Introduction to Rein in Prices and Unemployment Control Policies in the Islamic Golden Age: An Institutional Approach

In unstable conditions because of inadequate and incomplete information, accurate and efficient decisions decrease. Therefore traders prefer not to trade because they are afraid of choosing wrong. However if complete information were available, there werenchr('39')t situation in which individuals would lead to opportunism or were identified and it was avoided. Opportunistic situation and inadequate information (under uncertainty) increase transaction costs. In this study the relationship between stability and international trade institution in the era of the prophet Muhammad (pbuh) will be examined. It is clear, if government has been existed to create and complete stability institution in the community and change or reform it in accordance with the requirements and qualifications due to transaction costs reduction. It causes the development of the international trade institution. Since Islam bind government to establish and maintain stability, the transaction costs reduce that it lead to improvement of international trade institution. To prove this hypothesis, the historical narrative of issue to be addressed and by citing to historical evidences and facts, the hypothesis is proven. The method of descriptive- analytical has been used. Also in this article, two proxies have been defined for measuring of the stability. They are price volatility recreation and unemployment.