Modern Insurance and Medieval Islam
First, apologies on the absence, but I've been busy promoting my book on my times in Iraq (link to Amazon site on left). Latest interview was on Fred Andrle's estimable show, Open Line. You can listen to it here Also, if you haven't already, do buy the book.
Secondly, I just posted another article up on SSRN that I think those who enjoy the blog will take significant interest in. It's about how both national law and shari'a are blended and used among particular merchant communities in Iraq to create a remarkable and sophisticated commercial system. It also has my typical criticisms of the dominant trends in our field. You can find the article here. It will be published in the inaugural issue of the Berkeley Journal of Islamic and Middle Eastern Law (SSRN does not reflect that now, but will soon.) Also, if you can avoid it, do NOT download anonymously. Set up a (totally, completely) free SSRN account if you don't have one, it's harmless (social scientist academics, what can they do to you) and then I get credit for the download. See if you download anonymously and read carefully for three hours, it's wonderful, I am happy, but I get no credit. You download, and read for 5 seconds, well that's too bad it didn't interest you more, but I get credit. Your spouse downloads, and you download your own version, double credit, and so forth. And yes that means if you aren't sure whether you'll read it or not, download it onto your computer anyway, and do try to read it, that's the ultimate point anyway. Now, as the Arabs say, once they get to the subject of the day, "and what is more" (wa amma ba'ad):
Yesterday I had dinner with, among other people, the current President of the American Society of International Law Lucy Reed, who among many other things in her remarkable career negotiated with North Korea at some point on behalf of the US. One thing she had mentioned in passing was the challenge of explaining the concept of insurance to some of the North Korean leadership. This dovetailed with a talk made that day about the development of the concept of risk in the 19th century, that unfortunately I missed.
Anyway, the lack of knowledge on the part of the North Koreans didn't surprise me in the least, because quite frankly it seems precisely the situation with medieval classical Islamic thinkers. When you buy and sell in that world, it's goods basically--a camel, a slave, gold, dates, silver, etc. Even when discussing the (prohibited) sale of some intangibles, it's all sort of rephrased as sort of tangibles. For example, there is a prohibition against selling uncaught fish in the sea, on the basis of a Prophetic hadith. I think if one really considers it, the sale isn't really about the animal itself, it's about the sale of the right to fish in particular waters. That is, the fish must be in some waters I own (otherwise how can I sell it, on what basis could it possibly be argued that I own it), and the primary risk that the purchaser of the uncaught fish has is, really, that I don't know if I can catch it, or what it's going to look like when I do. So I discount that when purchasing the right to fish, and we make the deal. This is all prohibited under classical Islamic thought, but my point is a different one--that the sale of something that is fundamentally intangible is repackaged and rephrased as the sale of an item, a good, because that's generally how the authorities considered it.
(To be clear, it's not that the concept of risk is unfathomable, you can talk to a North Korean or a Muslim from the medieval era and they will understand what you say when you say "what happens if you purchase a camel and it turns out to be sick". Everyone knows stuff happens, part of that is the reason the uncaught fish sale is prohibited. But understanding that is not enough to create insurance, what you need to do is to commodify risk, to buy and to sell it, on the basis of how likely particular events are. That's the part that I don't think meant anything to anyone prior to the 19th century).
So now you get to this day and age, and you try to make sense of all of these rules so that they fit a modern paradigm, and you can't. My mother laughed when she first heard you can't sell an uncaught fish (she didn't know it was on the basis of a hadith at the time)--who sells an uncaught fish? Tell her the sale of the right to fish, and she gets that. We all get that in the modern world. Economists hear of the fish prohibition and they shake their head. The two parties agreed ex ante to a transaction. Why prohibit it, why prevent the efficient distribution of goods among these commercial actors? What's the problem here? And then we come to the commodification of risk and the sale of insurance, and Sunni Muslims refer to these medieval texts, which really aren't going to help because you're talking about texts written by people centuries ago who have no idea what you mean when you say you are going to package risk and sell it.
This isn't to say you can't sort of reinvent the texts to mean something new. You could say,for example, well where do the classicists say I can't sell risk? Obviously they don't, if they don't, then it should be okay, on the Ibn Taymiyya highly permissive theories of contract and stipulation. That more or less is what Mustafa Zarqa said in the 1960's. Insurance is not speculation, it's the purchase of a product, the avoidance of risk, and there is no reason I can't buy that any more than I can buy a guard dog to protect my property. (He uses the hiring of a guard as his example, but I'm trying to stick to goods and avoid services for now). I guess, though that's sort of like saying I don't oppose the sale of bsdasafa because I never said anything against it. Which is true, because the word bsdasafa doesn't mean anything to me, so I have no reason to say anything for or against it.
Or we can draw on other prohibitions to encompass ideas like insurance. So that if it is forbidden to sell uncaught fish in the sea, then that's because of the risk--I pay for something not sure what I'm going to get in return, possibly nothing. Insurance is the same, I pay my premiums not sure what I'm going to get in return. Now again, this is hardly precise, I don't seek to "win" in insurance, only cover potential losses, but close enough to make an argument, I guess.
Or we can turn to broader overarching themes in Islam to justify or decry insurance. We can consider it sacriligious to suggest that you are going to predict the date of death of a man. Or we can point to how in Islam, as brothers and sisters, we are supposed to take care of each other in times of calamity, and this is all that insurance does.
Or we can read the words to be espousing modern concepts indirectly. There is a very interesting passage in Averroes' work The Distinguished Jurist's Primer where the fellow tries to explain the basis of the riba prohibition, from which modern Islamic finance found its ban on interest. There are economists who seem to think it espouses a notion of proto-Pareto-efficiency, there are left leaning social justice types who think he's talking about exploitation and hoarding, and it's not that these guesses can't be made, it's that they are precisely that--guesses--that tell us much more of the person interpreting the words than they do of the person who originally wrote that.
All of the above have been raised to discuss modern financial and economic concepts, to varying degrees of success.
So what ultimately is the point? Well it's that ideas such as economic efficiency, or the commodification of risk, or democracy or human rights or constitutionalism, are modern, they meant nothing to anyone born before the 18th century, whether that be Ibn Taymiyya or Thomas Aquinas or Averroes or St. Augustine or Jesus or the Prophet himself. We are educated and understand concepts in the context of our own times, they understand them in the concept of theirs. And so ultimately, when asking the question "does Islam permit [insurance, transactions that enhance the efficient distribution of goods, democracy, human rights]" we as a Muslim polity are making up the answer as we go along, using our texts to make the arguments to be sure, but hardly circumscribed or defined by them because they don't address the question, and couldn't address the question given the people relaying their ideas. The answer isn't provided in a book, it's provided by a living, breathing people.
And to understand, therefore, why Muslims have opposed insurance and then adopted it another way, really the last thing you want to be doing is relying solely on texts and doctrine to figure that out. It won't tell you, it's the surface, yeah put the pieces together but then, to paraphrase Karl Llwellyn, once you've figured out what the authorities are saying the doctrine is, look underneath to really understand what they are doing to recreate the doctrine, and why they are doing it, through references to factors outside the law (social, political, cultural, economic, etc.). As true in Islamic law as it is in American.
HAH
Secondly, I just posted another article up on SSRN that I think those who enjoy the blog will take significant interest in. It's about how both national law and shari'a are blended and used among particular merchant communities in Iraq to create a remarkable and sophisticated commercial system. It also has my typical criticisms of the dominant trends in our field. You can find the article here. It will be published in the inaugural issue of the Berkeley Journal of Islamic and Middle Eastern Law (SSRN does not reflect that now, but will soon.) Also, if you can avoid it, do NOT download anonymously. Set up a (totally, completely) free SSRN account if you don't have one, it's harmless (social scientist academics, what can they do to you) and then I get credit for the download. See if you download anonymously and read carefully for three hours, it's wonderful, I am happy, but I get no credit. You download, and read for 5 seconds, well that's too bad it didn't interest you more, but I get credit. Your spouse downloads, and you download your own version, double credit, and so forth. And yes that means if you aren't sure whether you'll read it or not, download it onto your computer anyway, and do try to read it, that's the ultimate point anyway. Now, as the Arabs say, once they get to the subject of the day, "and what is more" (wa amma ba'ad):
Yesterday I had dinner with, among other people, the current President of the American Society of International Law Lucy Reed, who among many other things in her remarkable career negotiated with North Korea at some point on behalf of the US. One thing she had mentioned in passing was the challenge of explaining the concept of insurance to some of the North Korean leadership. This dovetailed with a talk made that day about the development of the concept of risk in the 19th century, that unfortunately I missed.
Anyway, the lack of knowledge on the part of the North Koreans didn't surprise me in the least, because quite frankly it seems precisely the situation with medieval classical Islamic thinkers. When you buy and sell in that world, it's goods basically--a camel, a slave, gold, dates, silver, etc. Even when discussing the (prohibited) sale of some intangibles, it's all sort of rephrased as sort of tangibles. For example, there is a prohibition against selling uncaught fish in the sea, on the basis of a Prophetic hadith. I think if one really considers it, the sale isn't really about the animal itself, it's about the sale of the right to fish in particular waters. That is, the fish must be in some waters I own (otherwise how can I sell it, on what basis could it possibly be argued that I own it), and the primary risk that the purchaser of the uncaught fish has is, really, that I don't know if I can catch it, or what it's going to look like when I do. So I discount that when purchasing the right to fish, and we make the deal. This is all prohibited under classical Islamic thought, but my point is a different one--that the sale of something that is fundamentally intangible is repackaged and rephrased as the sale of an item, a good, because that's generally how the authorities considered it.
(To be clear, it's not that the concept of risk is unfathomable, you can talk to a North Korean or a Muslim from the medieval era and they will understand what you say when you say "what happens if you purchase a camel and it turns out to be sick". Everyone knows stuff happens, part of that is the reason the uncaught fish sale is prohibited. But understanding that is not enough to create insurance, what you need to do is to commodify risk, to buy and to sell it, on the basis of how likely particular events are. That's the part that I don't think meant anything to anyone prior to the 19th century).
So now you get to this day and age, and you try to make sense of all of these rules so that they fit a modern paradigm, and you can't. My mother laughed when she first heard you can't sell an uncaught fish (she didn't know it was on the basis of a hadith at the time)--who sells an uncaught fish? Tell her the sale of the right to fish, and she gets that. We all get that in the modern world. Economists hear of the fish prohibition and they shake their head. The two parties agreed ex ante to a transaction. Why prohibit it, why prevent the efficient distribution of goods among these commercial actors? What's the problem here? And then we come to the commodification of risk and the sale of insurance, and Sunni Muslims refer to these medieval texts, which really aren't going to help because you're talking about texts written by people centuries ago who have no idea what you mean when you say you are going to package risk and sell it.
This isn't to say you can't sort of reinvent the texts to mean something new. You could say,for example, well where do the classicists say I can't sell risk? Obviously they don't, if they don't, then it should be okay, on the Ibn Taymiyya highly permissive theories of contract and stipulation. That more or less is what Mustafa Zarqa said in the 1960's. Insurance is not speculation, it's the purchase of a product, the avoidance of risk, and there is no reason I can't buy that any more than I can buy a guard dog to protect my property. (He uses the hiring of a guard as his example, but I'm trying to stick to goods and avoid services for now). I guess, though that's sort of like saying I don't oppose the sale of bsdasafa because I never said anything against it. Which is true, because the word bsdasafa doesn't mean anything to me, so I have no reason to say anything for or against it.
Or we can draw on other prohibitions to encompass ideas like insurance. So that if it is forbidden to sell uncaught fish in the sea, then that's because of the risk--I pay for something not sure what I'm going to get in return, possibly nothing. Insurance is the same, I pay my premiums not sure what I'm going to get in return. Now again, this is hardly precise, I don't seek to "win" in insurance, only cover potential losses, but close enough to make an argument, I guess.
Or we can turn to broader overarching themes in Islam to justify or decry insurance. We can consider it sacriligious to suggest that you are going to predict the date of death of a man. Or we can point to how in Islam, as brothers and sisters, we are supposed to take care of each other in times of calamity, and this is all that insurance does.
Or we can read the words to be espousing modern concepts indirectly. There is a very interesting passage in Averroes' work The Distinguished Jurist's Primer where the fellow tries to explain the basis of the riba prohibition, from which modern Islamic finance found its ban on interest. There are economists who seem to think it espouses a notion of proto-Pareto-efficiency, there are left leaning social justice types who think he's talking about exploitation and hoarding, and it's not that these guesses can't be made, it's that they are precisely that--guesses--that tell us much more of the person interpreting the words than they do of the person who originally wrote that.
All of the above have been raised to discuss modern financial and economic concepts, to varying degrees of success.
So what ultimately is the point? Well it's that ideas such as economic efficiency, or the commodification of risk, or democracy or human rights or constitutionalism, are modern, they meant nothing to anyone born before the 18th century, whether that be Ibn Taymiyya or Thomas Aquinas or Averroes or St. Augustine or Jesus or the Prophet himself. We are educated and understand concepts in the context of our own times, they understand them in the concept of theirs. And so ultimately, when asking the question "does Islam permit [insurance, transactions that enhance the efficient distribution of goods, democracy, human rights]" we as a Muslim polity are making up the answer as we go along, using our texts to make the arguments to be sure, but hardly circumscribed or defined by them because they don't address the question, and couldn't address the question given the people relaying their ideas. The answer isn't provided in a book, it's provided by a living, breathing people.
And to understand, therefore, why Muslims have opposed insurance and then adopted it another way, really the last thing you want to be doing is relying solely on texts and doctrine to figure that out. It won't tell you, it's the surface, yeah put the pieces together but then, to paraphrase Karl Llwellyn, once you've figured out what the authorities are saying the doctrine is, look underneath to really understand what they are doing to recreate the doctrine, and why they are doing it, through references to factors outside the law (social, political, cultural, economic, etc.). As true in Islamic law as it is in American.
HAH
This is an interesting point of view on insurance. This historical analysis is fascinating. You sure go around in high circles! I find fascinating the influence of cultural practices on economical practices. I have some interest in Victorian economics, and I agree with your analysis here.
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This is interesting. I have to wonder though - since Shariah Law forbids any dealing in a gambling enterprise, how does one reconcile a career in insurance - which is by definition a gamble?
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I don't agree that insurance is gambling. When I take out health insurance, I don't hope to "win" anything, just avoid a catastrophic loss. I purchase a product, the avoidance of risk, and if I never need it, all the better. If I do need it, I'm happy it's there, but it only covers my loss.
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Great post. However I must argue that insurance companies don't really take care of others in times of calamity. They will do so only at the very last resort, when there is no policy loophole left to find to avoid paying. If only insurance companies were more ethical, maybe that'd work.
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