other chapters in this lecture series). 

But furthermore,

K'=f4(X)=(f4 o f3 o f2 o f1)[T]. That is first, every subsequent evolution of K' is from the ethicized market venue. Second, there is a cumulative evolution of flows of knowledge from and towards the Stock T. These are direct consequences of the Tawhidi Unification Epistemology on the plane of circular causation and continuity model of unified reality. The process continues as is marked by the distinctness of Shuratic Process (i,j and the embedded socio-scientific system including markets and human ecology) in all of these.

We also need to note that the fundamentally moral and ethical construct of the knowledge-centered interrelationships means that all the variables are formed from their microeconomic levels to any level of aggregation. Thus for example, the C- variable being driven by dynamic basic needs baskets extended to both primary goods, capital goods and manufactures at diversified levels of their attributes, the ethicized market takes account of the space of mathematical intersection of the agent-specific C(i)'s at given levels of interactions and consensus; that is within a given evolutionary phase. The latter also marks a given phase of Islamization of knowledge pertaining to reactions to ethicized transformation of the markets. With the C-variable being determined by an aggregation in the space of C(i)-values, and since this mathematical intersection is brought about by the convergence (interactions-integration=Ijtehadi Ijma through Shuratic discursions), therefore by the previous mappings, INT(K(i,j)) -> INT(C(i,j)), where INT=mathematical intersection. These intersections expand in their dimensionality with the progressive impact of knowledge flows on them, that is with the advance of the Shuratic Process (=interactive-integrative-evolutionary world view of unified reality). This methodology also reflects the recreative process that is mentioned in the Qur'an to govern all the worlds. Here the markets and ecology form such worlds that get unified with the various human and institutional forms that find their presence within these worlds enabling interactions, integration and creative evolution to occur continuously. In the same way, the other variables can be treated.

But note particularly the price variable, p. The price of a particular good is determined by the sheer medium of exchange, given that there is knowledge induction towards realizing dynamic baskets of basic needs including primary goods, capital goods and manufactures of diverse vintages. In its most micro-level orientation, such a price is then the value of the transaction measured in terms of the currency value (money) paid out per unit of the goods bought and sold. Such a price concept is nearer to the classical economic concept and far away from the neoclassical economic concept of prices based on the value of money exchanged for goods by utility-maximizing individuals. But even in the classical economic notion, the market price for the good transacted in the microeconomic market of the specific good, the impossibility to hold prices constant except in the instantaneous market period of the very very...very short run (of no practical meaning for markets=Stigler's market period of the very very short run), because of the continuous evolution of knowledge flows and diversities accordingly created in the dynamic baskets of basic needs of consumer and producer goods, there cannot exist a an optimality and equilibrium either for individual preferences or for utility and production menus of the neoclassical type. Optimality- equilibrium are now market oriented ones. They appear and disappear in wisps with the advance and intensity of the knowledge formation process. The concept of equilibrium in such knowledge-based systems are thus of the evolutionary type and prices reflect values that perpetually evolve.

Consider now that p = M/Q, where M is the currency value of money, Q is the quantity of the good transacted; Q=C for the consumer, Q=P for the producer in the micro-level market of the specific good under transaction. In a chapter in this lecture series we have pointed out that the value of money is reflected in terms of the value of the good in exchange and money is simply a contravention, whereas its value being directly imparted by Q in exchange is endogenous. This concept makes a difference between the Quantity Theory version of money equation and the formulation here. Each of p, M, Q is knowledge induced and subsequently evolves into higher K as p is formed. Since p(S).P - p(D).C = M(P) - M(C), where, p(S) denotes supply price, p(D) denoted demand price, M(P) denotes money demand for the producer (seller), M(C) denoted money demand for the buyer, but there is no guarantee that these money demands will be equal to each other as the momentum of innovation is different from the side of the buyer and seller, when knowledge intensifies. Market exchange is thus influenced both from the consumer and the producer sides and not by the primacy of demand. Thus, even when P=C, yet the fact that M(P) is not equal to M(C) in the presence of knowledge induction, means that p(S) is not equal to p(D). But on a second round of interactions, it will be equally possible for P not to be equal to C and so on. A cobweb of notional prices converge and emerge to new levels even before full market equilibrium can take place. All this is due to the pervasiveness and intensity of knowledge flows determining endogenously all the variables.

It is also to be recalled that all goods in the space of permissible C's and P's, likewise for distribution in the markets for labour, capital etc., are complementary goods and services. The demand and supply curves thus experience frontward shifts under the impact of knowledge generating the extant of complementarities. Thus, even though notional prices rather than market equilibrium prices emerge under knowledge-inductions, yet the trajectories of prices as the locus of very temporarily expectational market equilibria remain steady and hence predictive.(Boulding, Grandmont, Choudhury) Price stability is then established. Consequently, stability in quantities of goods, services and money (as currency) must follow accordingly.

In another chapter of this series of lectures I have dealt with the topic of micro-macro interface in Islamic political economy. In the present chapter we thus recall that macroeconomic phenomenon is simply an aggregative reflection of microeconomic transactions. This aggregation is taken over the space of intersections of various variables as they interrelate and evolve according to the Shuratic Process now applied to markets and ecology. Thus, the idea of money supply is measured in terms of the currency supply that commercial banks and financial intermediaries can supply to fuel demands. The total supply of money in the economy is simply in terms of such currency aggregations. There is thus really M1 and 100 per cent reserve requirement prevailing. Thus accordingly, all speculative and precautionary components of money demand and the control of money by means of Central Banks interest rate policy are annulled. This does not mean return to gold standard necessarily, as other metals and alternatives including chequeable certificates can be equivalently considered to be valid. Fiscal policy is simply a means of supporting the quantity of money in demand in various activities. In this way the aggregation of government spending is measured in terms of the money needed to finance specific developmental activities as prescribed by Shari'ah and accented to in the Shuratic Process.

We can now note that money, goods, prices, price stability, entitlement, technology etc. are evolved interactively across knowledge-induced socioeconomic spaces. This means that the grassroots orientation to a dynamic basic needs focus on development is the be-all and end-all of all the processes that are generated. The essence of Islamic political economy as a globally interactive-integrative-evolutionary process invoking the Tawhidi Unification Epistemology in all systems as much as they can be discovered and induced during the knowledge induction, is now spelled out on the ethical nature of goods and their transformation effects. The grassroots mobilized by the various precepts of Shari'ah and the Shuratic Process is the foundation of the politico-economic order and grassroots here assumes the meaning of a profound IDEA.

We can now return to the chain of evolving relations between knowledge and the material order that forms the social well-being function, W(Z(K(i,j))), Z=(C,P,D,p,p^,E,L,...)[K(i,j)]. The relations of the recursive operations among the variables are given by, z=fs(Z/z). This means that any of the variables in the vector Z is expressed in terms of all the vectors of Z except z by the function fs, for different number of relations s that appear in these recursive derived relations. The additional relation is k=q(Z). We can now recursively simulate the social well-being function, W(Z), subject to the recursive relations fs and q. These recursions denote the levels of interactions, j, for specific markets, goods, agents etc. i (greater details can be introduced in terms of the indexes). Integration or social consensus (Ijma) would appear when there is expectational convergence in the Z and K values together with a temporary expectational convergence in the value of the simulative social well-being criterion. Creative evolution occurs when such temporary expectational convergences are reiterated upwards by shifts occurring due to knowledge-induced technological change, discoveries, moral feats etc. This is a description of the quantitative form of the recursive relations as opposed to maximization criteria for manistream economics. But the more important message here is the recursive process of the anthropic nature calling forth human participation and enactment of Shari'ah and the Shuratic Process, rather than giving any primacy to the scientific methods. Scientific methods can only follow the human actions in the Shuratic Process.

Islamic economics has fully emulated the methods of mainstream economics and has continued to treat Shari'ah and Islamic ethics as exogenous factors in accordance to the underlying methodology. Thus, the nature of goods as ethical/social goods transforming markets and subsequently emerging from ethicizing markets with its extensively increasing knowledge-induced domains, cannot be formalized in the methods of Islamic economics as in manistream economics. Preferences of agents in Islamic economics are not endogenously evolved by the process of interactions- integration and creative evolution. They are given ethical preferences and hence play the role of altruism as yet another form of optimum state of self-seeking agents of neoclassical economics with interdependent utility criteria. The optimization of such interdependent utility criteria despite the presence of the ethical perceptor of Islamic ethics exogenously imposed in the system brings out no learning process for the processes involved. For an optimum to attain, there must then methodologically exist either atomism of the individualists or the hegemony of the perceptor. In mainstream economics we would call such a overpowering optimist to be Eurocentric Agency. In Islamic economics, the similar agent in spite of invoking Shari'ah, remains exogenous and hence the power of Shari'ah to teach the world order and for agents to grow in its midst, is not invoked. The exogeneity of ethics, the benignity of preferences and the absence of Shari'ah as a dynamic Process of teaching and transforming are still another form of ethical imposition. The essence is contrary to the Qur'anic world view, which transforms out of the dynamic evolution of knowledge imparted by Shari'ah and evolved by humans in the midst of the Divinely created and ever-regenerative worlds. The methods of Islamic economics cannot therefore bring forth the ethicizing process that is presented by the Qur'an in very many of its verses. See Qur'an, Chapter III, verses 190-91; Chapter X, verse 4; Chapter XIII, verse 2; Chapter XIV, verses 24-26; Chapter XLII, verses 49-53.