Discounting for Future Costs and Benefits: Economic Versus Social Evaluation of Projects خصم التكاليف والفوائد المستقبلية: التقييم الاقتصادي مقابل المشاريع الاجتماعية

The issue of the proper relationship of finance to economics and society is a fraught one, both globally and in Islamic societies. This relationship involves not only historic precedent, religious guidance, culture and politics, but since the late 1700s, also economic theory, which attempts both to describe reality and changes it, since theory is used as a guide to economic policy. The end-product of this interplay of disparate forces has, on occasions, been disastrous with the most recent instance being the global financial crisis of 2008. Some aspects of that crisis were peculiar to interest-based finance, which is an institution that Islamic societies aspire to avoid. Others may arise even in an interest-free environment, if other measures are not taken to uphold the guiding principles of social and economic stability and distributional equity. In this comment on Muhammad Anas Zarqa’s paper (Zarqa, 2017), I focus upon four such issues: • The nature of lending in modern banking, • Whether profit-sharing based lending fundamentally overcomes the macroeconomic problems of interest-based lending, • How to discount for uncertainty in profit-making ventures; and • Whether to discount future costs and benefits for social purposes.