Islamic perspectives on market prices and allocation

Other Title(s)

وجهات نظر إسلامية بشأن أسعار و توزيعات السوق

Author

Abd al-Mannan, Muhammad

Publisher

King Abdulaziz University Islamic Economics Institute

Publication Date

1982-12-31

Country of Publication

Saudi Arabia

No. of Pages

30

Main Subjects

Economics & Business Administration
Islamic Studies

English Abstract

In this paper the author has advocated the concept of "effective need' instead of 'effective demand * as a basis for market mechanism in Islam.

The former is seen as a broader concept than the later.

It is demonstrated that free market mechanism based on effective demand is linked to the affluent, making resources available to those who can buy them and not necessarily to those who need them and that the market is either inefficient or ineffective or indifferent in providing all aspects of basic needs with which Islamic market is concerned. Thus prices offered by the secular market are not seen as a guide to social welfare particularly m the context of Islamic economy where social concern is so great as to treat distribution as a key to productive activities.

The competition as implicit in the market mechanism needs to be supplemented by conscious control, supervision and co-operation.

Therefore, the paper did not support the view that the poor may be allowed to enter into the market only through direct transfer payments, thereby allowing market to operate freely. It is further argued that resources allocation can not be left to the discretion of the individual when the question of collective welfare is involved.

The paper stressed the need for necessary correction to all price-signals and economic incentive packages coupled with needed institutional reform and delivery system which can allocate resources directly to the poor with the view to increasing their real income through increased productivity on a permanent basis. Islamic reluctance to accept market price as a true guide to a social welfare makes the function of conventional price elasticity of demand and supply limited in scope.

The re-action of “need' to changes in *income' is also considered to be far more important than *price * in an Islamic economy.

The mam analytical task of an Islamic economy is then to analyse the factors or underlying forces that influence origins of demand and supply. However a pricing options such as non-price rationing co-operative prices as suggested in the paper offer a limited scope for market mechanism, although the task of determining pricing policy in Islam will remain much more complicated than market or command economy.

The paper is addressed primarily to students having exposure to elementary economics.

Table of Contents

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Language

English

Document Type

Book

Notes

Includes bibliographical references : p. 30

Record ID

BIM-858796