A Systematic Review of Studies on Factors Affecting Market Governance

Extended Abstract
 
Introduction and Objectives: Conventional economic theory, primarily concerned with the optimal allocation of scarce resources through exchange mechanisms, traditionally presents the competitive free market as an efficient institution for achieving price equilibrium. Within this framework, core assumptions—such as a large number of market participants, freedom of entry and exit, and parametric prices independent of individual behavior—facilitate the Walrasian tâtonnement process, ultimately satisfying both the subjective equilibrium condition (individual utility maximization given equilibrium prices) and the objective equilibrium condition (equality of supply and demand). From this perspective, prices function as decentralized informational signals that coordinate economic activities without the need for centralized intervention. Hayek, in particular, emphasizes that the price system, if left unimpeded, ensures spontaneous order and social coordination.
Despite its analytical coherence, this theoretical construct encounters serious limitations when confronted with empirical realities. Market failures—such as monopoly power, externalities, asymmetric information, rent-seeking behavior, and the incompleteness of markets—challenge the universality of the competitive market paradigm and undermine its normative claims. Consequently, contemporary economic and policy debates have increasingly shifted toward the concept of market governance, which extends beyond abstract market models and focuses on institutional arrangements, regulatory mechanisms, and ethical constraints aimed at correcting inefficiencies and ensuring socially desirable outcomes.
Parallel to this development, governance studies over the past two decades have moved away from a state-centered conception of authority toward a more pluralistic understanding of power distribution. Governance is now understood as a networked system involving state institutions, non-state actors, intermediary organizations, professional guilds, civil society, and citizens. This approach rejects the rigid dichotomy between “state” and “market” and highlights the regulatory role of intermediate structures in coordinating economic behavior. Regulation, as a core function of governance, seeks to exercise public oversight over economic actors to safeguard public interest, fairness, and efficiency.
From the standpoint of Islamic economics, the market is not merely an arena of self-interested exchange governed solely by supply and demand. Rather, it is an ethically embedded institution shaped by moral norms, jurisprudential rules, and spiritual motivations. Islamic teachings emphasize principles such as justice (ʿAdl), fairness in exchange, leniency in transactions (Samāḥah), the desirability of rescinding regretful transactions (Iqālat al-Nādim), and the prohibition of exploitative practices. Within this framework, price formation is not morally neutral; instead, it is constrained by the concept of a just price (al-Siʿr al-ʿĀdil), which transcends pure market relativity and is bounded by divine and ethical considerations.
Against this background, the present study aims to systematically review Persian-language scholarly literature grounded in Islamic economics and jurisprudence in order to identify, extract, and categorize the key factors affecting desirable market governance. The ultimate objective is to provide a comprehensive macro-framework that can inform future research and policy design for market governance in Iran’s economy based on Islamic teachings.
Method: This research employs a systematic review methodology based on transparent, replicable, and bias-reducing procedures. The central research question guiding the study is:
“What are the key factors and components influencing desirable market governance from the perspective of Islamic economics?”
The review process was conducted in five structured stages:

Formulation of the research question and methodological protocol, including the definition of scope and analytical categories.
Specification of inclusion and exclusion criteria. Included sources comprised scientific–research journal articles, doctoral dissertations, and Persian-language books with an explicit Islamic economic or jurisprudential approach, published up to the end of 1403 SH (2024/2025) and available in full text. Excluded materials included master’s theses, conference papers, promotional publications, duplicate records, and sources lacking full-text access.
Systematic literature search using 36 core keywords related to market, governance, pricing, justice, and Islamic jurisprudence across major Iranian databases, including Noormags, SID, Magiran, IranDoc, and the Comprehensive Portal of Humanities. This stage yielded an initial pool of 223 sources.
Two-stage screening and eligibility assessment, consisting of title–abstract screening followed by full-text evaluation, resulting in the final selection of 63 eligible sources (56 journal articles, 3 PhD dissertations, and 4 books).
Data extraction and synthesis, using a standardized reporting form capturing information on research objectives, methodology, theoretical arguments, identified gaps, and relevance to the main research question.

Adherence to systematic review principles ensured methodological rigor, minimized selection bias, and enhanced the reliability of the synthesized findings.
Results: The systematic analysis of 63 valid sources led to the identification of ten core elements influencing desirable market governance from the perspective of Islamic economics:

Market competitiveness, including the prohibition of monopoly (Iḥtikār), hoarding, and collusion, alongside policies facilitating free entry and exit;
Justice and fairness, encompassing the concept of the just price (al-Siʿr al-ʿĀdil), prohibition of excessive fraud (Ghabn al-Fāḥish), prohibition of usury (Ribā), and protection of consumer rights;
Property rights, based on comprehensive bundles of ownership, the rule of dominion (Qāʿidat al-Taslīṭ), the no-harm principle (Lā Ḍarar), and liability guarantees (Ḍamān);
Transparency and information symmetry, achieved through prohibitions against uncertainty (Gharar), deception (Tadlīs), artificial price inflation (Najsh), and pre-emptive buying (Talqī al-Rukbān) across production, exchange, distribution, and consumption markets;
Facilitation and regulation, including the reduction of transaction costs, empowerment of market participants, and benevolent regulatory interventions;
Supervision, emphasizing the revival of the Hisbah institution in both civic and sovereign forms, adapted to contemporary technological contexts;
Market resilience, focusing on securing essential goods, implementing the principle of preventing domination (Nafy al-Sabīl), and strengthening resistance to economic shocks;
Market platforms, encompassing both physical infrastructures and digital trading environments;
A comprehensive pricing system, addressing fair pricing mechanisms and clarifying the legitimate scope of state intervention;
Business ethics, including honesty, fairness, leniency, and religious culture-building among economic agents.
Market platform (physical infrastructure and virtual trading platforms);
Comprehensive pricing system (regulations for fair pricing and the scope of government intervention);
Business ethics (honesty, fairness, leniency, and religious culturalization).

Figure: Key Elements of Desirable Market Governance in Islamic Economics
These elements were analyzed using Williamson’s (2000) four-level framework: the level of social embeddedness (religious and ethical norms), the institutional environment (formal laws and anti-monopoly regulations), the governance structure (regulatory institutions and modern hisbah), and the level of resource allocation and employment (the actual behavior of actors).
These elements were subsequently analyzed within Williamson’s (2000) four-level institutional framework, consisting of: (1) social embeddedness, (2) institutional environment, (3) governance structures, and (4) resource allocation and employment.
Discussion and Conclusion: By systematically reviewing Persian Islamic economic literature, this study provides, for the first time, a comprehensive and integrated framework of factors shaping desirable Islamic market governance. The findings demonstrate that the Islamic market model is neither an unregulated free market nor a fully state-controlled system. Rather, it represents an ethics-oriented, justice-centered, and efficiency-seeking institutional arrangement in which system-building jurisprudence (Fiqh al-Niẓām) functions as the primary architectural foundation.
Mapping the identified elements onto Williamson’s four-level model reveals that the distinctive strength of Islamic economics lies in the “deep layers” of institutional design. At the level of social embeddedness, values such as justice, prohibition of usury, Lā Ḍarar, and Nafy al-Sabīl generate trust and social capital—prerequisites for institutional stability. At the institutional environment level, jurisprudential rules governing contracts, pricing, fraud, monopoly, and liability operate as formal “rules of the game,” many of which predate modern economic regulation by centuries. At the governance structure level, the Hisbah institution emerges as a historically grounded yet fully adaptable regulatory mechanism. Finally, at the resource allocation level, religious motivations and ethical norms guide economic agents toward honest conduct, fair competition, and social responsibility.
The central implication of this research is that Islamic market governance is not a merely idealistic construct; rather, its operational foundations are deeply embedded in Islamic jurisprudential and historical sources. However, these capacities remain underutilized due to insufficient systematic integration. Key gaps persist in market design, modern regulatory frameworks, practical revitalization of Hisbah, and precise delineation of state intervention. Addressing these gaps requires interdisciplinary research grounded in primary Islamic sources, with the aim of developing a coherent, practical, and value-consistent model of market governance that simultaneously satisfies economic efficiency and public interest
Acknowledgements: The authors gratefully acknowledge the support of the Manat Think Tank (New Discussions in Balanced Ijtihad), which provided the intellectual and organizational platform for conducting this research.
Conflict of Interest: The authors declare that there is no conflict of interest regarding the publication of this article.
JEL Classification: A11; Z12; B59; D40.