Theory of Consumer Behavior: An Islamic Perspective

KHAN, MUHAMMAD AKRAM (2020): Theory of Consumer Behavior: An Islamic Perspective.

Abstract

The paper supplements the theory of consumer behavior with insights from the primary sources of Islam. A consumer who maximizes utility operates within four dimensions: moderation, extravagance, waste, and niggardliness. These dimensions take different meanings in each social stratum. A complicating factor is the context of consumption which could be individual, social, or public. For each social stratum and for each context, these dimensions have different meanings. The paper suggests using the methodology of behavioral economics for defining the dimensions of consumption. It elaborates the concept of marginal propensity to consume into four propensities: marginal propensity to moderation, extravagance, waste, and niggardliness. That necessitates re-defining the law of demand, leading to four curves instead of the one usually found in the economics textbooks. The last part of the paper relates consumer behavior with material well-being and happiness and concludes that moderation leads to the highest levels of happiness as compared to other dimensions of the consumer behavior.

• Item Type: MPRA Paper
• Language: English
• Keywords: Consumer behavior; extravagance; waste; moderation; law of demand; material well-being and happiness
• Subjects: E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E21 - Consumption ; Saving ; Wealth

References

References Abbot, Andrew. 2014. The problem of excess. Sociology Theory. 32(1):1-26. DOI: 10.1177/0735275114523419

Adam, Abdullah, et al. 2018. Islamic economics: Principles and analysis. Kuala Lumpur, Malaysia: International Shari’ah Research Academy for Islamic Finance (ISRA).

Al-Aaidroos, M., Norleyza Jailani and Muriati Mukhtar. 2016. The utilitarian decision making from Islamic perspectives: Review and settlement attempt. International Journal of Advance Science Engineering Information Technology, 6 (6): 896-903.

Amanda, F., Possumah, B. T., & Firdaus, A. 2018. Consumerism in personal finance: An Islamic wealth management approach. Al-Iqtishad: Jurnal Ilmu Ekonomi Syariah (Journal of Islamic Economics), 10 (2): 325 – 340. doi: http://dx.doi.org/10.15408/aiq.v10i2.5518.

Amin, Hanudin, Abdul-Rahim Abdul-Rahman, Dzuljastri Abdul Razak. 2014. Theory of Islamic consumer behavior. Journal of Islamic Marketing, 5 (2): 273-301.

Amiruddin, Rafi & Asad Zaman. 2015. Failures of the “Invisible Hand”. Forum for Social Economics, 45(1):41- 60. March. https://www.researchgate.net/publication/274511332.

Asad, Muhammad. 1980. The message of the Qur’an. Gibraltar: Dar Al-Andalus. [Distributors: London: E.J.Brill].

Atherton, J. Graham, Elaine L., Steedman, Ian. (Eds.) 2010. The practices of happiness: Political economy, religion, and wellbeing. London: Routledge, Taylor & Francis Group.

Aydin, Necati. 2017. Spirituality and subjective wellbeing: Living a fulfilled life without falling into the trap of consumer culture. Humanomics, 33 (3): 300-314. https://doi.org/10.1108/ H-03-2017-0052.

Azhar, Rauf A. Economics of an Islamic economy. Leiden & Boston: E.J. Brill.

Badawi, Jamal. 2010. Economic system of Islam - Consumption. http://jamalbadawi.org/index.php? option=com_content&view=article&id=149:84-economic-system-of-islamconsumption& catid=20:volume-8-economic-system-of-islam&Itemid=13.

Bagader, Abubakar A., Abdullatif Tawfiq el-Chirazi el-Sabbagh, Mohamad as-Sayyid al-Glayand, Mawil Yousaf Izzi-deen Samarrai and Othman Abd-Rehman Llewellyn. 1994. Environmental protection in Islam. 2n ed. UK: IUCN.

Baloch, Francis, Vijayendra Rao and Sonalde Desai. 2004. Wedding celebrations as conspicuous consumption signaling social status in rural India. The Journal of Human Resources, XXXIX (3): 675-695.

Bendjilali, Boualem. 1993. On Muslim consumer behavior. Journal of Islamic Economics, 3(1): 1-16.

Brown, H.S., P.J. Vergragt. 2015. From consumerism to wellbeing: Toward a cultural transition? Journal of Cleaner Production, (xxx): 1-10. http://dx.doi.org/10.1016/j.jclepro.2015.04.107

Caserta, Kimberly. 2008. Luxury goods demand. Boston college electronic thesis or dissertation. http://hdl.handle.net/2345/572.

Collier, Paul. 2018. The future of capitalism: Facing the new anxieties. New York, NY: HarperCollins.

Dekhil, Fawzi, Hajer Boulebech and Neji Bouslama. 2017.Effect of religiosity on luxury consumer behavior: The case of the Tunisian Muslim. Journal of Islamic Marketing, 8 (1): 74-94.

Devinney, Timothy M., Pat Auger, and Giana Eckhardt. 2010. The myth of the ethical consumer. Cambridge, UK: Cambridge University Press. www.cambridge.org/9780521766944

Dİlek, Serkan, Orhan KÜÇÜK, Sefa IŞIK, Fatih ÇAKMAK. 2018. An Islamic approach to consumption theory. International Journal of Islamic Economics and Finance Studies, 4 (2): 33-42. Doi: 10.32957/ijisef.452581

Easterlin, R.A. 1974. Does economic growth improve the human lot? In Abramovitz, M., David, P.A. and Reder, M.W. (Eds.), Nations and Households in Economic Growth: Essays in Honor of Moses Abramovitz. New York, NY: Academic Press.

Eckhardt, Giana M., Russell W. Belk, Jonathan A.J. Wilson. 2014. The rise of inconspicuous consumption. Journal of Marketing Management. December. http://www.tandfonline.com/10.1080/0267257X.2014.989890

El-Ashker, Ahmed Abdel-Fattah. 1985. On the Islamic theory of consumer behavior: An empirical inquiry in a non-Islamic country. Working Paper. Durham: Durham University. http://www.dur.ac.uk/sgia/

Etzioni, Amitai. 2009. Spent: America after consumerism. The New Republic, Pp. 20-23. June 17.

Eum, Ikran. 2009. Study on Islamic consumerism from a cultural perspective - Intensification of Muslim identity and its impact on the emerging Muslim market. International Area Review, 12 (2): 3-20. Fall. https://www.researchgate.net/publication/254097878

Fagan, Heather. 2016. Islamic Iktisad (Frugality): Solution to consumerism as the root cause of environmental destruction. Australian Journal of Islamic Studies, 1 (1): 65-80.

Friedman, Hershey H. and Gerstein, Miriam, 2016. Rethinking the meaning of self-interest, rational choice, growth, and happiness: How the misunderstanding of these concepts caused misery for millions. September https://ssrn.com/abstract=2842427

Friedman, Hershey H. and Linda W. Friedman. 2010. Dying of consumption? Voluntary simplicity as an antidote to hyper materialism. http://ssrn.com/abstract=1536006

Furqani, Hafas. 2017. Consumption and morality: Principles and behavioral framework in Islamic economics. Journal of King Abdul-Aziz University: Islamic Economics, (30): Special Issue, pp: 89-102. April. https://ssrn.com/abstract=3061373.

Ghassan, Hassan B. 2016. A consumer and social welfare model based on the writings of Shibani (750-805 AD, 131-189 AH). PSL Quarterly Review, 69 (278):235-266. September.

Ghassan, Hassan B. 2015. Islamic consumer model, fairness behavior and asymptotic utility. https://mpra.ub.uni-muenchen.de/67141/.

Hamdani, Syed Nisar Hussain Hamdani, Eatzaz Ahmad, and Mahmood Khalid. 2004. Study of philanthropic behavior in divine economics framework. The Pakistan Development Review, 43 (4): 875-894. Winter.

Hamm, Trent. 2017. Wealth Is not a route to happiness. What is? March 27. https://www.thesimpledollar.com/financial-wellness/wealth-is-not-a-route-to-happiness-what-is/

Hamm, Trent. 2018. The wisdom of frugality: What is simplicity? June 21. https://www.thesimpledollar.com/book-reviews/the-wisdom-of-frugality-what-is-simplicity/

Hamm, Trent. 2018-a. The Wisdom of frugality: Why simple living is thought to make us happier. July 5. https://www.thesimpledollar.com/book-reviews/the-wisdom-of-frugality-why-simple-living-is-thoughtto-make-us-happier/

Hammerl, Manfred and Carina Kradischnig. 2018. Conspicuous consumption (Marketing and Economics). In Encyclopedia of Evolutionary Psychological Science. Eds., T. K. Shackelford, V. A. Weekes-Shackelford. June. https://doi.org/10.1007/978-3-319-16999-6_3786-1

Hasan, Zubair. 1985. Comments on Munwar Iqbal’s ‘Zakah, Moderation and Aggregate Consumption in an Islamic Economy’ [Journal of Research in Islamic Economics (3:1)1985]. Journal of King Abdul-Aziz University: Islamic Economics, ( 2): 91-100.

Hasan, Zubair. 2005. Treatment of consumption in Islamic economics: An appraisal. Journal of King Abdulaziz University: Islamic economics, (18:2): 29-46.

Heslam, Peter. 2010. Happiness through thrift. In The practices of happiness: Political economy, religion, and wellbeing, Eds. Atherton, John et al. London: Routledge, Taylor & Francis Group, London.

Iqbal, Munawar. 1985. Zakah, moderation and aggregate consumption in an Islamic economy. Journal of Research in Islamic Economics, 3(1):45-61.

Iqbal, Munawar. 1998. Macro-consumption theory in an Islamic economic framework. In Lesson in Islamic Economics, Vol.1. Ed.,Monzer Kahf. Jeddah: Islamic Research and Training Institute. Pp. 261-276.

Jafari, A., & A. Suerdem. 2012. An analysis of material consumption culture in the Muslim world. Marketing Theory, 12(1): 59-77. DOI: 10.1177/1470593111424184

Kahf, Monzer. 1980. A contribution to the theory of consumer behavior. In Studies in Islamic Economics, Ed., Khurshid Ahmad. Jeddah: International Centre for Research in Islamic Economics, King Abdul-Aziz University.

Khan, M. Fahim. 1984. Macro consumption function in an Islamic framework. Journal of Research in Islamic Economics, 1 (2):3-25.

Khan, M. Fahim. 1992. Theory of consumer behavior in an Islamic perspective. in Lectures on Islamic Economics. Eds.,Ausaf Ahmad and Kazim Raza Awan. Jeddah: IRTI, Islamic Development Bank, pp. 169–81.

Khan, M. Fahim. 2003. Consumer behavior, sustainable development, and Islam. Unpublished. https://www.academia.edu/8657875/Consumer_Behavior_Sustainable_Development_and_Islam

Khan, M. Fahim. 2013. An alternative approach to analysis of consumer behavior: Need for distinctive “Islamic” theory. Journal of Islamic Business and Management, 3 (2): 1-35.

Khan, M. Fahim. 2014. The framework for Islamic theory of consumer behavior. Journal of Islamic Business and Management, 4(1): 17-54.

Kiani, Mehdi. 2018. A comparative analysis of concepts of "Consumerism", "Israf" and "Tabzir" in conventional and Islamic economics. https://www.researchgate.net/publication/326698402

Kirchgässner, Gebhard. 2014. On self-interest and greed. Centre for Economic Studies & IFO Institute (CESIFO) Working Paper No. 4883. Twww.CESifo-group.org/wpT

Madi, Ozlem. 2014. From Islamic radicalism to Islamic capitalism: The promises and predicaments of Turkish-Islamic entrepreneurship in a capitalist system (The case of İGİAD). Middle Eastern Studies, 50: (1) 144-161. http://dx.doi.org/10.1080/00263206.2013.864280

Mahdi, Iqbal S. 1985. Comments on Fahim Khan’s paper, ‘Macroeconomic consumption function in an Islamic framework’. Journal of Research in Islamic Economics, 2(2): 67-70.

Metawally, M.M. 1981. Macroeconomic models of Islamic doctrines. London: J. K. Publisher.

Muslim, Abu al-Husayn al-Nispuri bin al-Hajjaj. 1862-1868. Al-Jami’ al-Sahih, Leiden: E.J. Brill.

Modern History Sourcebook: Thorstein Veblen: Conspicuous Consumption. 1902. Fordham University: Internet Modern History Source Book. https://sourcebooks.fordham.edu/mod/1902veblen00.asp

Muttaqin, Zein. 2019. The nature of excessive behavior (israf) in the Islamic economic framework. Journal of Business and Economics Review, 4 (1): 49 – 57.

Naqvi, S.N.H. 1981. Ethics and economics. Leicester, UK: The Islamic Foundation.

Ng, Yew-Kwang. 2000. From preference to happiness: Towards a more complete welfare economics. http://papers.ssrn.com/paper.taf?abstract_id=222059

Nwankwo, Sonny, Nicolas Hamelin, Meryem Khaled. 2014. Consumer values, motivation, and purchase intention for luxury goods. Journal of Retailing and Consumer Services, (21): 735–744. http://dx.doi.org/10.1016/j.jretconser.2014.05.003.

Perez-Truglia, Ricardo, 2013. A test of the conspicuous-consumption model using subjective well-being data. SSRN: https://ssrn.com/abstract=1934007.

Planchenstainer, Francesco.2013. “They collected what was left of the scraps”: Food surplus as an opportunity and its legal incentives. February. https://ssrn.com/abstract=2221709

Porpino, Gustavo. 2016. Household food waste behavior: Avenues for future research, Journal of the Association of Consumer Research, 1 (1). http://dx.doi.org/10.1086/684528

Pugno, Maurizio. 2016. Beyond the distinction between necessaries and luxuries. https://mpra.ub.uni muenchen. de/73729/.

Ray, Michael, (ed.) Luxury. 2020 Encyclopedia Britannica, Inc. https://www.britannica.com/topic/luxury

Scitovsky, Tibor.1992, 1976. The joyless economy: The psychology of human satisfaction. New York: Oxford University Press. (Kindle Edition).

Shaw, Deirdre & Terry Newholm. 2002. Voluntary simplicity and the ethics of consumption. Psychology & Marketing, 19 (2):167–185. February.

Sims, Ramon. 2017. Money matters | Necessities vs. luxuries. Op-eds. https://thenassauguardian.com/2017/12/19/money-matters-necessities-vs-luxuries.

Srinivasan, R., R.K. Srivastava & Sandeep Bhanot. 2014. Impact of age on purchase behavior of luxury brands. Quest Journals: Journal of Research in Business and Management, 2 (9): 19-32.

Steedman, Ian. 2010. Economic theory and happiness. In The practices of happiness: Political economy, religion, and wellbeing. Eds. Atherton, John; Graham, Elaine L; and Steedman, Ian. London: Routledge, Taylor & Francis Group.

Stiglitz, Joseph E. 2019. People, power, and profits:Progressive capitalism for an age of discontent W. W. Norton & Company. Kindle Edition.

Stillman, Tyler F., Frank D. Fincham, Kathleen D. Vohs, Nathaniel M. Lambert, Christa A. Phillips. 2012. The material and immaterial in conflict: Spirituality reduces conspicuous consumption. Journal of Economic Psychology, (33): 1–7.

Tagel-Din, Seif E.I. 1984. Comments on ‘Fahim Khan’s, “Macro-consumption function in an Islamic framework” [JRIE 1 (2)1984], Journal of Research in Islamic Economics, 2 (1): 51-54.

Trentmann, Frank. 2004. Beyond consumerism: New historical perspectives on consumption. Journal of Contemporary History, 39(3): 373–401.

Veblen, Thorstein. 1902. The theory of the leisure class: An economic study of Institutions. New York: Macmillan. https://sourcebooks.fordham.edu/mod/1902veblen00.asp 7/

Yasin, H.M. and Atiquz Zafar. 2016. Fundamentals of Islamic economics and finance. Jeddah: IRTI, Islamic Development Bank.

Zaman, Asad. 2010. Scarcity: East and west. Journal of Islamic Economics, Banking and Finance, (1): 87-104. January-March.

Zaman, Asad. 2019. Islam’s gift: An economy of spiritual development. American Journal of Economics and Sociology, 78 (2): 443-491. March.

Zarqa, A. 1980. An approach to human welfare. In Studies in Islamic Economics, ed. by Khurshid Ahmad. Jeddah: International Centre for Research in Islamic Economics, King Abdul-Aziz University.

Zarqa, A. 1998. Consumer behavior in Islamic economy. In Lessons in Islamic economics, Volume 1. Ed. Monzer Kahf. Jeddah: IRTI, Islamic Development Bank.

Zimmermann, Stefan. 2014. The pursuit of subjective well-being through specific consumption choice. August 21. SSRN: https://ssrn.com/abstract=2484660 or http://dx.doi.org/10.2139/ssrn.2484660