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His name was Waliuddin Abdurrahman bin Muhammad bin Muhammad bin Abi Bakar Muhammad bin al-Hasan who later became known as Ibn Khaldun. He was born in Tunisia on 1 Ramadhan 732 H./27 May 1332 M. Ibn Khaldum is known as a Muslim historian and sociologist who has memorized the Qur'an since early age. As an Islamic politician, he was also known as the father of the Islamic Economy, because his ideas on logical and realistic economic theory were advanced before Adam Smith (1723-1790) and David Ricardo (1772-1823) presented his economic theories.
Even as a teenager, his writings have spread everywhere.
He is known for his book Muqaddimah or Prolegomena (Introduction). The book draws on 17th-century Ottoman historians such as K?tip ?elebi, Ahmed Cevdet Pasha and Mustafa Naima, who used the book's theories to analyze the growth and decline of the Ottoman Empire. Nineteenth-century European scholars recognized the importance of the book and regarded Ibn Khaldun as one of the greatest philosophers of the Middle Ages.
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His work also influenced the modern 20th century economy, especially the economics of supply-side thinkers like Arthur Laffer and Ronald Reagan.
Labor Theory of Value, Economic of Labor, Labor as the of Growth and Capital Accumulation. According to Ibn Khaldun, labor is a source of value. He gives detailed information on his valuable labor theory and presents it for the first time in history. Ibn Khaldun's contribution was later invited by David Hume in his Political Discourse published in 1752 entitled "Everything in the world is bought by labor." Therefore, "what is bought with money or with goods purchased by labor, such as that which we obtain from our hard work, money or goods is indeed saving us because they have a certain value of labor that we exchange for what was supposed to be the value of the same quantity, in turn, to the person who owned it, and which meant not to use or use it alone, but to exchange it for another commodity, equal to the quantity of labor that enabled it to buy or govern.
is the true measure of the exchangeable value of all commodities. "According to Ibn Khaldun, labor is a source of value. It is necessary for all income and capital accumulation. This is obvious in the case of crafts. Although the result is "the result of something other than crafting, the value of capital gain and capital must include the labor value it produces. Without labor, it will not be earned."
Ibn Khaldun divided all income into two categories namely ribh (gross income) and kasb (living income). Ribh means obtained when a man works for himself and sells its object to others. Therefore, value must include the cost of raw materials and natural resources. Meanwhile, Kasb can be obtained when a man works for himself. However, most of Ibn Khaldun's translators have made common mistakes in their understanding of ribh. It can mean gross profit or income depending on the context. For example, ribh means gross income because the cost of raw materials and natural resources is included in the selling price of an object.
Ibn Khaldun emphasized the role of "extra effort" which was later known as "marginal productivity", in the prosperity of society. His theory of labor provided the basis for urban development as an analysis of historical insights presented as the focal point of civilization.
According to Ibn Khaldun's ideas, natural resources are a necessary and sufficient condition for income and profit. Labor and its efforts led to production, which in turn was used for exchange through barter or through the use of money, namely gold and silver. Thus, the process generates the income and profits that humans derive from crafting as labor value after reducing raw material costs. Ibn Khaldun gives an original explanation of the reasons behind income disparities that may be attributed to differences in skills, market size, location, craftsmanship or employment, and the extent to which governments and governors buy end products. If the demand for a particular type of job is more valuable than the available offer, the revenue should increase. High income in one craft attracts the attention of others which creates a dynamic phenomenon that will eventually lead to increased supply and consequently lower profitability. Therefore, this principle describes Ibn-Khaldun's original analysis and insights on long-term adjustments in employment and between jobs and others. Nevertheless, Ibn Khaldun's analysis has not only proved to be historically correct but has also constituted the core thinking of classical economists.
On the whole, Ibn Khaldun briefly observes, explains, and analyzes how income in one place may be different from another, even for the same profession. For example, income from judges, craftsmen, and beggars is directly related to the prosperity and standard of living of each city that can be achieved through labor and productive community mobilization. However, Adam Smith explains the difference in income by comparing it in England and in Bengal with the reasoning given by Ibn Khaldun four centuries earlier when he compared income in Fez with the Tlemcen people. Ibn Khaldun first introduced labor donations as a way to build a nation's wealth, stating that labor, productivity improvements, and product exchanges in the big markets were the main reason behind the country's wealth and prosperity. On the other hand, declines in productivity can lead to economic decline and the income of the people.
Among Ibn Khaldun's contributions was the introduction and careful study of the interaction of several economic analysis tools, such as demand, supply, price, and profit.The demand for an object is based on the utility it obtains and not necessarily the need for it. Therefore, utility is the motive force behind demand. It creates incentives for consumer spending in the market. Ibn Khaldun introduced the theory of modern demand, which has since been developed and expanded by Thomas Robert Malthus, Alfred Marshall, John Hicks, and others. As commodities in demand attract increasing consumer spending, prices and quantity sold increase. Similarly, if demand for a particular skill decreases, its sales fall and as a result the price drops.
Ibn Khaldun continues to find the concepts known in modern economic literature as demand. The demand for an essay entrepreneur depends on the demand for its products in the market.As is well known, modern price theory states that cost is the backbone of supply theory. It was Ibn Khaldun who first studied the role of production cost in terms of supply and price. In observing the difference between the price of food produced in fertile land and that produced in poor land, he experienced this mainly due to differences in production costs.
If Ibn Khaldun's Gospel is used to analyze costs, it is clear that profits can be increased. Even for a given final product price, one reduces the cost of raw materials and other inputs used in the production by buying them at a discounted price. Or, generally, at low prices even from far-flung markets. As shown in his account of the benefits of foreign trade. However, Ibn Khaldun concluded that both too low and too high a price would disrupt the market. Therefore, it is advisable that countries do not keep prices low through subsidies or other means of market intervention. Such policies are economically disadvantaged because cheap goods will disappear from the market and there will be no incentive for suppliers to produce and sell when their profits are affected. Ibn Khaldun also concluded that too high a price would not be compatible with market expansion. As high-value goods sell less in the market, too high a price policy becomes unproductive and disrupts the flow of goods in the market. Ibn Khaldun laid the foundations of ideas which then led to the formulation of inequality analysis. Among the factors that influence the general price level are the increase in demand, supply restrictions, and rising costs of production, which are included in sales tax as one component of total cost.
In macroeconomics, Ibn Khaldun used John Maynard Keynes's policies as "effective aggregate demand," the multiplier effect and the similarity of income and expenditure. When demand increases with increasing population will result in more production, profits, customs, and taxes. Cycle growth continued as civilization expanded and new wave of demand created for luxury crafts and products. This means that the value they feel will increase, and the profits will once again be multiplied in the city. Production there grew more than before, and with the second and third increases. Thus, the wealth of the people will increase. The concept of multiplier was later developed and expanded by several economists, in particular John Maynard Keynes. However, it was first discovered in Ibn Khaldun's history.
Modern country income accounts are also developed and expanded using the same income and expenditure. Spending on one citizen is another person's income. Therefore, the total expenditure is the same as the total income first discovered by Ibn Khaldun. In fact, he uses both terms as synonyms to each other after establishing equality between them. Income and expenses are balanced against each other in each city and on the contrary if the income is large, the expenses are also large. incomes and expenses are huge which makes the population better and the city thrives.
In addition, Ibn Khaldun also introduced the pioneer growth theory based on capital accumulation through human effort. However, through human endeavor this will contribute to their needs. The benefits will be their living, if they meet their needs. They will make their capital accumulation bigger than they need to be.
Ibn Khaldun gives examples of economic development, from nomads to agriculture to greater cooperation in economic matters that occur through city to city expansion. Where the demand has increased and the workforce is growing and expanding the production of both quantities. Economic growth continued as additional efforts created capital accumulation. In turn, it was combined with efforts that led to more production and crafts development in cities. As previously stated, wealth grows through labor and effort, while human effort is less likely to cause stagnation and is followed by a declining trend in people's standard of living.Governments play an important role in the growth and economy of the nation generally through the purchase of their goods and services through a fiscal and spending policy. The government can also provide an incentive environment for work and prosperity or vice versa, a system of oppression that ultimately defeats itself.
Although Ibn Khaldun considers the government to be inefficient because there are not many calculations done by those who are basically known as costs and benefits, they still play an important role in the country's economy through their big purchases. Government spending stimulates the economy by increasing income through multiplier effects. However, if the king considers the amount he collects in taxes, the country's business weakness and economic activity are affected by the multiplier effect. In addition to its welfare programs for the elect such as the poor provided there is no treasury for the treasury. Governments need to spend tax revenue wisely to improve the situation to protect their rights and to protect them from harm.
Ibn Khaldun was a major contributor to tax theory in history. He was a philosopher who shaped the minds of several rulers throughout history. An economy driven by tight tax rates will not generate enough income to offset the budget because it will not produce enough jobs or enough profit. So, the reason why we need to have tax programs and budget cuts is because budget cuts will reduce government spending. According to Ibn Khaldun, the tax revenue of the government dynasty is increasing due to the prosperity of the business which is thriving rather than excessive taxation. Therefore, he was the first in history to lay the groundwork for optimal tax rates.
Cultural enterprises grow and rise, as low taxes bring satisfaction as cultural enterprises grow and the number of imposts and individual valuations increase. As a result, tax revenues, which are the sum of all individual assessments, increase while large tax assessments, income and profits are adversely affected, resulting in lower tax revenues. Ibn Khaldun made a strong case against the government's attempt to confiscate or otherwise influence private property. The problem of government interference in human resources results in a loss of incentives that results in weakening of the country. The takeover is self-defeating for any government as it is a form of oppression of society. In macroeconomics too, Ibn Khaldun also contributed to money theory. According to him, money is not a form of real wealth but a vehicle by which it can be acquired. He was the first to present the main function of money as a measure of value. All other things are subject to market volatility while gold and silver are exempt. This is because it is the basis of profit, wealth and wealth. The real form of wealth is not money. However, wealth is created or transformed through labor in the form of capital accumulation. Thus, Ibn Khaldun was the first to distinguish between money and real wealth. However, money plays a much more effective role than barter in business transactions in societies where people exchange their labor, whether in goods or services or with others to meet needs that they cannot meet on their own. Money also facilitates the flow of goods from one market to another, even across national borders.
Last but not least, Ibn Khaldun also contributed to the international economy. Through his sensitive observations and his analytical mind, he could not be denied the light of trade advantages between countries. According to Ibn Khaldun's view, the people's satisfaction, the profits of the merchants and the wealth of the country all increased through foreign trade.
If foreign benefits are cheaper than those produced internally, foreign trade will work to save workers and other resources by allowing them to be diverted from high-cost advantages that cannot compete with other cheap products. The resources saved from this redirect process can be used to produce other goods or may add another capital accumulation. Thus, foreign trade may positively contribute to the country's income level, economic growth and prosperity. If foreign good is of a higher quality than that produced internally, the imported good will increase the level of consumer satisfaction. At the same time, internal manufacturers facing competitive high quality products should try to increase their production or accept their sales and revenue reductions. There will be well-being benefits in any case, such as improving the quality of the internal product or diverting resources from high cost production to high cost. In the latter case, when the goods being imported are completely new products, the welfare benefits of the foreign trade may be expressed in terms of increasing the satisfaction level of the buyer or in terms of increasing the quantity or quality of production of other goods if the imported item is a new tool or an existing remodeling is there. In addition, the introduction of completely new products through foreign trade may attract internal manufacturers, if they can produce better and compete with foreign products.
Ibn Khaldun was aware of what he later called "opportunity cost". Resources should generally be used best to avoid loss of value. Foreign trade provides further incentives in an attempt to optimize the use of labor and other natural resources.
In conclusion, both Ibn Khaldun and Adam Smith made contributions in the field of labor division, in which Ibn Khaldun emphasized the importance of living conditions and the importance of survival for the individual and the power of the individual is not sufficient to meet these needs. Therefore, individuals must work together to stabilize and balance their production, even in agriculture and one man could not survive and needed the help of others. The more individuals who work together, the more achievements they will achieve. (Mccaffrey)
Ibn Khaldun also argued that there must be a division of labor and that it must be divided among individuals to achieve a good result. Adam Smith's contribution to the division of labor also occurs in the same flow as Ibn Khaldun but with more details and sophistication because of the time difference between the two economists. Where Adam Smith has provides detailed step-by-step accounting of the benefits of labor distribution and states that it is not just one people can do business and it should be distributed to employees. Both Ibn Khaldun and Adam Smith have stated in their books the importance of production, income and the surplus and most importantly the role of government and national wealth.
Ibn Khaldun's Economic Legacy: Pioneering Theories and Insights. (2019, Nov 27). Retrieved from https://studymoose.com/ibn-khaldun-biography-essay
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