What is a Traditional Economy? - Definition, Characteristics, Advantages & Examples

What is a Traditional Economy? - Definition, Characteristics, Advantages & Examples
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  • 0:00 What Is a Traditional Economy?
  • 0:47 Characteristics
  • 1:34 Advantages
  • 2:10 Disadvantages
  • 2:35 Example
  • 3:36 Lesson Summary
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Lesson Transcript
Instructor: Brianna Whiting
In this lesson, we will learn about traditional economies. We will define the term, look at both advantages and disadvantages, and apply the information to an example. This will be followed by a summary and a quiz.

What Is a Traditional Economy?

Let's imagine you and your spouse decide to take a vacation to some far off destination. You decide to go to a third world country so that you can experience life from a different perspective. You want to experience a place where the people have strong customs and traditions, and monetary status is not significant. What you are looking for is a place that has a traditional economy.

So, what exactly is a traditional economy? Well, a traditional economy is that in which customs, traditions, and beliefs are rich in developing the goods and services for the area. In other words, a traditional economy is one that is built around the way a society lives. The goods and services are determined based on the livelihood of the people.

Characteristics of a Traditional Economy

Now that we know that a traditional economy is built upon traditions, customs, and beliefs, let's look at some other factors that contribute to this type of economy.

  1. Traditional economies are often based on one or a few of agriculture, hunting, fishing, and gathering.
  2. Barter and trade is often used in place of money.
  3. There is rarely a surplus produced. In other words, most of the goods and services are fully used.
  4. Often, people in a traditional economy live in families or tribes.
  5. Societies may follow herds of animals in order to hunt and sustain those in the traditional economy.
  6. Many people progress from hunters to farmers where they can place permanent structures and start a society.

Advantages of a Traditional Economy

You may be asking now, what are the advantages to this type of economy? Why does this type of economy work for certain areas of the world? Well, for starters, each person in a traditional economy understands what they are supposed to do or what their job is. Second, everyone is aware of the resources and how they will be distributed among the group. Next, each person understands what they will receive when doing their jobs and participating in a traditional economy. Lastly, there is less destruction to the environment because many of these traditional economies farm and use the land in a positive manner.

Disadvantages of Traditional Economies

While there are several advantages to a traditional economy, these economies are not without their disadvantages. Because these economies rely on hunting, fishing, gathering, and the land in the form of farming, when the weather changes, the economy becomes jeopardized. Also, if they are not able to find animals to hunt or fish to catch, people can starve because they don't have the goods needed to survive.

Example of a Traditional Economy

So, how can this information be applied to real life? Well, let's look at an example to help explain this type of economy.

Bill, his son, and his grandchildren live in a third world country. Where they live, there are not any stores, like many of us are familiar with. So, they have nowhere to purchase all of the things they need to survive. Instead, Bill and his family have to gather their own resources.

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