Ibn Khaldun History of Islamic economics

statue of ibn khaldoun in tunis

perhaps best known islamic scholar wrote economics ibn khaldun of tunisia (1332–1406), considered forerunner of modern economists. ibn khaldun wrote on economic , political theory in introduction, or muqaddimah (prolegomena), of history of world (kitab al-ibar). in book, discussed called asabiyya (social cohesion), sourced cause of civilizations becoming great , others not. ibn khaldun felt many social forces cyclic, although there can sudden sharp turns break pattern. idea benefits of division of labor relate asabiyya, greater social cohesion, more complex successful division may be, greater economic growth. noted growth , development positively stimulates both supply , demand, , forces of supply , demand determines prices of goods. noted macroeconomic forces of population growth, human capital development, , technological developments effects on development. in fact, ibn khaldun thought population growth directly function of wealth.

although understood money served standard of value, medium of exchange, , preserver of value, did not realize value of gold , silver changed based on forces of supply , demand. introduced concept known khaldun-laffer curve (the relationship between tax rates , tax revenue increases tax rates increase while, increases in tax rates begin cause decrease in tax revenues taxes impose great cost producers in economy).

ibn khaldun introduced labor theory of value. described labor source of value, necessary earnings , capital accumulation, obvious in case of craft. argued if earning results other craft, value of resulting profit , acquired (capital) must (also) include value of labor obtained. without labor, not have been acquired.

his theory of asabiyyah has been compared modern keynesian economics, ibn khaldun s theory containing concept of multiplier. crucial difference, however, whereas john maynard keynes middle class s greater propensity save blame economic depression, ibn khaldun governmental propensity save @ times when investment opportunities not take slack leads aggregate demand.

another modern economic theory anticipated ibn khaldun supply-side economics. argued high taxes factor in causing empires collapse, result lower revenue collected high rates. wrote:

should known @ beginning of dynasty, taxation yields large revenue small assessments. @ end of dynasty, taxation yields small revenue large assessments.