19 Advantages and Disadvantages of a Traditional Economy

A traditional economy is defined as an economic system where customs, traditions, and believes that helped to shape the culture also help to shape the products and services that are offered. These traditions and beliefs also become the foundation of rules that are used for the distribution of goods and services and the manner of their distribution.

Most countries that follow a traditional economy design are rural, feature agricultural products, and exchange goods and services through barter or trade rather than financial transactions.Pure traditional economies experience no change in how they operate. They are often stigmatized as being part of the developing world and primitive. Examples from the Inuit people, however, or the tea plantations found in Southern India disprove this stigmatization.

Here are the pros and cons of a traditional economy when compared to other economy formats that are employed by governments around the world today.

List of the Advantages of a Traditional Economy

1. The traditional economy centers around the family.

Because traditional economies tend to be rurally-based, the needed skills to produce goods or services are handed down to each new generation. That means the skills and traditions gained by the elders within each family group become the expressions of how the economy operates in the future. That process helps to keep family units together, keeping the economy centered around meeting the needs of one another.

2. It is an economy which allows for movement and freedom.

The traditional economy is based on the concept that you go where you must to obtain the resources you require to survive. Traditional economies are often nomadic by design as that allows each family group to follow migration or seasonal patterns of food growth. Groups that are following the concepts of a traditional economy rarely need to trade with the outside world because they are able to produce everything they need on their own.

3. Traditional economies only produce what they require.

Within the traditional economy, there is rarely any waste created when developing goods or services. Surplus is a rarity within this economy type as well. Most traditional economies will produce what they need and nothing more. That is because there is no value to this type of economy in the action of trading with someone else. Once needs are met, there is no need to continue producing.

4. It heavily relies on the bartering system.

Traditional economies rarely have a need for currency. That means when they do trade with other groups, the goal of the bartering is to obtain items that are required for survival. One group might be excellent farmers. Another group might be excellent hunters. By trading corn for venison, both groups can serve their individual needs better without the requirement of money changing hands to complete the transaction.


5. Traditional economies usually evolve into a different type over time.

Once a traditional economy can settle into a routine which involves farming, a surplus will eventually develop through improve growing methods. Instead of wasting that surplus, the economy will look to barter it with neighboring groups. If enough surplus becomes available, the traditional economy will develop some type of currency. With currency, long-distance trades become possible to relieve the pressures of surplus products.

6. Friction is a rarity within a traditional economy.

Because the groups in a traditional economy are family-based, the amount of friction that is present within the economy is minimal. That is because everyone is following the traditions and customs that are set forth by the elder. Each person knows their role within the economy and what is expected of them. That allows production levels to remain stable, no matter what the role of the individual may be. Members also know what they will receive for their work, which makes it possible for all basic needs to be met.

7. Traditional economies can be very friendly to the environment.

A traditional economy does not operate on a mass scale. These economies are small. Some may involve just one tribe or household. That means they are less destructive to the environment without sacrificing the needs of members. Although they may have limited production capabilities, the outcomes of these economies are predictable, which makes planning for future needs easier compared to other economy types.

8. It isolates population groups from the outside world.

Before the colonization of North America, a disease like smallpox was out of the question for the nomadic population groups in the area. Small communities naturally insulate themselves from infectious diseases and other health issues. That means each traditional economy tends to form its own natural defenses, leading to stronger immune systems and a better overall quality of life.

9. Traditional economies focus on the skills of the individual.

Although there are limited opportunities for job changes within a traditional economy, there is much less job dissatisfaction found within this economy type. People in a traditional economy are matched to jobs that make the best use of their natural talents and skills. That makes it easier for people to take pride in their work and love what they do since they are good at it. With the supports of a family or tribe available each day as well, work becomes part of life in the traditional economy instead of life being defined by a job.

List of the Disadvantages of a Traditional Economy

1. There are high levels of competition in traditional economies.

Because traditional economies focus on meeting internal needs above any other need, there can be high competition levels for available resources. Groups that are closely positioned to one another may find themselves fighting often to command limited natural resources in their region. That competition can take on many forms, including war, which may further limit the availability of resources to all affected groups.

2. Traditional economies can be devastated by natural events.

Weather plays a big role in determining the size and scope of success that a traditional economy receives. One bad growing season can be enough to stop farming altogether. If the migratory herds avoid an area because of bad weather, it may be difficult for those in the traditional economy to find their new location. To limit the negative impacts that unexpected changes in weather may cause, families within this economy type tend to limit their overall population growth.

3. People starve if a harvest or hunting is poor.

The traditional economy relies upon the efforts of farmers, hunters, and gatherers to provide food supports for the entire population. If there isn’t enough food that can be located, then there is a good chance that the people living within that economy will starve. Unlike other economy types, there is a very limited amount of food storage available. What is needed is what is grown or gathered, then used, right away. And, because bartering is a common practice, there is no way to obtain needed goods because there is nothing available for trade.

4. Traditional economies are vulnerable to other economy types.

Other economy types, such as command economies or market economies, often consume the natural resources that the traditional economy uses to support themselves. Because the other economy types are usually more advanced technologically, they can decide to come in and take what they need or want to meet their own needs. When Russia moved into the Siberia region, their quest for crude oil reduced reindeer herding, fishing, and farming in the traditional economies because they damaged the environment.

5. This economy type places populations at-risk for infectious diseases.

Once the Europeans began moving into the Americas, the diseases they brought with them devastated family groups. The traditional economies had never been exposed to smallpox, which meant that their immune systems struggled to adapt to the disease. Poaching and warfare helped to place many traditional economies at-risk for extinction. Those who could adapt started using the weapons and tools that the other economy types brought to them. Over time, a traditional economy cannot compete with the technological advantages other economy types offer.

6. There are few options to expand personal horizons.

Within the traditional economy, each person tends to know what their role will be in the production cycle. That becomes their responsibility. The only way they can move into a new responsibility is if someone dies or becomes disabled and are unable to continue working. For someone who wants to explore new options or try something different, the options available are few and far between. Many people within a traditional economy work the same job or fill the same role for most of their lives.

7. It can devastate the environment.

There have been numerous incidents where traditional economies harmed the environment instead of helping it. The Dust Bowl is one of the biggest examples, where farms in Kansas, Oklahoma, and Northern Texas were forced into closure because of poor growing practices. Once a drought hit, the land was no longer usable. In Haiti, forests are in decline because wood is being used as a fuel source. Rainforests in South America are being destroyed to promote traditional economy growth. When the production of a traditional economy is not reflective of the needs of the environment, then it will eventually fail.

8. Traditional economies can limit medical access.

Traditional economies often face high infant mortality rates because there is a lack of access to modern medical care. Children under the age of 5 are the most vulnerable population demographic within this economy type. All it takes is one poor season that reduces food access to promote malnutrition. From a young age, many children contribute to household production as means of self-survival, which is not always the healthiest way to live.

9. There are fewer choices available in a traditional economy.

Because traditional economies only create what is needed, there are few consumer choices available for community members. You’re not going to get to go to a grocery store within a traditional economy and shop through tens of thousands of different brand options. You’re going to eat what you gather, hunt, and grow. During a tough year, that might mean you’re limited to one food choice every day.

10. This type of economy limits genetic variability.

Because traditional economies tend to remain isolated, family groups keep new couplings within the family. Close family relationships that produce offspring increase the chance for genetic disease concerns for future generations. That is because both parents come from the same genetic contribution pool which has already been exposed to potentially defective genes. Over time, even if marriages occur between cousins, the quality of the genetic pool declines, eventually causing the traditional economy to eliminate itself unless new genetics are introduced into the group.

The advantages and disadvantages of the traditional economy are quite unique. There is little waste produced within this economy type because people work to produce what they need. That is also a disadvantage, because if there is no way to fulfill production needs, the population group may starve. Good practices can create a healthy traditional economy. In recent years, however, we have also seen how quickly poor practices can devastate people, like the Dust Bowl in the early 1930s.