ECONOMIC GOODS AND THEIR TRAITS

Goods in economics mean those commodities and services that have value to people and are saleable at some price. The word ‘good’ is used as against the word ‘bad.

Written by

Dr. Waquar Anwar

Published on

August 17, 2022

Goods in economics mean those commodities and services that have value to people and are saleable at some price. The word ‘good’ is used as against the word ‘bad.’ That which is useful and not ‘bad’ is called good. Not all goods are good all the time and not all goods are good to all people. These are objects or services human beings like to possess and which serve their routine economic needs. These things satisfy some desire or need. These are capable of being delivered involving transfer of ownership from one person to another.

Goods are classifiable in various manners. For example, economic or commercial goods as against free goods like air that are naturally available in abundant supply.  Another classification may be that of ‘Industrial goods’ that are produced for use by industry in production of other goods; ‘Commercial goods’ that are not required for use in production of other goods but are used in business in the form in which they are produced such as stationary, furniture, office machines, etc.; ‘Consumer goods’ that are ultimately consumed by individuals without any further processing.

Goods are called by other names, namely Riches, Resources, Materials, Assets, Possessions, Commodities, and Products. The Arabic word Maal has similar connotations.

 

MAAL IN ISLAMIC LITERATURE

It is interesting to note the discussions relating to Maal in the Islamic literature. Islam is proactive about human possessions including his/her resources and riches provided it has come through permitted (halal) sources and is utilised in permitted manners and Zakat and Ushr, as applicable, are paid according to the Shari’ah (the Islamic law) on the savings, if any.

The wealth accumulated by a person is subject to distribution according to the Islamic law of inheritance. On the basis of these provisions of the Shari’ah, Islamic scholars have discussed in detail the related provisions and extracted laws so that issues cropping up can be resolved. It must go to the credit of such scholars that all issues were addressed and viable solutions in keeping with the verses of the Qur’ān, traditions of the Prophet (peace and blessings of Allah be to him) and practices of the exalted and rightly guided four caliphs were suggested.

It may be noted that that rulers of the Muslim world, despite varied degree of practices of Islam in their personal life, desisted from giving rulings on legal issues ignoring the Islamic scholars who the Muslim masses regarded as pious and eligible for the purpose.

The whole body of Islamic jurisprudence (Fiqh) were developed by the private efforts of such scholars who paid no heed to the wishes, commands and fancies of the rulers of their times. They did face hostile rulers and persecutions and punishments in their hands but they remained firm to their respective understanding of the correct interpretation of the Qur’ān and Sunnat (traditions of the Prophet). Muslim masses always had faith in them and ultimately their rulings prevailed.

 

CHARACTERISTICS

Past Islamic scholars defined maal in terms of following characteristic features.

  1. It should attract human beings. Men should feel affinity and liking for it.
  2. It can be possessed and kept in possession safely. A likeable thing which cannot be acquired and which is not storable is not maal.
  3. It should serve some human need. A useless thing can never be maal.
  4. A good number of persons must recognise it as maal. A particular person may develop a fancy for a particular thing and consider that thing to be useful but that cannot be considered maal. This preference and fondness cannot be considered worthy of consideration unless a markedly good number of persons share this affection and fondness.

 

TYPES OF MAAL

Islamic Fuqahah (Jurists) have classified goods in terms of their specific needs of jurisprudence. Their basic need has been to classify permitted and non-permitted transactions and related transfer of possessions.  First, this idea of permissibility or otherwise of any goods and the legality of their transactions gave rise to the classification of Maal Mutaqawwim and Maal Ghair Mutaqawwim. The related discussion shows a unique feature of Islamic economics.

Maal Mutaqawwim can be loosely translated as goods with proper authority, having economic and monetary value. Literally, it would mean goods with proper standing. Maal Ghair Mutaqawwim is just the converse, unauthorised goods without any economic or monetary value and without any standing as such. This distinction can be understood with a simple example. Liquor is not permitted (haram) to Muslims. So a Muslim is not authorised to possess liquor. For him it should have no economic or monetary value and if a bottle of liquor available with a Muslim (clandestine belonging!) is broken by a non-Muslim, there will not be any compensation payable by that non-Muslim because the commodity (liquor) is Maal Ghair Mutaqawwim (possessions without any standing) for the Muslim.

However the case of a non-Muslim possessing liquor is quite different. There is no bar on him to possess the same and it is a Maal Mutaqawwim (commodity with standing) and if any loss to this legal possession is caused by a Muslim, compensation will be payable by that Muslim.

The above mentioned transaction is very significant because legality or otherwise of a transaction depends on this classification. There cannot be any business transaction of Maal Ghair Mutaqawwim as it would be illegal and void ab-initio.

 

GENERIC AND SPECIFIC GOODS

Another classification of goods done by Islamic scholars and jurists is that of Mislee (Generic) and Quaimi (Specific) goods. Generic goods mean the items whose similar goods are generally available in market. For example, provisions like eggs, rice, and sugar are generally available in market and all these items are akin. One piece of egg available in one shop is like another piece of egg available in another shop. Specific goods are just the reverse of Generic goods. These are goods whose likes are not generally available in market. Consider the case of livestock. One goat owned by one person is not like another goat with another person. These two goats may have different prices. Similar is the case of houses. Every house may be unique with regard to its construction or locality, and these may justify difference in their respective values.

The importance of this classification between Generic and Specific Goods is that in any barter system Generic goods shall have to be transacted without any difference of quantity or weight, as the case may be. Any excess in quantity or weight will be riba (interest). However, Specific goods can be bartered with unequal quantities. If a person borrows three eggs from his neighbour, he will have to return three eggs in lieu of that. One cannot take the plea that the eggs borrowed were bigger, so the eggs refunded should be more in number. The difference in size, if any, shall be ignored. Refunding two eggs in lieu of three will be unjust and demanding or giving four eggs in lieu of three would be riba. [Riba literally means excess and Islam forbids the excess that has no counter-value/justification.]

Specific goods can be bartered with unequal quantity. One can exchange one house with more than one house and this excess in quantity may be justified. So this excess in quantity shall not be riba as such.

 

USABLE AND CONSUMABLE

Yet another classification of goods which is very much relevant to the subject of Islamic economics and finance is the classification of commodities and assets as Usable and Consumable. A proper understanding of this particular categorisation provides an understanding of the stand of Islam with regard to interest. It also provides a justification of prohibition of riba. This difference between usable and consumable is generally not considered in contemporary economics and finance whereas the Islamic approach is guided by this distinction. Something that has been consumed cannot be returned in its original manner. It is possible to return a similar generic item. Any excess of the item in this return will be treated as interest by Islam and shall be illegal. Neither any excess in quantity nor any rental for the consumed commodity is permitted in Islam. The rental too shall be interest and it is forbidden. However, it is possible to give and take rent for the utilisation of the Usable goods. The item as such is returned intact.

One example will explain the position. Suppose a person borrows five litres of petrol from someone and utilises it as fuel in his car and consumes that item. Now the person who borrowed the fuel will either pay the price of this fuel consumed or purchase five litres of petrol and return. The petrol so returned is not the same petrol that was borrowed as the original commodity has been consumed. Islam will not permit any rental in money terms or excess in quantity while returning the consumed item.

Now let us consider the case of a man using a car of another person on rental basis. The car in original form is returned after using and rental for using its services is paid. This transaction is proper and fully justified in Islam.

The significance of this discussion can be appreciated when we consider the case of reward to the factors of production in economics. As we have already discussed earlier, Islam recognises payment of ujrat (wages) to labour against utilisation of their services for a specific period. Rent too is the payment for utilising natural resources like land, minerals, natural vegetations, etc. All these are cases of using services without changing the shape or form of these human and natural resources. They are kept intact, their services utilised for a specific period and payments are made in due recognition of these services. But the capital brought in by an entrepreneur does not remain intact. It is simply consumed because its shape and form are changed. Now Islam does not recognise any rental in the name of interest or otherwise for the capital as the item has been consumed. Rental for utilisation of a fixed period is permitted only in the case of a Usable item and forbidden in the case of any Consumable item.

Here lies the justification and locus standi of prohibition of riba (interest) in Islam.