Tuesday, 14 February 2012

Review: The Indicator to the Virtues of Commerce

The Indicator to the Virtues of Commerce
Book review

The recent translation by Dr Adi Setia of one of the earliest books in economics, “The Indicator to the Virtues of Commerce”, written by Abu al-Fadl Ja’far al-Dimashqi (a merchant and Islamic scholar from the 6th century) is a welcome addition to the modern world, where too often credit is given to Adam Smith for the founding of economics.

This book shows that economic thought was prevalent at quite a sophisticated level even within the early history of the Islamic world, but this aspect perhaps was ignored by modern historical economists because the book is actually about commerce, but has economic aspects spread throughout the book. Or it can be because the Western world wants to claim credit for invention of such fields (though sound papers have been written on the economics of Imam Ghazali etc, they are not generally given credit by historical economists).
The book is divided into twenty-four chapters, ranging from descriptions of wealth, different types of merchandise and trades, measurements of items, to how people should act with their income.

The starting discussion gives a refreshing insight on the different types of wealth, how they are achieved, their different virtues, money and the different types of money (including the suitability of different types, such as gold and silver). It shows that the current paper currency, that is the bane of modern society through inflation, can be countered through a different type of money.

Even the description of merchandise is fascinating since it shows the different items sold in historical Asia, how to assess their quality and how to deal with them (such as how to preserve meat) and how life must have been like in such an era.  It does away with the notions that life in the middle ages must have been backward and unsophisticated. Yet it indicates that there were some counterfeiters then too.

But the more relevant ideas come through the discussion of how businesses/merchants should behave towards customers, and this includes not just not cheating them, but also to be generous, not to deceive, to offer a fair price, and so on. It emphasises the need for knowledge and good character/morals amongst businessmen, how to detect and avoid deceptive people, and how to ensure that the person you are dealing with is reliable. All this is needed in current times when many people go to extremes in deceiving people.

Furthermore there is theoretical and practical discussion of economics, through how the forces of market demand and supply work, how prices are set and change, how arbitrage is made, the causes of price changes, what is needed to reach the “correct” price (like an equilibrium price) and so on. This means that one can understand to some extent the thought processes of businesses at the author’s time, and that their knowledge was very practical.

The book’s final chapters discuss the approaches to the preservation of wealth, how to plan expenditure and revenue, both at the governmental level and the individual level. It emphasises prudence like modern accounting, tries to curb greed, and balances between profit making and risk taking.

The book is not large, about 172 pages, so it can be read through quickly. But some areas need to be reflected over, since some theory comes into play, and one should try to understand it and ponder over the life at the time. It is a welcome addition to the history of Islamic civilisation. and in cultivating an authentic appreciation for it.

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