Beyond State and Market: Institutional Diversity and Polycentricity in Islamic Contexts

Abstract

In discussing capitalism in Islamic contexts, and in societies generally, many will focus on the role of the market in relation to the state. My main thesis is that the emphasis on ideal types of market and state are inadequate and misleading, particularly when considering development issues. Instead, understandings of property, authority, and governance generally require more sensitivity to institutional diversity. Changing the starting point to an appreciation of institutional diversity greatly improves analyses and under-standings of potentials. A society’s cultural endowment, including religious tradition, can be understood as a set of institutions responding to collective action problems in society. While much of the literature on political economy in Islamic contexts has emphasized diversity in ideas, interests, and attitudes, institutions have largely been treated as derivative or epiphenomenal. In contrast with mono-lithic depictions of ‘Sharia’ or ‘Islamic Law’, the Islamic tradition presents a rich heritage of institutional diversity, and the means to accommodate insti-tutional diversity. Combined with a political economic approach that em-phasizes institutional diversity and polycentric order, this heritage suggests underappreciated development potentials in contemporary Islamic con-texts. Considering these potentials requires going beyond the market-state dichotomy.