Pouring in Firenze
Thoughts from Iraj Toutounchian’s Islamic Money & Banking, Integrating Money in Capital Theory
- In economics, we are basically dealing with two interrelated concepts – one legal (or conventional), the other real. All contractual agreements such as marriage, ownership, organizational hierarchy, money, interest and the like fall into the first category; while human-beings, commodities, buildings, amenity and the like are included in the second. Each of these concepts is able to produce the other or be transformed into itself. Let us call these two properties “Completeness” and “Reflexivity,” respectively. Hence, money, being a legal concept, is capable of producing another legal concept (actually its derivative) called “interest” or a real concept such as capital equipment.
- Money as potential capital is a legal concept capable of being transformed into actual capital. A simple example given earlier is that of a Mudarabah contract, in which as soon as one person’s money…
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