Throughout history, different traditional economy theories have shaped societies. For instance, ever since capitalism sprouted in Europe during the 18th century, it has been responsible for promoting the culture of work, incentivizing the pursuit of profit, and encouraging all facets of competition within the market. Conversely, upon appearing in countries like China and the former Soviet Union, communism has led to the centralization of power and the dream of establishing a classless society. However, neither capitalism nor communism is the earliest economic system known to man: Instead, that honor would have to go to traditional economics.

Understanding traditional economy:

Every other economic system out there started as a traditional economy first. Some primitive societies, emerging markets, and developing countries still utilize traditional economics in some form or another. One of the main elements that make every economic system out there feasible is the invention of money. However, traditional economies do not use money; instead, they rely on the trade and bartering of both products and services. As a result, there is no market in a traditional economy, and there is no profit incentive pushing individuals to work harder than they have to.

In a traditional economy, the modes of production limited. Societies subsist on agriculture, hunting, gathering, fishing, or a combination of these different activities. Without a profit incentive or centralized control of assets, traditional societies don’t have a strong impetus for innovation, so modern means of production such as technology and industry are not utilizes.

Ownership of assets

Another important element that makes traditional economics stand out is its stance towards the ownership of assets. One of the main pillars of capitalism is that individuals can own assets. Whereas both communism and socialism premise on the importance of having the state control most, if not all, of the assets. However, traditional economies aren’t built on assets in the first place; they are built on customs, history, and beliefs that passes down from one generation to the next. This is why nomadic tribes almost always adopt a traditional economy.

It is important to understand the role tradition plays in a traditional economy. For instance, when it comes to the distribution of roles, the job of hunter passed on from father to son. Similarly, farmers inherit the role from their parents and so on. Also, a traditional economy is one where individuals revere their elders and let the elders’ experiences and beliefs guide the political and economic decisions of the rest of society. As mention earlier, most economists and anthropologists are of the opinion that all the economic systems we have today began as traditional economics. Consequently, they also believe that any traditional economies remaining are bound to evolve eventually. And to occupy their own space on the infinite spectrum between a free market economy and a fully centralized command one.

The properties of a traditional economy:

To sum up everything said so far, here is a quick list of the main characteristics of a traditional economy:

  • Traditional economies rely on archaic forms of production, including hunting, gathering, and agriculture.
  • In a tradition economy, there is no currency; everyone barters and trades what they need.
  • Elements such as tradition, culture, and hierarchy play a pivotal role in a traditional economy.
  • Because there is no profit incentive, there is no reason to overwork or innovate.
  • Traditional economies can found in primitive and nomadic societies. For instance, the Maasai tribe follow their cattle, moving from place to place, and seeing as the Cro-Magnon man are hunters, they’ve been known to follow herds of animals.
  • Traditional economies eventually evolve into more advance economic systems.

The advantages and disadvantages of a traditional economy:

Armed with a better understanding of what traditional economies are and how they operate, it is possible to appreciate both their advantages and disadvantages:

The advantages:

  • Owing to the pivotal role played the tradition and custom, members within a traditional economy are always aware of their roles, be it hunter, gatherer, or farmer, which minimizes any friction with society. Members also aware of the expected distribution of goods, so even if an individual dissatisfy with their lot, they will not rebel as they appreciate the importance of upholding tradition and custom.
  • Traditional economies foster community bonds and ensure that the entire community is tightly knit together. This is important since many traditional economies compete for scarce resources and rely on each member knowing their role.
  • Since traditional economies do not produce any waste, they do not harm the environment, making them more sustainable than larger, more modern economies.

The disadvantages:

  • Even though traditional societies encourage developing a societal view, they shun individualism. This means that each member has to conform to tradition and that they have to accept the roles passed onto them from the earlier generation. It also means that any change discouraged as change could potentially threaten the society’s overall chances of survival.
  • With no surplus, traditional economies are always at the mercy of mother nature. In other words, should a traditional society suffers a bad harvest, there is a very real chance that some of their members will starve. This very real risk is one of the main reasons traditional economies forced to limit population growth.
  • Another result of having no surplus is that traditional economies have to work around the clock to sustain themselves. Hence, they do not enjoy any time off, and the idea of enjoying the weekend is a foreign concept to them. And, worst of all, despite all their hard work, members of a traditional society still have no guarantee that everyone will well-fed at the end of the day.
  • Aside from mother nature, other modern economies threaten traditional societies. After all, modern economies have little to no difficulty outcompeting traditional societies for natural resources. Furthermore, some of the activities of modern economies can have adverse effects on traditional societies. A simple case in point is how oil development  ia through Russian entities operating in Siberia harmed the surrounding streams and tundra. That affecting neighboring traditional societies and impairing their fishing and reindeer herding activities.

The relationship between traditional economies and trade:

It has already established that traditional economies have no profit incentive, so they do not innovate or overwork themselves. Rather, they produce exactly what they need and consume everything they produce. Consequently, there is neither surplus nor waste. Also, without innovation or surplus, traditional economies tend to be at the mercy of the seasons, fighting every day to make the most out of the scarce resources surrounding them.

Additionally, if two tribes live near one another, living off the same resources, this could generate competition and even animosity between both tribes. Furthermore, given how traditional economies rely on limited production means, their products and services tend to ubiquitous. Put differently, different hunter-gatherer societies will produce the same things. The above observations help draw a clear picture of the relationship between traditional economies and trade:

  • Given that traditional economies rarely have surpluses, there is no reason to trade. Moreover, the lack of a currency makes trade all the more difficult. And, seeing as most traditional economies produce and consume the same things, trade would not be beneficial to them.
  • And, even if different traditional societies would like to trade, they would not able to do so if they were in direct competition with neighboring societies.
  • All that said, trade can develop between different traditional societies in the event of said societies producing different things. For instance, a tribe that sustains itself through hunting may choose to barter with one that lives off fishing.

The interaction between traditional economies and more modern economies:

So far, the discussion centered on traditional economies and how they interact with each other. But, when a traditional economy interacts with a more modern economy, things are a bit different:

  • For starters, the traditional economy begins to appreciate the role currency has to play. Armed with cash, traditional economies can purchase better equipment for themselves, hence increasing the productivity of their members. This, in turn, means that the traditional society will able to enjoy a surplus and the stability that comes with it or to spend less time working and more time on leisure activities.
  • This interaction expedites the evolution of the traditional economy into a more advanced economic system. This is facilitated through introduction of currency, the existence of surplus, and the ability to trade with other economies.


    traditional economy – what is it?

    A traditional economy is a kind of economy that institute of ancestral practices of adaptation to a particular environment, still, money-making does not intercede. It is base on family or community relationships. In the early stages, all human society were unquestionably recognize this type of market system and economic relationship. This economy is essentially agricultural and livestock, which consists of exchanges between the community. Regarding the result of their economic activity, people modestly produce their own products and services that are directly a consequence of their habits, cultures, beliefs, and religions. To be specific, tradition, customs, and acquired skills are responsible for guiding an economic decision, which produce by agreeing to long-established patterns.

  • What is traditional economy system?

    The traditional economy system has been the most common way of giving life structural behavioral economics throughout history. It is a structure focused on folkways, tradition, and time-honored convictions. Tradition controls economic decisions in a country like production and distribution. It usually has an economic model based on rural activities like farming or fishing and more. During prehistoric times the people would organize their life in this way.

    Nowadays some regions still use this method, but those are usually progressing countries like Latin America or Africa in comparison with countries with a capitalist economy. Here the people determine the products, the services, and the labor that each will have, this is define through the customs of their elders and ancestors, they truly believe that what was practice by their ancestors is the best for our human society and shall not question also there is no use of technology in this system because they also believe that technology attracts negatives criticism.

    What are the main features of a traditional economy?

    The main features of a traditional economic system can summarized as:

    -The economic production is archaic with a focus on manual work such as agriculture, harvesting, and hunting. All this without the aid of advanced machinery.

    -The roles for each individual are distribute in a hereditary way. The same position of the parents transferred to the children, the farmers acquire the role of their parents, the hunters acquire the role of their parents, and so on with every job.

    -Absence absolutely of the currency as a method of payment.

    -The development of power based on traditional tribal relations.

    -Lack of development in science and technology.

    -Beliefs transfer from one generation to another.

    -Small participation of the extractive industries.

    -Exploitation, rights restrictions, and freedoms to the lowest social stratum.

    What are the benefits of a traditional economy?

    Over the years, human beings have organized their resources in different manners, until they reached the systems which are best fitted to each society. At the present time, our civilization is organize with mechanisms that allow us to take independent or collective economic choices, as a sign of its continuous evolution. The traditional economy is characterized as its dependence on the history, hierarchy, customs, and current life of a culture. The benefits of such a society, which depends on its people and community, are many, including less destruction of the environment and a general understanding of how resources will distribute.

    Another benefit of this is that it does not depend on currency since it is completely influence the exchange or negotiation of goods. Finally, in this economic model, there are no losses, the existence of this economy designed for the full use of products and services, there is never a surplus.

    What is a mixed economy and what countries have them?

    A mixed economy means a system that is combined with characteristics from market, command, and traditional economies. Many mixed economies conserve some aspects of a traditional economic model; however, it is left to the free market, and it is partially run by the government too. Also, it can include elements from capitalism, socialism, or communism. The traditions are very established, and as a consequence people are no conscience about it. For instance, they finance royal families. Others fund in hunting and fishing.

    So, when these traditional economies cooperate with market or command economy, things grow differently. Cash gets now another role, becomes significant. Since allows those who are in the traditional economy to improve in their equipment. As a result, farming, hunting, or fishing is more gainful and cost-effective. If this occurs, they convert a traditional mixed economy.

    Concerning the mixed economic system, globally there are several mix economies. Some country examples are Iceland, Sweden, France, China, Hong Kong, USA, England, Canada.

    One of the best examples of a mixed economy is India, considering:

    • Capitalism and socialism work hand by hand.
    • There are both public and private banks.
    • The railway system:The government conserve the trains and the railway stations owned  the capitalist.
    • The airline area has both public and private Airlines. Air India works properly with the other capitalist fellowship.