Concept of Money in the Conventional Economy

Conventional economics interprets money in terms of interchangeability (back and forth), namely money as a medium of exchange and money as capital. However, money is often identified with capital.  Western economists also have differences in interpreting money. The irving fisher concept of money (capital) is a flow concept whereas according to the Cambridge School (Marshal-Pigou) defines money as a stock concept. Money as private goods.

Islam interprets money as a flow concept and is a public good. The meaning of the flow concept is that money must flow. When money flows are public goods, then settles into someone's ownership (stock concept). The money becomes private property (private goods). The Islamic concept of money utility, that money is recognized only as an intermediary form, medium of change, or unit of account. Money is not a commodity, because we do not benefit from the money itself, but from the function of the money.

With the existence of money, the nature of the economy in an Islamic economic perspective can take place better, that is, it is maintained and the circulation of assets increases among humans (economic actors). With the existence of money, zakat, infaq, alms, waqf, and other activities can be carried out more smoothly. With the existence of money, private, public and social sector activities can take place with a faster acceleration.

In conventional economics, the system of interest and its function which can be equated with commodities has resulted in the emergence of a separate market with money as a commodity and interest as a price.

The dichotomy of the real and monetary sectors does not occur in the Islamic economy because of the absence of an interest system and the prohibition of trading money as a commodity so that the style of the Islamic economy is the real sector economy with the function of money as a medium of exchange to facilitate investment activities, production in the real sector.

The concept of money in Islam is different from the concept of conventional money. In the Islamic concept, money is a tool for transactions and a medium of exchange, not as a commodity (goods). Meanwhile, in the conventional concept, money is not only a transaction tool, but also a commodity (goods). So often the term money in conventional economics is interpreted uncertainly and back and forth (interchangeability). In Islam the concept of capital is private goods, while money is public goods. This means that the money that flows is called public goods, then when the money starts to settle down it is called the stock concept, and the money that belongs to the holders of money is called private goods.

Meanwhile, from this research it can be concluded that bitcoin is not a safe and good investment vehicle for everyone because it is a commodity. When talking about commodities, when the demand is too much than the supply, the price will automatically increase. However, whether bitcoin can carry out such a trend continuously is something that no one can know. In this case, bitcoin is a questionable matter, because the harm is greater than the benefits.

Next Post Previous Post