Price Control System in Islam

A Brief Study


Essay, 2009
13 Pages

Excerpt

Table of Contents

Introduction
Price

Concept of Just price

Type of price (according to Islamic point of view)
Halal price
Haram price

Price Control in Islam

Price control policy

Type of price control policy
Price control in goods
Price control of Laborers

Types of Wage Rate
a) Wages regarding time.
b) Wages regarding work.

1st type of views about price control

2nd type of views about price control

Advantages of price control
Suppression of inflation
Balanced terms of exchange
Control rates of monopolistic profit
Control on Hoarding & Black marketing
Equitable distribution of benefit
Attraction for the foreign investors

Disadvantages of price control

References

Abstract

This paper is written about that topic on which most scholars have not the similar views. So, it may be said that this topic presents some brief discussion about the dilemma of price control. Actually, prices of goods affect not only consumers but producers also. Similarly, prices of factors of production also affect the supply and demand of different factors of production. Therefore, stable prices of goods and services show stable circumstances of the economy and vice versa. Anyhow, in this article, types of price control, types of wage rate and some scholars’ views are presented in brief manner. But brief discussion does not mean that this does not have important aspects about price control. While discussing the price control, scholars’ views about price control are presented in favor of both sides, to producers and to consumers. Anyhow, price control is a mandatory policy for consumers and for the development of economy in fair dealings. Therefore, no section of society could feel oppressed by the other. In the end of discussion, some advantages and some disadvantages of price control policy are briefly discussed.

Key words: price control, wage, scholars, views, control, Islam.

*Ph.d Scholar, Dept. of Islamic Studies, B.Z. University. Multan, Pakistan.

A Brief Study on,“Price Control System in Islam”

Introduction

Before the discussion of types of price control, the word “price” is literally explained in the following lines:-

Price

The word “price” is derived from Latin word “pretium” which has following meanings:-

- The amount of money, etc. asked or paid for something; cost,
- Value or worth
- The cost, as in life, labor, etc. of obtaining some benefit.

Pricing means “to fix the price of” (1)

Now the just price is discussed briefly before explaining about the types of prices and the types of price control.

Concept of Just price

The concept of’ justum pretium’ (just price) was formulated in Rome in View of the necessity of laying down special rules for guidance of magistrates in cases in which they had to pronounce upon the value of a commodity or service. (2)

This shows that in the concept of just price, the value of goods and the value of service both are mentioned in this way, with the price of things the waged of labor should set at just level.

Type of price (according to Islamic point of view)

Islam has declared two main types of prices according to the nature of goods. These are Haram (prohibited) goods and Halal (permitted) goods. So, the price of Haram goods is Haram and the price of Halal goods is also Halal if any wrong doings are not involved. Similarly some things are not haram but these are not liked. So price of these disliked goods will be also between Halal & Haram. This means the price of these disliked goods will also be disliked. These disliked goods are not prohibited but it is better to avoid from them.

Halal price

Price on buying and selling of Halal goods is called Halal price provided that no exploitation & wrong doing is involved. (3) Therefore, use of halal things is allowed and its trade is also allowed.

Haram price

Price on buying & selling of Haram goods is also haram (prohibited). Holy Prophet said “when God declares anything Haram then price of haram things will also Haram” (4)

In Islam, haram things are not allowed to use neither for business nor for personal use except in the fear of death, that quantity may be use which could save life. Therefore the prohibited things cannot be used for personal purpose and not as trade also.

Price Control in Islam

Islam has liked to set the bazaar free so that all natural laws might do their work. In bazaar, due to ratio of supply price decreases or increases. Similarly, the prices goods increase due to increase in demand for goods. Therefore, it is seen that when prices increased in the period of Holy Prophet (S.A.W), the people demanded from Holy Prophet (S.A.W) to set the prices of goods. But Holy Prophet did not set the prices but he declared without any need, to interfere in personal freedom is oppression and cruelty. But if the un- natural factors are involved in any bazaar such as black marketing or increase the prices artificially. In such situation, the collective welfare will be preferable than individual welfare. (5) Price can be set if collective benefit requires this otherwise in the situation of fair trade, interfere is not permitted.

Price control Islamic law allows the Islamic state to ordain punish for the protection of community interest under the concepts of Ta’zir and Seyasah. Here i shall highlight some of the characters ties of Ta’zir. Ta’zir punishments vary in both quantity and quality according to the seriousness of the offences. To protect the interests of the consumers, Islamic state may inflect punishments for omission of duties and commission of alligators. A comparable case is the action of the UmerbinKhatatab who on seeing that a man had diluted his milk (with water), punished him by spilling it away. One group of the Jurists who uphold his principle have given this ruling, for it prescribed the watering down of milk for sale though not for drinking purposes, because if the milk is diluted the buyer does not know the relative quantities of milk and water and for this reason, Umer ( R.A) the second caliph destroyed it.(6)

This shows that diluted things should not be used. And the person who commits such acts, these persons should be penalized.

Price control policy

If the prices of necessities of goods (increased) become high, then a modern state fixes prices for the availability of goods at suitable price. This is called price control policy. (7)

The word “pricing” also means “to fix (set) the price of.“ if price control creates justice in people then this type of price control is not only permitted but it is obligatory. For example, People may be bound that they sell their goods at suitable price or at market price, and they did not charge more price then the market price. That is prohibited for them on the other hand, if the prices of goods increased due to increase in population or due to shortage of goods and traders are selling their goods in a fair way then nobody can bound them on fixed price. (8)

Therefore, in the conditions fair economy, price control policy is not allowed.

Type of price control policy

- Price control in goods (Tasi’r -Fil-amwal)
- Price control in laborer (Tasi’r -Fil-Ammal)

Price control in goods

In economic, to keep balance in the prices of goods, so that there should not oppression with seller or buyer, this is called price control policy of goods. The purpose of this policy is to for bade the seller from artificial ways to increase the prices of goods. For example, when the weapons or instruments are needed in any occasion, then it is obligatory to sell these goods at a equivalent price, when sellers are not selling on that price. (9)

Just Price of goods is necessary for the consumers. Otherwise, due to increase in prices by the sellers will decrease the real income. Therefore for just price system is necessary for economic activities and for consumers also.

Price control of Laborers

To set the prices of factors of production is called price control of factor or laborers, Tasi’r Fi-Al-Ammal. This is also permitted like price control of goods when there is need of people for industry but people did not do work or due to oppression of industrialists in giving low level wages. Then in such situation, it becomes obligatory to set the price of labors because it is closest to justice. (10)

Therefore, it is the duty of muhtasib (ombudsman) to take action in case if he finds any wrong doings in setting prices of goods or setting of wages of laborers. If he neglects this situation of oppression then he will have to give answer about this on the day of resurrection also. Anyhow, as for as just price is necessary for the consumers and producers, similarly the just wages of workers are also necessary for individuals and for the prosperous society also, otherwise the corruption and bribery will prevail in the society. In the following lines, the types of wage rate are discussed.

There are two types of fixation of wage rate of laborers. These are as under:

Types of Wage Rate

There are two types of wage rate setting, these are as under:

a) Wages regarding time.

This means that wage rate which is set with quality and time. e.g. wage of one monthwill be ten thousand rupees or rupees 2400 will be given per week.

b) Wages regarding work.

If the wage rate of laborers will be set according to the quantity of work. This will be called wages regarding work. e.g. If laborer is given rupees 1000 for preparing one chair. This will be called wage rate regarding work.( 11)

Anyhow, in setting the wage rate, it will be tried that such wage rate of laborers should be set so that laborers could fulfill their basic needs of life. In case if they feel difficulty in meeting their basic needs, then wrong doing and corruption will prevail.

The Muhtasib will ensure that all the needs of people are taken care of. If the people are in need of the skill and services of the certain group, the Muhtasib can equivalent compensation, while he must not allow then to charge more than the just wages, he must also see that people do pay their dues without diminution. (12)

Price of laborers should be such so that they could meet their basic needs easily otherwise they will adopt negative ways to fulfill their necessities of life.

Some people sell grain and other necessities goods to some certain people then these certain people sell goods to other common people. And it is forbidden to sell any other people. In such situation, it is obligatory to compel every trader to sell on fixed price so that monopolist could sell at equivalent price. And they could buy others goods at equivalent price. If others people are forbidden to sell the goods of same kind then monopolist will be authorized to sell their goods at his own price. According to him, own will and buy other goods at his price. This will be cruelty on the creature of God due to two reasons. One will seller who sells there goods and other will be on these people who buy these goods from them. If cruelty did not eliminate completely then it will cruelty should be eliminated, in such type of conditions price control is obligatory without any opposition of views. (13)

Therefore, monopsony and monopoly situations are not allowed in Islamic economy due to its negative effects. But in practically, both situations are adopted by both, consumers and sellers consecutively.

If sellers set a price collectively for selling then it is necessary to control them. Similarly, people decide collectively about the purchase of goods that they will buy particular goods of particular seller. This means that they are decreasing the value of the other goods of other sellers. By demanding particular good will increase the price of goods of that particular seller. On the other hand, the other sellers’ goods are not demanded then their supply will increase due to decrease in demand. Ultimately the prices of goods will also decrease in demand for goods. (14)

So, it is necessary that prices of goods should be fixed. There are two types of views about price control. These are as under:

1st type of views about price control

When prices are already high and anybody wants to sell on more than this price. In Imam Malik, views, he should be forbidden to sell his goods in the market or bazaar. If anybody wants to sell his goods on lower price than market price, then this should also be forbidden to sell his goods. In Imam Malik’sviews, (about lower price), there are also more two types of viewers, one are with Imam Malik while other opposed to forbid from selling at lower price. In forbidden imam Shafi, Imam Ahmad and some scholars who have similar views are like Abu Hafs Askeri, Qazi Abu Ya’la, Abu Ja’afar, Abu-al-Khattab and Ibn- Aqeel etc. are included. (15)

This means that it is not better to sell lower than the market price. In this situation, this one person is disturbing the market price as well as for other traders who are selling at market price. Therefore, it is dangerous for sellers also and it is not permitted for any trader.

2nd type of views about price control

In Second type of price control, if all traders are doing their activities in true manners then price should not be fixed. In Modern era some scholars forbade to fix price of goods. Even Imam Malik also has same views. In this 2nd type of views about price fixation, Hazrat Ibne Umar, Salim and Qasim bin Muhammad are also included who opposed to fix upper limit of price during right activities for traders. (16)

[...]

Excerpt out of 13 pages

Details

Title
Price Control System in Islam
Subtitle
A Brief Study
Author
Year
2009
Pages
13
Catalog Number
V375812
ISBN (eBook)
9783668525788
ISBN (Book)
9783668525795
File size
486 KB
Language
English
Tags
price control, wage, scholar, islam, justice
Quote paper
Tariq Mahmood (Author), 2009, Price Control System in Islam, Munich, GRIN Verlag, https://www.grin.com/document/375812

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