Traditional economy

Traditional Economic System

• A traditional economy is a system where traditions, customs, belief systems, and inheritance determine the answer to the three economic questions.

Examples of Traditional economies

• Australian aborigines

The Mbuti in Central Africa

The Inuit of Northern Canada

Traditional Economies¨ Traditional economies are found in rural, non-

developed countries (approx. 400 million practice it)

¨ Customs govern the economic decisions that are made

¨ Modern technology is not used in traditional economies.

Traditional Economic Systems• The economy works through bartering and

trading, and there is very little of that because so little surplus is produced.

• Traditional economic systems are usually based on subsistence-based agriculture

Traditional Economies

¨ Economic activities are usually centered toward the family or ethnic unit; most produce only enough to keep their families alive.

¨ Little surplus exists

Advantages of Traditional economy

• There is little to no uncertainty

• Everyone knows what role to play

• Life is generally stable, predictable, and continuous

Disadvantages of Traditional economies

• Tend to discourage new ideas and new ways of doing things

• Lack of progress lowers standard of living

Traditional Economies

• Basic economic questions answered by what has been done in the past

• Traditions are maintained

• Ritual, Habit, and Custom

Traditional economies• Individual roles and

choices are defined by the customs of elders and ancestors

• These economies are usually based in societies of hunter/gatherers

• Sharing is a big part of these economies