Price Mechanism

It is agreed that the shape of the supply and demand curves as depicted by the conventional analysis is valid, subject to the usual qualifications. But no moral approval can be given to prices so determined unless the market is free from deception, coercion, hoarding, monopoly and similar evils and the distribution of income and wealth is fair. It is noted that the latter condition is not satisfied in any contemporary society. Assuming that both conditions are satisfied, the resulting prices are acceptable but not sacrosanct. The social authority may still intervene if doing so is necessary for realizing social goals, but it is preferable to try other means and let price controls be the last resort. This would suit the objectives of freedom and efficiency, exception being made only when it becomes necessary to secure justice and ensure need fulfillment.

Islamic economists emphasize the influence of Islamic values on the functioning of the market and hope to see better results in terms of allocation of resources and need fulfillment. No attempts have been made to support this contention as shown by case studies, even dating from early Islamic history.

Source: Dr. Muhammad Nejatullah Siddiqi, Economics An Islamic Approach. Republished with permission.