A Critical Review of the Ethical Foundations of Game Theory in Islamic and Conventional Economics

Extended Abstract
 
Introduction and Objectives: Game theory has emerged as a rigorous analytical and mathematical framework for studying strategic decision-making, wherein the success of each actor depends not only on their choices but also on the decisions and behaviors of others. It has been applied across a broad spectrum of disciplines, including economics, social sciences, management, and even politics. The actors in game theory can encompass individuals, firms, governments, and social institutions. Classical game theory is grounded in four primary ethical assumptions: utilitarianism, self-interest, consequentialism, and secular notions of justice. While these foundations provide predictive power for competitive and interactive behaviors, they exhibit substantial ethical and social limitations, failing to account for moral cooperation, intent and motivation, distributive justice, collective responsibility, and spiritual dimensions.
From an Islamic economic perspective, humans are not merely self-interested or profit-driven agents; they are ethically conscious, accountable, and oriented toward the afterlife. Economic behavior must be guided by principles such as justice, cooperation, honesty, altruism, and respect for the rights of others. Islamic economics emphasizes not only individual welfare but also collective well-being, intergenerational equity, and sustainability of resources. Sharia-based institutions such as Zakāt, Khūms, Sadaqah, and Waqf serve as practical mechanisms to realize these objectives. The primary aim of this study is to critically examine the ethical foundations of classical game theory from the standpoint of Islamic economics and to propose an analytical framework that models human socio-economic behavior in line with ethical, legal, and spiritual criteria. The central research question is: how can game theory be adapted within an Islamic economic framework to predict behavior while simultaneously reflecting social justice, ethical responsibility, afterlife-oriented motivations, and economic-ethical equilibria?
Methodology: This study adopts a descriptive-analytical approach grounded in theoretical comparison. Data sources include classical and contemporary game theory literature, behavioral economics studies, articles on economic ethics, and Islamic references. The analytical framework focuses on the four core pillars of classical game theory—utilitarianism, self-interest, consequentialism, and secular justice—and critically evaluates each through the lens of Islamic ethical and legal principles.
In analyzing utilitarianism, the study examines valuation criteria, the concept of utility, and the role of justice in decision-making. It demonstrates that maximizing material benefits without consideration of intent and fairness may yield unethical and short-term outcomes. Critique of the self-interest assumption is based on the conceptualization of humans as committed, responsible, and ethically guided agents, with analysis extending to interactive games, repeated games, and social cooperation. Consequentialist assumptions are critiqued for focusing narrowly on material outcomes, offering short-term analysis, and neglecting the legitimacy of means and the moral intent of actors. The evaluation of secular justice incorporates anthropological underpinnings, redistributive institutions, intergenerational equity, and spiritual dimensions.
A comparative analysis highlights divergences and overlaps between classical game theory and Islamic economics. Analytical insights, including tabular representations integrated into the text, elucidate the ethical and institutional limitations inherent in classical models. The study proposes a novel framework termed “Islamic Interaction Theory,” which redesigns utility functions, defines Sharia-based and institutional constraints, and integrates ethical, social, and afterlife-oriented motivations into economic behavior analysis. This framework enables comparative assessment of economic efficiency, social justice, afterlife-oriented incentives, and respect for individual and societal rights.
Results: The findings indicate that, despite its analytical rigor, classical game theory has fundamental limitations in predicting human economic behavior. Pure utilitarianism, devoid of justice, ethical intent, or social responsibility, can result in inequitable, short-term outcomes. The self-interest assumption—even in repeated and interactive games—can undermine social efficiency and cooperative behavior, highlighting an ethical insufficiency. Consequentialist analysis, while a predictive tool, emphasizes material and short-term results, neglecting legitimacy, moral intent, and long-term social and spiritual outcomes. Justice in classical game theory is often mathematically modeled, omitting redistributive institutions or Sharia-compliant constraints.
Conversely, Islamic economics offers a multidimensional, goal-oriented framework. Utility in this paradigm encompasses material, ethical, and afterlife dimensions, while justice is both a Sharia-based constraint and an intrinsic objective. Economic-ethical actors consider individual welfare alongside social and divine responsibilities, embedding cooperation, honesty, respect for rights, and altruism into their behavior. Redesigning utility functions and incorporating Sharia and ethical constraints in game models allow identification of equilibria that are economically efficient, socially just, and morally sustainable.
Furthermore, Sharia institutions such as Zakat, Khums, Waqf, and various ownership models play a pivotal role by redistributing resources, ensuring intergenerational justice, and promoting socio-economic sustainability, thereby influencing game outcomes. Comparative analysis demonstrates that Islamic economic principles enrich classical game theory with ethical, social, and spiritual values, emphasizing intent and divine motivation. This framework also enables prediction of cooperative and collective behavior according to ethical and Sharia-based norms, a capacity absent in classical models.
Discussion and Conclusion: The discussion underscores that classical game theory, despite its analytical sophistication, has inherent ethical and institutional limitations, potentially leading to undesirable economic outcomes, inequality, and neglect of social responsibilities. Islamic economics, by revising human assumptions, redefining utility, and incorporating Sharia constraints, provides a comprehensive ethical framework that accounts for economic efficiency, justice, cooperation, and afterlife-oriented motivations. Critiquing utilitarianism reveals that maximizing collective welfare without distributive justice and ethical intent may produce immoral outcomes and social harm. Revising the self-interest assumption enables redefining equilibria based on cooperation, collective responsibility, and public good. Critique of consequentialism emphasizes that legitimacy, actor intent, and long-term and spiritual outcomes must be included in game-theoretical analyses.
In terms of justice, Islamic economics leverages Sharia institutions, intergenerational equity, respect for individual and societal rights, and ethical and afterlife-oriented motivations to align game structures with justice. Development of the “Islamic Interaction Theory” allows redefining utility functions, institutional structures, and decision-making processes, ensuring that game equilibria are both economically efficient and ethically and legally sustainable. This framework is applicable for market analysis, economic policy, and resource management in both Muslim and non-Muslim societies that value justice, cooperation, and social responsibility.
In summary, “Islamic Interaction Theory” bridges mathematical-economic analysis with ethical and social values, addressing classical game theory’s moral limitations. It also aids in designing fair market policies and mechanisms, aligning economic decisions with social and ethical objectives to achieve simultaneous economic efficiency and social justice.
Acknowledgments: I sincerely appreciate the efforts of the reviewers and the editorial team of the Iranian Journal of Economic Essays with an Islamic Approach.
Conflict of Interest: The author declares no conflict of interest with regard to the content and findings of this article.