Definition of Traditional Economy and how It Works

The definition of traditional economy can be explained in different ways depending on the experts defining it. To put it simply, traditional economy can be defined as particular market system that still employs custom and belief. This system is recorded in the history yet still thriving up to modern days. In this particular system, local custom plays important role in order to determine the economy. Plenty of economic decision is selected by taking into the consideration about the tradition. Let’s talk about this topic, including traditional economy characteristics in more detailed information as well as the traditional economy examples.

definition of traditional economy
image: vecteezy.com

Definition of Traditional Economy and how It Works

As previously explained on the definition of traditional economy, tradition is the key of the development of local economy. Economy itself involves three important activities. Other than producing, it also involves distributing and consuming. Those activities will determine whether the development of local economy will thrive or decline into chaos. The production of items and services on traditional market is mostly coming from fishing, agriculture, hunting, gathering, or a combination between them. Such traditional market system can be found in Asia, Africa, Middle East, Latin America, and many more.

The definition of traditional economy is often associated with its development. When talking about economic development, people in the modern days always use money as indicator for its development. That being said, it is interesting to point out that money is rarely involved in traditional economy. Trading process is using barter method rather than using money. In this particular process, people trade items with the same economic value to other items. However, that is not the only traditional economy characteristics.

The traditional economy characteristics are divided into several points. The market that still uses traditional system often occurs on particular tribes or ethnic groups. Elder experiences from the tribes or ethnic groups are used as guideline to the market condition. Other characteristic can be found in the people who still practicing it. They are mostly coming from nomadic society. Hunter-gatherer society is using the same economic system as well. Natural resources become the main source for production activity. When it is difficult to obtain, the price will rise accordingly.

The definition of traditional economy mentions about production activity. In this case, the producer only produces what they need. Therefore, leftover and surplus of item is rarely happened. Therefore, it makes gathering money unnecessary. The last characteristic can be found on the relation between producer and consumer. Farmers of traditional economy system often relies the life to hunter and fishermen to get balanced meal. The same thing goes other way around where hunter rely their vegetable food to the farmer.

There are specific reasons why traditional market survive and thrive up to these modern days. Apparently, traditional economy offers several advantages that cannot be found in modern days. One of the most notable traditional economy advantages is the friction between people in traditional market is at its minimum. Tradition guide their development, therefore people knows their contribution for the economic development. In most case, uprising is not happening despite the member of the same market are not satisfied. Keeping the unity of traditional market is their main reasons for it.

Besides traditional economy advantages, unfortunately there are also the major drawbacks as well. Traditional system rely their process entirely to the nature. Therefore, it is highly influenced by changes in the nature. If the nature is not friendly with them, they will have hard time in keeping the traditional economy in stable development. One of the best traditional economy examples can be found in the traditional fish market. During particular season, fish is difficult to come by due to season changes. This change will have great impact on this traditional fish market.

READ: Definition of Debt, Knowing the Different Debts and Types

What makes this system changes into modern economy system? The answer lies on the interaction between members of traditional market and modern market. In most case, carrying cash around is more practical than carrying particular items to sell in the same market. The definition of traditional economy does not say anything about when traditional market gets unstable. In most traditional economy examples, traditional system cannot prevail against modern market system. Plenty of traditional economy systems are finally replaced with modern one. That being said, you might still be able to find market with traditional system around you and get all the traditional economy advantages.

Santiash

Leave a Reply

Your email address will not be published.