The economy is the heart of any country, any society, and any community. Without a fostering economy, one can’t sustain as there will be no production of goods and services. There are numerous types of economic models followed in different countries among which capitalist, socialist, communist, and market economies are the popular ones.
There is one more economic model which is the oldest of all of them and which prevails in some of the underdeveloped countries of the world today, it is called the traditional economy (also called conventional or customary economy). Today, we will have a look at the traditional economy definition, understand what exactly it is, and know its pros and cons. So, keep reading and know about it in detail.
What is the Traditional Economy?
The traditional economy is usually found in underdeveloped countries. It is a way of life for the people in underdeveloped countries. It is an economy that doesn’t operate under the motive of making money but makes sure that all the people of the community have work and enough goods to sustain.
It is based on the customs and traditions prevailing in the society. People of the community, region, or culture participate in this economy and do bartering of the goods and services. Goods and services are sold not with money but with the bartering system.
In a bartering system, one good is exchanged for another good. For example, someone who produces wheat will exchange it to someone who needs it not with money but with some other good like fruits or vegetables.
People who follow the conventional economy rely on old-fashioned and traditional economic activities like farming, hunting, cattle herding, etc. They don’t follow the technological innovations and modern economic models.
There is no excess, oversupply of the goods, and even a shortage in a customary economy. People here don’t work with a motive to earn more or have more profit but rather work to feed themselves daily and sustain their life.
There are many examples of a conventional economy. Currently, this model is followed in underdeveloped countries and rural areas where the people live a life based on their traditions and customs. They don’t follow the modern trends and customs so the conventional economy is still followed there.
Many tribal communities are following this practice in the rural regions and places that are remote and out of reach from the modern world. Here, the decisions are taken by the tribal leaders who will perform which task and how the goods and services will be produced and consumed.
What are its Characteristics?
- It is based on beliefs, customs, and traditions that the community or society is following over the years.
- It is modeled based on the life of the people.
- The production means are hunting, fishing, agriculture, etc.
- It is not based on any means of currency but involves barter trading.
- There is no waste, as well as no oversupply as all the goods produced, are consumed.
Now, let’s have a look at the traditional economy pros and cons.
- Every member of the community is engaged in doing something. Someone does the farming work, some do cattle herding, some do fishing and other stuff. This way they work is distributed among all the members and everyone is busy producing the goods and services.
- Every member is aware of his/her responsibilities and they have the required skills and knowledge to carry out the specific tasks and then this knowledge is passed on to their next generation.
- There is no excess production as well as no shortage so everyone gets what they want. There is no industrial pollution so the environment remains clean and pure too.
- People here don’t work for profits and money so they are not greedy but live their life with simplicity. Barter trading remains well effective here.
- There is often more work involved in the conventional economy. People have to work continuously and there are no holidays as they have to produce the goods to survive. Also, there is no guarantee that the crops will give a good yield, there are weather issues as well.
- Quality of life is not that good in this economy as compared to the market economy.
- The biggest disadvantage of this economy is that there are very few career choices available to choose from. Hunting, farming, fishing, cattle herding, etc. are the only options available that one has to choose from.
- Exposure is very less to the modern world and growth and change are not respected in this economy. People fear that their traditions and cultures will be ruined if they prefer to change.
So, here was an overview of the traditional economy and its pros and cons. I hope you got a complete idea of it. The market economy is much better than the conventional economy in the current times where the world is accelerating at a huge pace and the industrial and technical revolution is changing the world.
Quality life and growth are seen in the market economy, unlike the conventional economy where people live a simple life with no focus on growth and change! For more information, visit Financeshed.