Munich Personal RePEc Archive

Profit Maximisation: Secular Versus Islamic

Hasan, Zubair (1992): Profit Maximisation: Secular Versus Islamic. Published in: Sayyid Tahir et al (Ed): Readings in Microeconomics: An Islamic Perspective, Longman, Malaysia (Chapter 20) (1992): pp. 239-255.

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Abstract

This paper argues that profit maximization of mainstream economics though unrealistic serves a useful function in price theory formation. In Islamic economics too we need it for the same purpose. Maximization per se is value neutral. What is maximized, how, and to what end are the real issue to be investigated in a case. Profit maximization from an Islamic perspective can be accommodated if all the Islamic norms of conducting business are scrupulously observed. In that case it will simply work as a pressure for attaining efficiency both in resource allocation and production. One need not throw away the baby with the bath water.

The paper shows profit maximization as conducive to social well-being. under an Islamic dispensation. It would lead to a lower price, greater output, and lower risk as compared to a competitive firm under secular framework.

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