278 chapter six
in its turn in line with the increasing profit, crafts would be created
to obtain luxury products, the value realized from them would
increase, and as a result profits would again be multiplied in the
city. Production in the city would thrive even more than before.
In a nutshell, this sounds as if Ibn-Khaldùn was saying that the
increase in population does not impose per se a problem for eco-
nomic development. On the contrary, it may lead to further economic
prosperity. One would say in reply to Ibn-Khaldùn’s view, produc-
tion opportunities must exist for his theory to materialise otherwise
the increase of population may lead to unemployment. In other
words, this will depend upon whether the economy is in a state of
full employment and upon the procedures taken by the state in cre-
ating employment opportunities. Keynes’s theory of the effect of pub-
lic expenditure on the creation of employment opportunities, and
the effect of propensity to consumption on income may be mentioned
here in comparison with Ibn-Khaldùn’s opinion. Interestingly enough,
we find Ibn-Khaldùn, in clarifying his observation further, stating,
“Income and expenditure balance each other in every city; if the
income is large the expenditure is large, and vice versa. And if both
income and expenditure are large, the inhabitants become more
favourably situated, and the city grows”.
Prices
In a striking awareness of the effect of the power of markets on
prices, we find Ibn-Khaldùn’s stating that prices were affected by
two main factors: demand and supply. The effect of cost of pro-
duction on the state of supply was similarly ascertained. All depended
upon the state of prosperity, as he stated, with varying degrees of
effects on basic as compared with luxury goods. If a community was
prosperous, prices of necessities would be low, while prices of luxury
goods would be high. The opposite is true in the state of lack of
prosperity. In this case, the demand and supply of necessities would
play an influential role in determining the price of these goods. He
continued to clarify that in the state of affluence enough labour and
suitable natural resources would be devoted to the satisfaction of the
needs of the affluent society. And while the demand for these basic
goods in this society was steady, by virtue of the state of saturation
and the absence of natural disasters, the supply of goods would be
able to meet the demand and the price would become low. Con-
ceivably, in case of natural calamity or high production costs, the