Islamic economy and capitalism: Comparison using econophysics models of exchange and redistribution

What are the fundamental differences between an Islamic economy and capitalism? The Islamic economy is characterized by the prohibition of Riba (interest) and the enforcement of Mudaraba (joint venture) and Waqf (donation). We propose new econophysics models of wealth exchange and redistribution to quantitatively compare these characteristics with the differences in capitalism, and evaluate wealth distribution and disparities by simulation. Specifically, we propose a loan interest model representing finance capitalism and Riba, a joint venture model representing shareholder capitalism and Mudaraba with respect to exchange, and a transfer model representing inheritance tax and Waqf with respect to redistribution. As exchanges are repeated from an initial uniform distribution of wealth, the distribution of wealth approaches a power-law distribution more quickly in the loan than in the joint, and the Gini index, which represents disparity, rapidly increases. The joint has a slower increase in the Gini index, but eventually the wealth distribution in both models becomes a delta distribution, and the Gini index gradually approaches 1. Next, when both models are combined with the transfer model to redistribute wealth every given period, the loan has a larger Gini index than the joint, but both models converge to a value with a Gini index less than 1. These results quantitatively reveal that in the Islamic economy, disparities are restrained by their characteristics. These correspond to the three economic modes Polanyi presented: reciprocity, redistribution, and exchange. The insights encourage an economy that embraces the morals of mutual aid as described in Mauss's theory of gifts, Kropotkin's theory of mutual aid, Graeber's theory of debt, Sarthou-Lajus's repayment to third parties, and Karatani's mode of exchange D, and provide guidelines for the next alternative to capitalism.