196 chapter five
Pricing, scarcity and value
The general rule of determining prices by market forces is affirmed
by Abù-Yùsuf. Price fixing was rejected by the Prophet in an exam-
ple given when people asked him to fix prices, as previously stated.
But while discussing pricing of goods, Abù-Yùsuf made a perti-
nent remark. His thought on this was that supply does not affect
prices: goods supply can be high and the goods abundant, but prices
can be high, while supply can be low and goods not in abundance
and prices can be low. He applies the same to money supply. Abù-
Yùsuf does not elaborate on this, however, nor does he refer, explic-
itly, to the relationship between demand and supply as illustrated in
Adam Smith’s example of the scissor blades. He seemed to have
focused on the supply side only. Could the demand side be inferred
from his statement to complete the equation? We do not know. But
what we do know is that he reached what became a plausible argu-
ment after him that the supply side on its own does not make the
prices what they are. Conceivably, he seemed to have assigned a
greater role to demand in affecting prices than supply.
Furthermore when dealing with pricing, Abù-Yùsuf touched on a
very important point in economics, on the relationship between eco-
nomic goods, scarcity and value. Discussing the issue of whether one
could charge for a good that is regarded as readily available com-
monly and the conditions for the charge, he, using the example of
water, stating that while the water from a running river may not
have a value, it would have a value if it was brought to a different
location where the river was not running. He referred in particular
to three important factors that would create a value for a good, the
water in his example: scarcity, the cost of equipment and trans-
portation costs. This analysis conforms to the fundamental analysis
of value in economics.
The above were the main points in Abù-Yùsuf ’s book of al-Kharàj.
We have given Abù-Yùsuf a considerable amount of thought in this
book. This is for various reasons: (a) it was the first book to be pub-
lished on Islamic economics, (b) it was necessary to look, in some
detail, into the work to gain an insight into the thinking of the first
Muslim writer in the field, especially as (c) the book was a first seri-
ous work on Islamic economics, particularly when (d) the book pro-
vided a comprehensive framework, almost a constitution, on the state
finance and public administration, of (e) a considerable magnitude,