Chaidir, Muhammad (2015) THE ROLE OF GOVERNMENT IN THE ECONOMY (Comparative Study of Ibn Taimiyyah and Keynes' Thought). S1 Undergraduate thesis, UNIVERSITAS DARUSSALAM GONTOR.

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Abstract

There are variety of issues in economics occurred nowadays in fact those are not release from the results of policies undertaken by the government. Such government policies are closely connected with the problems of an economy, such, as a crisis for the sake of the crisis that happen in the United States, Europe and other parts of the world. From the reality occurs appen in the economic problems, it bring bad consequences for countries in the world, and these problems have given evidence on the actual failure of an economic system applied to the world economy now. In an attempt to resolve these problems, the researcher tries to look back to the thought of two great economists, namely Ibn Taymiyah and John Maynard Keynes, so that is necessary for a study of the comparison between the thought of both figures. Based on the case above, this study purposes to study the theory about the role of government in the economy according to Ibn Taimiyyah and Keynes's thought. It also compare both of thought by looking at the similarity and difference of them This research uses literature study with comparative analysis. To collect the data, the researcher uses documentation method. Then the data is analyzed by deductive to get the general theory of the role of government in the economy and inductive method to get the basic thought of them, so descriptive method to analyze and describe the theory of the role of government clearly. Afterwards, comparative method to analyze the relationship, similarity and difference between them. The result of this study is Ibn Taimiyah and Keynes have the similarity in the rationale of the role of government in the economy, that is to solve a distortion. A distortion in their views has the difference, where Ibn Taimiyyah looks a distortion as injustice that caused of the deviate behavior of market participants, while Keynes considers a distortion is caused of unbalanced between the level of an aggregate demand with an aggregate supply in the economy. in solving a distortion, both of them use some some instruments, namely fiscal and monetary policy, price and wage regulation as well as the supervisory body of government. In fiscal policy, both of them have a difference where Keynes uses fiscal policy to increase the level of an aggregate dermand in order to increase an investment increased, then it can reduce the amount of unemployment so a distortion is solved. While Ibn Taimiyyah forbids a government to regulate the level of an aggregate demand because it is not fair, the level of an aggregate demand can increase automatically according to the market condition without any intervention of government, a fiscal can be used to distribute income and wealth equally to avoid a distortion. In monetary policy, both of them have difference, where Keynes uses the interest rate to increase an aggregate demand, while Ibn Taimiyyah forbids the usage of an interest rate in every aspect of the economy, because the interest rate is forbidden in Islam. in price and wage regulation, Keynes allows a price and wago regulation used by government in order to an aggregate demand increased, while a price and wage regulation according to Ibn Taimiyyah only allows to be used if the economy in urgent condition o maintain the economic condition still remain in stability. In the supervisory body of to government, Ibn Taimiyyah uses the institution of hisbah in solving the deviate behavior of market participants as the cause of a distortion, while in Keynes's thought, there is no a special form of institution from the supervisory bod of government in solving the economic problems. From the explanation above, Ibn Taiiyyah is better in solving a distortion rather than Keynes. Besides that, Ibn Taimiyyah also more just in using the instruments of the role of government in solving a distortion than Keynes. The researcher realizes that a research still has many shortcomings and weaknesses, so it needs to be completed. At least, this research can give a scientific contribution to the development of Islamic economic, especially in case of the role of government in the economy. And for the the next researcher is expected to fulfill the lacking of this study by empirical study or other research that can consolidate the research. ii

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