Islamic economics are a set of theories based on the teachings of the Islamic holy book, the Koran. Timur Kuran, author of the highly critical article in the American Economic Review, "The Discontents of Islamic Morality," argued that the purpose of Islamic economics as helping to "prevent Muslims from assimilating into the emerging global culture whose core elements have a western pedigree" (Kuran, 1996, 1). Kuran also believes that Islamic economics are primarily concerned with attaining cultural goals rather than improved fiscal goals. According to Kuran, these theories are an attempt to limit outside influence of any kind on the Arab world.
However, Timur Kuran makes a common error in his review of Islamic economics by assuming that it is one homogenous school of thought motivated solely toward limiting western influence. In fact, there are several different schools of Islamic economics with widely divergent and conflicting philosophies. In the article, "Islamic Economics and Economic Policy Formation in Post revolutionary Iran: A Critique," Mehrdad Valibeigi labels the two most prominent schools as "Liberal Islamic Economics" and the other as the "Tawhid Islamic Economics" (Valibeigi, 1993, 3).
Globally, Islamic economics in various forms and degrees have been instituted in several Muslim dominated nations in the last 40 years, such as Saudi Arabia, Egypt, Pakistan, and the United Arab Emirates. Yet no nation has attempted to implement these economic theories as comprehensively as post revolutionary Iran. Beginning after the overthrow of the Shah in 1979, Iran's revolutionary government has applied Islamic economics to its fiscal policies with only minimal success. Their lack of cohesive policies and solid fiscal growth has been due primarily to the paralyzing conflicts between proponents of Liberal and Tawhid economic policies, within the Iranian government, from 1979 to 1997. While the two sides have squabbled f...