The traditional economy in simple words refers to that economic system that does not operate for profit rather it is driven by traditions and methods which are being used for many years by the people of the country or the region. Hence one can say that this economic system is a way of life or in other words, one can easily say that it comes in the DNA of people born in regions or countries having the traditional economic system. Given below are some of the frequently asked questions regarding the traditional economy –

Traditional Economy Questions

Characteristics of Traditional Economy

This economy is characterized by systems and practices which are developed over centuries by the ancestors of the country, another characteristic of this economy is that money is not used in this system rather this economy is dependent on the barter system of trade. Another feature of this economy is that emphasis of society is towards using all the goods and services produced by the economy thus leaving no scope of surplus production. People use traditional methods like agriculture, fishing, and hunting rather than using machines and technology for their livelihood.

Advantages of Traditional Economy

First and foremost advantage of this economy system is that under traditional economy people produces only those goods and services which are required for their survival which implies that there will no wastage of precious resources by the people of the country, another benefit is that people know their job and role in the economy which makes it easier to manage them, another indirect benefit of not using machines and technology is that there is less pollution or one can say that in today’s times when everyone is worried about global warming traditional economic system is tailor-made to be environment-friendly.

Disadvantages of Traditional Economy

The biggest disadvantage of the traditional economy is that since these economies rely on fishing, hunting, and agriculture the climate plays a big part in the success or failure of these economies and we all know that how fragile the climate is which makes these economies vulnerable to any adverse climate change. Another problem with this economic system is that since people do not use makes use of technology and machines the productivity of countries or societies having traditional economy is very low, besides due to increased emphasis on producing goods or services for survival only makes people lazy as once people have produced enough goods for survival they do not long for producing goods for future which makes them vulnerable in future as time does not remain same and sometimes it is better to plan for future which sadly is missing in traditional economic system.

Difference between Traditional Economy and Mixed Economy

The principal difference between traditional economy and mixed economy is that while in case of traditional economy all decisions are made on the basis of traditions and beliefs of ancestors and thus there is no intention to produce goods and services for profit, while the use of money is limited or non-existent rather people use of barter system of trade. While in the case of the mixed economy both corporates, as well as the government take decisions for producing goods and services and the price of goods and services, is determined by market forces of demand and supply.

Is there competition in the Traditional Economy

In case of this economic system people produce goods and services for survival purpose there is no question or scope of competition as competition is there only when companies or individuals produce goods and services for selling but in this case of economic system there is no excess production which results is lack of competition. However as far as natural resources are concerned one can say that there is some degree of competition regarding owning and using those natural resources for the production of goods and services.

Who Makes Economic Decisions in Traditional Economy

The economic decisions related to the production of goods and services as well as the distribution of produced goods and services are not made by any company or government rather they are made by individuals on the basis of their needs and beliefs which their ancestors passed to them.

Difference between Traditional Economy and Market Economy

Market economy as the name suggests is an economy in which all decisions related to production or distribution of goods and services are determined by market forces of demand and supply and government has limited role or say in the economy of the country and thus if you are poor then you cannot expect government to help as government has left all economic decision to the market while in case of traditional economy since people produce goods and services for survival there is no question of any market forces and people are expected to help each other in case of this economic system due to strong belief in traditions and cultural values of people living in this type of economic system.

Goals of Traditional Economy

The goals of the traditional economy are not profit or wealth maximization rather its goals are survival by producing a limited amount of goods and services as well as sticking to the traditions and beliefs of the ancestors and living a simple life.

Are there any Real Life Examples of Traditional Economies

After reading above questions and answers you might have guessed it correctly that there cannot be an economy which follows traditional economic system completely as it is not possible in today’s times, however, some small isolated regions or group of people may still follow this economic system. In real life we have mixed economy or market economy system or command economic system which is there, however, concepts of traditional economy are quite useful and can be used together with other economic systems but if you are thinking that country run following a traditional economic system than you are looking for the sun in the night.

Does Traditional Economy Concept is of No Use

Well it is true that in real life there are no successful examples of traditional economies but one cannot ignore some of the good aspects or concepts of traditional economy like this economy advocates cooperation among people which is the need of hour in this age of greed, another useful concept is that in case of this economic system people are taught how to be satisfied with limited needs and wants as people produce only those goods and services which they require which can of great help for today’s generation who have unlimited wants and are never satisfied.