Rukun Islam

Dari Abu Abdirrohman Abdulloh bin Umar bin Khoththob rodhiyallohu ‘anhuma, dia berkata “Aku pernah mendengar Rosululloh shollallohu ‘alaihi wasallam bersabda: ’Islam itu dibangun di atas lima perkara, yaitu: Bersaksi tiada sesembahan yang haq kecuali Alloh dan sesungguhnya Muhammad adalah utusan Alloh, menegakkan sholat, mengeluarkan zakat, mengerjakan haji ke Baitulloh, dan berpuasa pada bulan Romadhon.”(HR.Bukhori dan Muslim)

Kedudukan Hadits
Hadits ini merupakan hadits yang agung karena menyebutkan tonggak-tonggak Islam atau yang disebut dengan Rukun Islam. Berpangkal dari kelima rukun tersebut Islam dibangun.

Macam-macam penggunaan istilah Islam

Istilah islam digunakan dalam dua bentuk, yaitu:

1. Islam ‘Am berarti berserah diri kepada Allah dengan cara bertauhid, tunduk kepada-Nya dalam bentuk ketaatan serta bersih dan benci dari syirik dan penganutnya. Islam dalam pengertian ini merupakan ke-Islam-an makhluk secara umum tak seorangpun keluar dari ketentuan ini baik suka atau-pun terpaksa. Islam seperti ini-lah Islam yang diajarkan oleh seluruh rasul.

2. Islam Khos berarti Islam yang dibawa oleh Muhammad shallallaahu álaihi wa sallam, yaitu: mencakup Islam dengan makna ‘am yang sesuai dengan tuntunan Muhammad shallallaahu álaihi wa sallam. Jika istilah Islam datang secara mutlaq maka maksudnya adalah Islam khos.

Syahadatain
Syahadat tidaklah sah sehingga terkumpul padanya tiga hal: keyakinan hati, ucapan lisan dan menyampaikan kepada orang lain. Dalam kondisi tertentu terkadang diperbolehkan untuk tidak menyampaikan kepada orang lain. Makna syahadat “la ilaha illa’llahu” adalah menafikan hak disembah pada selain Allah dan menetapkan hanya Allah-lah yang berhak untuk disembah. Konsekuensinya harus mentauhidkan Allah dalam ibadah, oleh karena itu kalimat tersebut dinamakan sebagai kalimat tauhid.

Makna syahadat “Muhammad Rasulullah” adalah meyakini dan menyatakan bahwa Muhammad bin Abdillah adalah benar-benar utusan Allah yang mendapatkan wahyu berupa Kalamullah untuk disampaikan kepada manusia seluruhnya. Dan dia adalah penutup para Rasul. Konsekuensi dari syahadat ini yaitu membenarkan beritanya, mentaati perintahnya, menjauhi larangannya dan beribadah kepada Allah hanya dengan syar’iatnya .

Utusan Allah dari kalangan manusia mendapatkan wahyu melalui utusan Allah dari kalangan malaikat maka tidak-lah mereka langsung mendapatkan dari Allah kecuali pada sebagian, sesuai dengan kehendak Allah.

Hukum meninggalkan rukun Islam.
Hukum meninggalkan Rukun Islam dapat diperinci sebagai berikut:

1. Meninggalkan syahadatain hukumnya kafir secara ijma’.

2. Meninggalkan shalat hukumnya kafir menurut jumhur ulama atau ijma’ sahabat.

3. Meninggalkan rukun yang lainnya hukumnya tidak kafir menurut jumhur ulama.

Meninggalkan disini dalam arti tidak mengerjakan dengan meyakini kebenarannya dan kewajibannya, adapun jika tidak meyakini kebenarannya dan kewajibannya maka hukumnya kafir walaupun mengerjakannnya.

Pembagian Rukun Islam
Rukun islam terbagi menjadi empat kelompok yaitu:
1. Amal i’tiqodiyah yaitu syahadataian
2. Amal badaniyah yaitu solat dan puasa.
3. Amal maliyah yaitu Zakat.
4. Amal badaniyah dan maliyah yaitu haji.
Sumber: Ringkasan Syarah Arba’in An-Nawawi - Syaikh Shalih Alu Syaikh Hafizhohulloh

Iman, Islam dan Ihsan

Dari Umar rodhiyallohu’anhu juga, beliau berkata: Pada suatu hari ketika kami duduk di dekat Rosululloh shollallohu ‘alaihi wasallam, tiba-tiba muncul seorang laki-laki yang berpakaian sangat putih dan rambutnya sangat hitam. Pada dirinya tidak tampak bekas dari perjalanan jauh dan tidak ada seorangpun diantara kami yang mengenalnya. Kemudian ia duduk di hadapan Nabi shollallohu ‘alaihi wasallam, lalu mendempetkan kedua lututnya ke lutut Nabi, dan meletakkan kedua tangannya di atas kedua pahanya, kemudian berkata: ”Wahai Muhammad, terangkanlah kepadaku tentang Islam.” Kemudian Rosululloh shollallohu’alaihi wasallam menjawab: ”Islam yaitu: hendaklah engkau bersaksi tiada sesembahan yang haq disembah kecuali Alloh dan sesungguhnya Muhammad adalah utusan Alloh.

Hendaklah engkau mendirikan sholat, membayar zakat, berpuasa pada bulan Romadhon, dan mengerjakan haji ke rumah Alloh jika engkau mampu mengerjakannya.” Orang itu berkata: ”Engkau benar.” Kami menjadi heran, karena dia yang bertanya dan dia pula yang membenarkannya. Orang itu bertanya lagi: ”Lalu terangkanlah kepadaku tentang iman”. (Rosululloh) menjawab: ”Hendaklah engkau beriman kepada Alloh, beriman kepada para malaikat-Nya, kitab-kitab-Nya, para utusan-Nya, hari akhir, dan hendaklah engkau beriman kepada taqdir yang baik dan yang buruk.”Orang tadi berkata: ”Engkau benar.” Lalu orang itu bertanya lagi: ”Lalu terangkanlah kepadaku tentang ihsan.” (Beliau) menjawab: “Hendaklah engkau beribadah kepada Alloh seolah-olah engkau melihat-Nya. Namun jika engkau tidak dapat (beribadah seolah-olah) melihat-Nya, sesungguhnya Ia melihat engkau.” Orang itu berkata lagi: ”Beritahukanlah kepadaku tentang hari kiamat.” (Beliau) mejawab: “Orang yang ditanya tidak lebih tahu daripada yang bertanya.” Orang itu selanjutnya berkata: ”Beritahukanlah kepadaku tanda-tandanya.” (Beliau) menjawab: ”Apabila budak melahirkan tuannya, dan engkau melihat orang-orang Badui yang bertelanjang kaki, yang miskin lagi penggembala domba berlomba-lomba dalam mendirikan bangunan.” Kemudian orang itu pergi, sedangkan aku tetap tinggal beberapa saat lamanya. Lalu Nabi shollallohu ’alaihi wasallam bersabda: ”Wahai Umar, tahukah engkau siapa orang yang bertanya itu ?”. Aku menjawab: ”Alloh dan Rosul-Nya yang lebih mengetahui.” Lalu beliau bersabda: ”Dia itu adalah malaikat Jibril yang datang kepada kalian untuk mengajarkan agama kalian.”(HR. Muslim).

Kedudukan Hadits
Materi hadits ke-2 ini sangat penting sehingga sebagian ulama menyebutnya sebagai “Induk sunnah”, karena seluruh sunnah berpulang kepada hadits ini.

Islam, Iman, dan Ihsan
Dienul Islam mencakup tiga hal, yaitu: Islam, Iman dan Ihsan. Islam berbicara masalah lahir, iman berbicara masalah batin, dan ihsan mencakup keduanya.
Ihsan memiliki kedudukan yang lebih tinggi dari iman, dan iman memiliki kedudukan yang lebih tinggi dari Islam. Tidaklah ke-Islam-an dianggap sah kecuali jika terdapat padanya iman, karena konsekuensi dari syahadat mencakup lahir dan batin. Demikian juga iman tidak sah kecuali ada Islam (dalam batas yang minimal), karena iman adalah meliputi lahir dan batin.

Perhatian!
Para penuntut ilmu semestinya paham bahwa adakalanya bagian dari sebuah istilah agama adalah istilah itu sendiri, seperti contoh di atas.

Iman Bertambah dan Berkurang
Ahlussunnah menetapkan kaidah bahwa jika istilah Islam dan Iman disebutkan secara bersamaan, maka masing-masing memiliki pegerttian sendiri-sendiri, namun jika disebutkan salah satunya saja, maka mencakup yang lainnya. Iman dikatakan dapat bertambah dan berkurang, namun tidaklah dikatakan bahwa Islam bertambah dan berkurang, padahal hakikat keduanya adalah sama. Hal ini disebabkan karena adanya tujuan untuk membedakan antara Ahlussunnah dengan Murjiáh. Murjiáh mengakui bahwa Islam (amalan lahir) bisa bertambah dan berkurang, namun mereka tidak mengakui bisa bertambah dan berkurangnya iman (amalan batin). Sementara Ahlussunnah meyakini bahwa keduanya bisa bertambah dan berkurang.

Istilah Rukun Islam dan Rukun Iman
Istilah “Rukun” pada dasarnya merupakan hasil ijtihad para ulama untuk memudahkan memahami dien. Rukun berarti bagian sesuatu yang menjadi syarat terjadinya sesuatu tersebut, jika rukun tidak ada maka sesuatu tersebut tidak terjadi.Istilah rukun seperti ini bisa diterapkan untuk Rukun Iman, artinya jika salah satu dari Rukun Iman tidak ada, maka imanpun tidak ada. Adapun pada Rukun Islam maka istilah rukun ini tidak berlaku secara mutlak, artinya meskipun salah satu Rukun Islam tidak ada, masih memungkinkan Islam masih tetap ada.

Demikianlah semestinya kita memahami dien ini dengan istilah-istilah yang dibuat oleh para ulama, namun istilah-istilah tersebut tidak boleh sebagai hakim karena tetap harus merujuk kepada ketentuan dien, sehingga jika ada ketidaksesuaian antara istilah buatan ulama dengan ketentuan dien, ketentuan dien lah yang dimenangkan.

Batasan Minimal Sahnya Keimanan

1. Iman kepada Allah.
Iman kepada Allah sah jika beriman kepada Rububiyyah-Nya, uluhiyyah-Nya, dan asma’ dan sifat-Nya.

2. Iman kepada Malaikat.
Iman kepada Malaikat sah jika beriman bahwa Allah menciptakan makhluk bernama malaikat sebagai hamba yang senantiasa taat dan diantara mereka ada yang diperintah untuk mengantar wahyu.

3. Iman kepada Kitab-kitab.
Iman kepada kitab-kitab sah jika beriman bahwa Allah telah menurunkan kitab yang merupakan kalam-Nya kepada sebagian hambanya yang berkedudukan sebagai rasul. Diantara kitab Allah adalah Al-Qurán.

4. Iman kepada Para Rasul.
Iman kepada para rasul sah jika beriman bahwa Allah mengutus kepada manusia sebagian hambanya mereka mendapatkan wahyu untuk disampaikan kepada manusia, dan pengutusan rasul telah ditutup dengan diutusnya Muhammad shallallaahu álaihi wa sallam.

5. Iman kepada Hari Akhir.
Iman kepada Hari Akhir sah jika beriman bahwa Allah membuat sebuah masa sebagai tempat untuk menghisab manusia, mereka dibangkitkan dari kubur dan dikembalikan kepada-Nya untuk mendapatkan balasan kebaikan atas kebaikannya dan balasan kejelekan atas kejelekannya, yang baik (mukmin) masuk surga dan yang buruk (kafir) masuk neraka. Ini terjadi di hari akhir tersebut.

6. Iman kepada Taqdir.
Iman kepada taqdir sah jika beriman bahwa Allah telah mengilmui segala sesuatu sebelum terjadinya kemudian Dia menentukan dengan kehendaknya semua yang akan terjadi setelah itu Allah menciptakan segala sesuatu yang telah ditentukan sebelumnya.

Demikianlah syarat keimanan yang sah, sehingga dengan itu semua seorang berhak untuk dikatakan mukmin. Adapun selebihnya maka tingkat keimanan seseorang berbeda-beda sesuai dengan banyak dan sedikitnya kewajiban yang dia tunaikan terkait dengan hatinya, lesannya, dan anggota badannya.

Taqdir Buruk
Buruknya taqdir ditinjau dari sisi makhluk. Adapun ditinjau dari pencipta taqdir, maka semuanya baik.

Makna Ihsan
Sebuah amal dikatakan hasan cukup jika diniati ikhlas karena Allah, adapun selebihnya adalah kesempurnaan ihsan. Kesempurnaan ihsan meliputi 2 keadaan:

1. Maqom Muraqobah yaitu senantiasa merasa diawasi dan diperhatikan oleh Allah dalam setiap aktifitasnya, kedudukan yang lebih tinggi lagi.

2. Maqom Musyahadah yaitu senantiasa memperhatikan sifat-sifat Allah dan mengaitkan seluruh aktifitasnya dengan sifat-sifat tersebut.
Sumber: Ringkasan Syarah Arba’in An-Nawawi - Syaikh Shalih Alu Syaikh Hafizhohulloh

IKHLAS

Dari Amirul Mu’minin, (Abu Hafsh atau Umar bin Khottob rodiyallohu’anhu) dia berkata: ”Aku pernah mendengar Rosululloh shollallohu’alaihi wassalam bersabda: ’Sesungguhnya seluruh amal itu tergantung kepada niatnya, dan setiap orang akan mendapatkan sesuai niatnya. Oleh karena itu, barangsiapa yang berhijrah karena Alloh dan Rosul-Nya, maka hijrahnya kepada Alloh dan Rosul-Nya. Dan barangsiapa yang berhijrah karena (untuk mendapatkan) dunia atau karena wanita yang ingin dinikahinya maka hijrahnya itu kepada apa yang menjadi tujuannya (niatnya).’” (Diriwayatkan oleh dua imam ahli hadits; Abu Abdillah Muhammad bin Ismail bin Ibrohim bin Mughiroh bin Bardizbah Al-Bukhori dan Abul Husain Muslim bin Al-Hajjaj bin Muslim Al-Qusairy An-Naisabury di dalam kedua kitab mereka yang merupakan kitab paling shahih diantara kitab-kitab hadits)

Kedudukan Hadits
Materi hadits pertama ini merupakan pokok agama. Imam Ahmad rahimahullah berkata: “Ada Tiga hadits yang merupakan poros agama, yaitu hadits Úmar, hadits Aísyah, dan hadits Nu’man bin Basyir.” Perkataan Imam Ahmad rahimahullah tersebut dapat dijelaskan bahwa perbuatan seorang mukallaf bertumpu pada melaksanakan perintah dan menjauhi larangan. Inilah halal dan haram. Dan diantara halal dan haram tersebut ada yang mustabihat (hadits Nu’man bin Basyir). Untuk melaksanakan perintah dan menjauhi larangan dibutuhkan niat yang benar (hadits Úmar), dan harus sesuai dengan tuntunan syariát (hadits Aísyah).

Setiap Amal Tergantung Niatnya
Diterima atau tidaknya dan sah atau tidaknya suatu amal tergantung pada niatnya. Demikian juga setiap orang berhak mendapatkan balasan sesuai dengan niatnya dalam beramal. Dan yang dimaksud dengan amal disini adalah semua yang berasal dari seorang hamba baik berupa perkataan, perbuatan maupun keyakinan hati.

Fungsi Niat
Niat memiliki 2 fungsi:
1. Jika niat berkaitan dengan sasaran suatu amal (ma’bud), maka niat tersebut berfungsi untuk membedakan antara amal ibadah dengan amal kebiasaan.
2. Jika niat berkaitan dengan amal itu sendiri (ibadah), maka niat tersebut berfungsi untuk membedakan antara satu amal ibadah dengan amal ibadah yang lainnya.

Pengaruh Niat yang Salah Terhadap Amal Ibadah
Jika para ulama berbicara tentang niat, maka mencakup 2 hal:

1. Niat sebagai syarat sahnya ibadah, yaitu istilah niat yang dipakai oleh fuqoha’.

2. Niat sebagai syarat diterimanya ibadah, dengan istilah lain: Ikhlas.
Niat pada pengertian yang ke-2 ini, jika niat tersebut salah (tidak Ikhlas) maka akan berpengaruh terhadap diterimanya suatu amal, dengan perincian sebagai berikut:

a. Jika niatnya salah sejak awal, maka ibadah tersebut batal.

b. Jika kesalahan niat terjadi di tengah-tengah amal, maka ada 2 keadaan:
- Jika ia menghapus niat yang awal maka seluruh amalnya batal.
- Jika ia memperbagus amalnya dengan tidak menghapus niat yang awal, maka amal tambahannya batal.

c. Senang untuk dipuji setelah amal selesai, maka tidak membatalkan amal.

Beribadah dengan Tujuan Dunia
Pada dasarnya amal ibadah hanya diniatkan untuk meraih kenikmatan akhirat. Namun terkadang diperbolehkan beramal dengan niat untuk tujuan dunia disamping berniat untuk tujuan akhirat, dengan syarat apabila syariát menyebutkan adanya pahala dunia bagi amalan tersebut. Amal yang tidak tercampur niat untuk mendapatkan dunia memiliki pahala yang lebih sempurna dibandingkan dengan amal yang disertai niat duniawi.

Hijrah
Makna hijrah secara syariát adalah meninggalkan sesuatu demi Allah dan Rasul-Nya. Demi Allah artinya mencari sesuatu yang ada disisi-Nya, dan demi Rasul-Nya artinya ittiba’ dan senang terhadap tuntunan Rasul-Nya.

Bentuk-bentuk Hijrah:
1. Meninggalkan negeri syirik menuju negeri tauhid.
2. meninggalkan negeri bidáh menuju negeri sunnah.
3. Meninggalkan negeri penuh maksiat menuju negeri yang sedikit kemaksiatan.

Ketiga bentuk hijrah tersebut adalah pengaruh dari makna hijrah.
Sumber: Ringkasan Syarah Arba’in An-Nawawi - Syaikh Shalih Alu Syaikh Hafizhohulloh

Demand

by David R. Henderson
One of the most important building blocks of economic analysis is the concept of demand. When economists refer to demand, they usually have in mind not just a single quantity demanded, but a demand curve, which traces the quantity of a good or service that is demanded at successively different prices.
The most famous law in economics, and the one economists are most sure of, is the law of demand. On this law is built almost the whole edifice of economics. The law of demand states that when the price of a good rises, the amount demanded falls, and when the price falls, the amount demanded rises.
Some of the modern evidence supporting the law of demand is from econometric studies which show that, all other things being equal, when the price of a good rises, the amount of it demanded decreases. How do we know that there are no instances in which the amount demanded rises and the price rises? A few instances have been cited, but most have an explanation that takes into account something other than price. Nobel laureate GEORGE STIGLER responded years ago that if any economist found a true counterexample, he would be “assured of immortality, professionally speaking, and rapid promotion” (Stigler 1966, p. 24). And because, wrote Stigler, most economists would like either reward, the fact that no one has come up with an exception to the law of demand shows how rare the exceptions must be. But the reality is that if an economist reported an instance in which consumption of a good rose as its price rose, other economists would assume that some factor other than price caused the increase in demand.
The main reason economists believe so strongly in the law of demand is that it is so plausible, even to noneconomists. Indeed, the law of demand is ingrained in our way of thinking about everyday things. Shoppers buy more strawberries when they are in season and the price is low. This is evidence for the law of demand: only at the lower, in-season price are consumers willing to buy the higher amount available. Similarly, when people learn that frost will strike the orange groves in Florida, they know that the price of orange juice will rise. The price rises in order to reduce the amount demanded to the smaller amount available because of the frost. This is the law of demand. We see the same point every day in countless ways. No one thinks, for example, that the way to sell a house that has been languishing on the market is to raise the asking price. Again, this shows an implicit awareness of the law of demand: the number of potential buyers for any given house varies inversely with the asking price.
Indeed, the law of demand is so ingrained in our way of thinking that it is even part of our language. Think of what we mean by the term “on sale.” We do not mean that the seller raised the price. We mean that he or she lowered it in order to increase the amount of goods demanded. Again, the law of demand.
Economists, as is their wont, have struggled to think of exceptions to the law of demand. Marketers have found them. One of the best examples involves a new car wax, which, when it was introduced, faced strong resistance until its price was raised from $.69 to $1.69. The reason, according to economist Thomas Nagle, was that buyers could not judge the wax’s quality before purchasing it. Because the quality of this particular product was so important—a bad product could ruin a car’s finish—consumers “played it safe by avoiding cheap products that they believed were more likely to be inferior” (Nagle 1987, p. 67).
Many noneconomists are skeptical of the law of demand. A standard example they give of a good whose quantity demanded will not fall when the price increases is water. How, they ask, can people reduce their use of water? But those who come up with that example think of drinking water or household consumption as the only possible uses. Even here, there is room to reduce consumption when the price of water rises. Households can do larger loads of laundry or shower quickly instead of bathe, for example. The main users of water, however, are agriculture and industry. Farmers and manufacturers can substantially alter the amount of water used in production. Farmers, for example, can do so by changing crops or by changing irrigation methods for given crops.
What the skeptics may have in mind is not that people would not cut back their purchases at all when the price of a good increases, but that they might cut back only a little. Economists have considered this thoroughly and have developed a measure of the degree of cutback, which they call the “elasticity of demand.” The elasticity of demand is the percentage change in quantity demanded divided by the percentage change in price. The greater the absolute value of this ratio, the greater is the elasticity of demand. When there is a close substitute for one firm’s brand, for example, a small percentage increase in that firm’s price may lead to a large percentage cut in the amount of the firm’s good demanded. In such a case, economists say that the demand for the good is highly elastic. On the other hand, when there are few good substitutes for a firm’s product, the firm might be able to raise its price substantially with only a small decrease in the quantity demanded resulting. In such a case, demand is said to be highly inelastic.
Interestingly, though, if a firm is in a position whereby it can increase a price substantially and reduce sales only a little, and if its owners want to maximize PROFITS, the firm is well advised to raise the price until it reaches a portion of the demand curve where demand is elastic. Otherwise, the firm is forsaking an increase in revenue that it could have had with no increase in costs. One important implication of this fact is that the elasticity of demand in a market is a negative test for whether the firms are acting together as a MONOPOLY. If, at the existing price, the elasticity of the market demand for the good is less than one, that is, if the demand is inelastic, then the firms are not acting monopolistically. If the elasticity of demand exceeds one—that is, if the demand is elastic—then we do not know whether they are acting monopolistically or not.
It is not just price that affects the quantity demanded. Income affects it too. As real income rises, people buy more of some goods (which economists call “normal goods”) and less of others (called “inferior goods”). Urban mass transit and railroad transportation are classic examples of inferior goods. That is why the usage of both of these modes of travel declined so dramatically as postwar incomes were rising and more people could afford automobiles. ENVIRONMENTAL QUALITY is a normal good, and that is a major reason why Americans have become more concerned about the environment in recent decades.
Another influence on demand is the price of substitutes. When the price of Toyota Camrys rises, all else being equal, the quantity of Camrys demanded falls and the demand for Nissan Maximas, a substitute, rises. Also important is the price of complements, or goods that are used together. When the price of gasoline rises, the demand for cars falls.
________________________________________
About the Author
David R. Henderson is the editor of this encyclopedia. He is a research fellow with Stanford University’s Hoover Institution and an associate professor of economics at the Naval Postgraduate School in Monterey, California. He was formerly a senior economist with President Ronald Reagan’s Council of Economic Advisers.
________________________________________
Further Reading
Nagle, Thomas T. The Strategy and Tactics of Pricing: A Guide to Profitable Decision Making. Englewood Cliffs, N.J.: Prentice Hall, 1987.
Stigler, George J. The Theory of Price. 3d ed. New York: Macmillan, 1966.

Economic Growth

by Paul M. Romer
Compound Rates of Growth
In the modern version of an old legend, an investment banker asks to be paid by placing one penny on the first square of a chessboard, two pennies on the second square, four on the third, etc. If the banker had asked that only the white squares be used, the initial penny would have doubled in value thirty-one times, leaving $21.5 million on the last square. Using both the black and the white squares would have made the penny grow to $92 million billion.

People are reasonably good at forming estimates based on addition, but for operations such as compounding that depend on repeated multiplication, we systematically underestimate how quickly things grow. As a result, we often lose sight of how important the average rate of growth is for an economy. For an investment banker, the choice between a payment that doubles with every square on the chessboard and one that doubles with every other square is more important than any other part of the contract. Who cares whether the payment is in pennies, pounds, or pesos? For a nation, the choices that determine whether income doubles with every generation, or instead with every other generation, dwarf all other economic policy concerns.
Growth in Income per Capita
You can figure out how long it takes for something to double by dividing the growth rate into the number 72. In the twenty-five years between 1950 and 1975, income per capita in India grew at the rate of 1.8 percent per year. At this rate, income doubles every forty years because 72 divided by 1.8 equals 40. In the twenty-five years between 1975 and 2000, income per capita in China grew at almost 6 percent per year. At this rate, income doubles every twelve years.
These differences in doubling times have huge effects for a nation, just as they do for our banker. In the same forty-year time span that it would take the Indian economy to double at its slower growth rate, income would double three times—to eight times its initial level—at China’s faster growth rate.
From 1950 to 2000, growth in income per capita in the United States lay between these two extremes, averaging 2.3 percent per year. From 1950 to 1975, India, which started at a level of income per capita that was less than 7 percent of that in the United States, was falling even farther behind. Between 1975 and 2000, China, which started at an even lower level, was catching up.
China grew so quickly partly because it started so far behind. Rapid growth could be achieved in large part by letting firms bring in ideas about how to create value that were already in use in the rest of the world. The interesting question is why India could not manage the same trick, at least between 1950 and 1975.
Growth and Recipes
Economic growth occurs whenever people take resources and rearrange them in ways that make them more valuable. A useful metaphor for production in an economy comes from the kitchen. To create valuable final products, we mix inexpensive ingredients together according to a recipe. The cooking one can do is limited by the SUPPLY of ingredients, and most cooking in the economy produces undesirable side effects. If economic growth could be achieved only by doing more and more of the same kind of cooking, we would eventually run out of raw materials and suffer from unacceptable levels of pollution and nuisance. Human history teaches us, however, that economic growth springs from better recipes, not just from more cooking. New recipes generally produce fewer unpleasant side effects and generate more economic value per unit of raw material (see NATURAL RESOURCES).
Take one small example. In most coffee shops, you can now use the same size lid for small, medium, and large cups of coffee. That was not true as recently as 1995. That small change in the geometry of the cups means that a coffee shop can serve customers at lower cost. Store owners need to manage the inventory for only one type of lid. Employees can replenish supplies more quickly throughout the day. Customers can get their coffee just a bit faster. Although big discoveries such as the transistor, antibiotics, and the electric motor attract most of the attention, it takes millions of little discoveries like the new design for the cup and lid to double a nation’s average income.
Every generation has perceived the limits to growth that finite resources and undesirable side effects would pose if no new recipes or ideas were discovered. And every generation has underestimated the potential for finding new recipes and ideas. We consistently fail to grasp how many ideas remain to be discovered. The difficulty is the same one we have with compounding: possibilities do not merely add up; they multiply.
In a branch of physical chemistry known as exploratory synthesis, chemists try mixing selected elements together at different temperatures and pressures to see what comes out. About a decade ago, one of the hundreds of compounds discovered this way—a mixture of copper, yttrium, barium, and oxygen—was found to be a superconductor at temperatures far higher than anyone had previously thought possible. This discovery may ultimately have far-reaching implications for the storage and transmission of electrical ENERGY.
To get some sense of how much scope there is for more such discoveries, we can calculate as follows. The periodic table contains about a hundred different types of atoms, which means that the number of combinations made up of four different elements is about 100 × 99 × 98 × 97 = 94,000,000. A list of numbers like 6, 2, 1, 7 can represent the proportions for using the four elements in a recipe. To keep things simple, assume that the numbers in the list must lie between 1 and 10, that no fractions are allowed, and that the smallest number must always be 1. Then there are about 3,500 different sets of proportions for each choice of four elements, and 3,500 × 94,000,000 (or 330,000,000,000) different recipes in total. If laboratories around the world evaluated one thousand recipes each day, it would take nearly a million years to go through them all. (If you like these combinatorial calculations, try to figure out how many different coffee drinks it is possible to order at your local shop. Instead of moving around stacks of cup lids, baristas now spend their time tailoring drinks to individual palates.)
In fact, the previous calculation vastly underestimates the amount of exploration that remains to be done because mixtures can be made of more than four elements, fractional proportions can be selected, and a wide variety of pressures and temperatures can be used during mixing.
Even after correcting for these additional factors, this kind of calculation only begins to suggest the range of possibilities. Instead of just mixing elements together in a disorganized fashion, we can use chemical reactions to combine elements such as hydrogen and carbon into ordered structures like polymers or proteins. To see how far this kind of process can take us, imagine the ideal chemical refinery. It would convert abundant, renewable resources into a product that humans value. It would be smaller than a car, mobile so that it could search out its own inputs, capable of maintaining the temperature necessary for its reactions within narrow bounds, and able to automatically heal most system failures. It would build replicas of itself for use after it wears out, and it would do all of this with little human supervision. All we would have to do is get it to stay still periodically so that we could hook up some pipes and drain off the final product.
This refinery already exists. It is the milk cow. And if nature can produce this structured collection of hydrogen, carbon, and miscellaneous other atoms by meandering along one particular evolutionary path of trial and error (albeit one that took hundreds of millions of years), there must be an unimaginably large number of valuable structures and recipes for combining atoms that we have yet to discover.
Objects and Ideas
Thinking about ideas and recipes changes how one thinks about economic policy (and cows). A traditional explanation for the persistent poverty of many less-developed countries is that they lack objects such as natural resources or capital goods. But Taiwan started with little of either and still grew rapidly. Something else must be involved. Increasingly, emphasis is shifting to the notion that it is ideas, not objects, that poor countries lack. The knowledge needed to provide citizens of the poorest countries with a vastly improved standard of living already exists in the advanced countries (see STANDARDS OF LIVINGAND MODERN ECONOMIC GROWTH). If a poor nation invests in EDUCATION and does not destroy the incentives for its citizens to acquire ideas from the rest of the world, it can rapidly take advantage of the publicly available part of the worldwide stock of knowledge. If, in addition, it offers incentives for privately held ideas to be put to use within its borders—for example, by protecting foreign patents, copyrights, and licenses; by permitting direct INVESTMENT by foreign firms; by protecting PROPERTY RIGHTS; and by avoiding heavy REGULATION and high MARGINAL TAX RATES—its citizens can soon work in state-of-the-art productive activities.
Some ideas such as insights about public health are rapidly adopted by less-developed countries. As a result, life expectancy in poor countries is catching up with that in the leaders faster than income per capita. Yet governments in poor countries continue to impede the flow of many other ideas, especially those with commercial value. Automobile producers in North America clearly recognize that they can learn from ideas developed in the rest of the world. But for decades, car firms in India operated in a government-created protective time warp. The Hillman and Austin cars produced in England in the 1950s continued to roll off production lines in India through the 1980s. After independence, India’s commitment to closing itself off and striving for self-sufficiency was as strong as Taiwan’s commitment to acquiring foreign ideas and participating fully in world markets. The outcomes—grinding poverty in India and opulence in Taiwan—could hardly be more disparate.
A poor country like India can achieve enormous increases in standards of living merely by letting in the ideas held by companies from industrialized nations. With a series of economic reforms that started in the 1980s and deepened in the early 1990s, India has begun to open itself up to these opportunities. For some of its citizens, such as the software developers who now work for firms located in the rest of the world, these improvements in standards of living have become a reality. This same type of opening up is causing a spectacular transformation of life in China. Its growth in the last twenty-five years of the twentieth century was driven to a very large extent by foreign investment by multinational firms.
Leading countries like the United States, Canada, and the members of the EUROPEAN UNION cannot stay ahead merely by adopting ideas developed elsewhere. They must offer strong incentives for discovering new ideas at home, and this is not easy to do. The same characteristic that makes an idea so valuable—everybody can use it at the same time—also means that it is hard to earn an appropriate rate of return on investments in ideas. The many people who benefit from a new idea can too easily free ride on the efforts of others.
After the transistor was invented at Bell Laboratories, many applied ideas had to be developed before this basic science discovery yielded any commercial value. By now, private firms have developed improved recipes that have brought the cost of a transistor down to less than a millionth of its former level. Yet most of the benefits from those discoveries have been reaped not by the innovating firms, but by the users of the transistors. In 1985, I paid a thousand dollars per million transistors for memory in my computer. In 2005, I paid less than ten dollars per million, and yet I did nothing to deserve or help pay for this windfall. If the government confiscated most of the oil from major discoveries and gave it to consumers, oil companies would do much less exploration. Some oil would still be found serendipitously, but many promising opportunities for exploration would be bypassed. Both oil companies and consumers would be worse off. The leakage of benefits such as those from improvements in the transistor acts just like this kind of confiscatory tax and has the same effect on incentives for exploration. For this reason, most economists support government funding for basic scientific research. They also recognize, however, that basic research grants by themselves will not provide the incentives to discover the many small applied ideas needed to transform basic ideas such as the transistor or Web search into valuable products and services.
It takes more than scientists in universities to generate progress and growth. Such seemingly mundane forms of discovery as product and process engineering or the development of new business models can have huge benefits for society as a whole. There are, to be sure, some benefits for the firms that make these discoveries, but not enough to generate INNOVATION at the ideal rate. Giving firms tighter patents and copyrights over new ideas would increase the incentives to make new discoveries, but might also make it much more expensive to build on previous discoveries. Tighter INTELLECTUAL PROPERTY rights could therefore be counterproductive and might slow growth.
The one safe measure governments have used to great advantage has been subsidies for education to increase the supply of talented young scientists and engineers. They are the basic input into the discovery process, the fuel that fires the innovation engine. No one can know where newly trained young people will end up working, but nations that are willing to educate more of them and let them follow their instincts can be confident that they will accomplish amazing things.
Meta-ideas
Perhaps the most important ideas of all are meta-ideas—ideas about how to support the production and transmission of other ideas. In the seventeenth century, the British invented the modern concept of a patent that protects an invention. North Americans invented the modern research university and the agricultural extension service in the nineteenth century, and peer-reviewed competitive grants for basic research in the twentieth. The challenge now facing all of the industrialized countries is to invent new institutions that encourage a higher level of applied, commercially relevant research and development in the private sector.
As national markets for talent and education merge into unified global markets, opportunities for important policy innovation will surely emerge. In basic research, the United States is still the undisputed leader, but in key areas of education, other countries are surging ahead. Many of them have already discovered how to train a larger fraction of their young people as scientists and engineers.
We do not know what the next major idea about how to support ideas will be. Nor do we know where it will emerge. There are, however, two safe predictions. First, the country that takes the lead in the twenty-first century will be the one that implements an innovation that more effectively supports the production of new ideas in the private sector. Second, new meta-ideas of this kind will be found.
Only a failure of imagination—the same failure that leads the man on the street to suppose that everything has already been invented—leads us to believe that all of the relevant institutions have been designed and all of the policy levers have been found. For social scientists, every bit as much as for physical scientists, there are vast regions to explore and wonderful surprises to discover.
About the Author
Paul M. Romer is the STANCO 25 Professor of Economics in the Graduate School of Business at Stanford University and a senior fellow at the Hoover Institution. He also founded Aplia, a publisher of Web-based teaching tools that is changing how college students learn economics.
Further Reading
Easterly, William. The Elusive Quest for Growth. Cambridge: MIT Press, 2002.
Helpman, Elhanan. The Mystery of Economic Growth. Cambridge: Harvard University Press, 2004.
North, Douglass C. Institutions, Institutional Change, and Economic Performance. Cambridge: Cambridge University Press, 1990.
Olson, Mancur. “Big Bills Left on the Sidewalk: Why Some Nations Are Rich, and Others Poor.” Journal of Economic Perspectives 10, no. 2 (1996): 3–23.
Rosenberg, Nathan. Inside the Black Box: Technology and Economics. Cambridge: Cambridge University Press, 1982.