General Equilibrium in Islamic and Conventional Economics: A Comparative Analysis of Foundations, Functionality, and Implications

Abstract

General equilibrium theory, long a cornerstone of neoclassical economics, describes how supply and demand across interconnected markets achieve balance through price mechanisms. In contrast, Islamic economics integrates moral and legal-spiritual dimensions, shaping economic interactions based on divine guidelines. The divergence in foundational assumptions and normative goals between these systems invites a comparative inquiry into how general equilibrium functions within each framework. This study seeks to examine the structure and functionality of general equilibrium theory in both Islamic and conventional economics. It identifies where the two systems align and diverge—particularly in assumptions, mechanisms of market clearing, the role of money and interest, and conceptions of welfare and justice. The research applies a qualitative, textual-analytical approach, sourcing from classical economic texts, modern journal publications, and authoritative Islamic jurisprudential works. Findings reveal that while conventional general equilibrium rests on utility maximization, market-clearing prices, and self-interest, Islamic general equilibrium is shaped by concepts such as māṣlaḥah, ʿadl, and prohibition of ribā. Islamic models aim for equilibrium not merely in price, but in ethical resource allocation and social justice. This study contributes to the growing field of comparative economics, offering insights relevant to policy formulation, curriculum development, and epistemological pluralism. It affirms that meaningful equilibrium must encompass not only efficiency, but also moral integrity.