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Efficiency with Rule-Compliance: A Contribution to the Theory of the Firm in Islamic Economics

Journal of Economics and Political Economy

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Title Efficiency with Rule-Compliance: A Contribution to the Theory of the Firm in Islamic Economics
 
Creator AKIN, Tarik; Islamic Financial Services Board
Level 5, Sasana Kijang,
Bank Negara Malaysia,
2, Jalan Dato' Onn,
50480 Kuala Lumpur
Phone: +601111685075
MIRAKHOR, Abbas; INCEIF
Lorong Universiti A,
59100 Kuala Lumpur
Phone: +60376514000
 
Subject Allocative efficiency; The theory of the firm; Profit maximization; Profit sharing; Islamic economics
P42; D21; C61
 
Description Abstract. The theory of the firm and the profit maximization have been important areas of debate among Islamic economists as being fore bearers of applicability of conventional economic theory in the Islamic economics. One strand of the debate holds the view that the postulate of profit maximization, as a useful theoretical construct, has to be modified for a firm operating in an Islamic economy, while the other strand highlights that Islamic economy has its own normative rules with an underlying institutional scaffolding derived from the Qur’an and Sunnah. Following the second view, this paper is a modest contribution to the debate by demonstrating that once an institutional scaffolding containing the rules of behavior compliant with the Qur’an and Sunnah is in place, the profit maximization postulate becomes a useful concept in Islamic economic theory. The paper also shows that allocation efficiency with equity is possible provided that the firm is rule-compliant, even in case of a monopoly.Keywords. Allocative efficiency, Firm theory, Profit maximization, Profit sharing, Islamic economics.JEL. P42, D21, C61
 
Publisher Journal of Economics and Political Economy
Journal of Economics and Political Economy
 
Contributor —
 
Date 2016-09-18
 
Type info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion
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Format application/pdf
 
Identifier http://www.kspjournals.org/index.php/JEPE/article/view/864
10.1453/jepe.v3i3.864
 
Source Journal of Economics and Political Economy; Vol 3, No 3 (2016): September; 560-574
Journal of Economics and Political Economy; Vol 3, No 3 (2016): September; 560-574
2148-8347
 
Language eng
 
Relation http://www.kspjournals.org/index.php/JEPE/article/view/864/993
http://www.kspjournals.org/index.php/JEPE/article/downloadSuppFile/864/441
http://www.kspjournals.org/index.php/JEPE/article/downloadSuppFile/864/442
http://www.kspjournals.org/index.php/JEPE/article/downloadSuppFile/864/443
 
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http://creativecommons.org/licenses/by-nc/4.0