A traditional economy is an original economic system in which traditions, customs, and beliefs shape the goods and the products the society creates. Countries that use this type of economic system are often rural and farm-based. They also include a high amount of traditional values.

These types of economies are often found in underdeveloped communities that use primitive tools in methods in order to harvest or hunt for their food. They are also found in rural areas with high levels of subsistence farming.

All economy types have developed from this original economy type.

Here you can see a local fisherman preparing his fish so he may trade them in the future

In a Traditional economy, goods are traded directly for other goods that people need. For example a subsistence farmer could trade some tomatoes for a fisherman's fish. Since there is no defined currency or government intervention, bartering plays a big role in traditional economies.  

Since traditional economies rely on the traditions of locals to determine the trade values of different goods, they usually reside in small areas where tradition is shared.


Some Frenchman trading with an Indian during the fur trade.

In history, many different trade eras relied on traditional economy because were no shared currency. They had to trade goods they had in order to obtain goods they didn't have. The Pilgrims traded with the Indians for food and skins while the Indians got rifles and ammo. The Spice trade and the Fur trade both used traditional economies in order to work.



The main benefit in a traditional economy is that it produces the services and goods that are needed for survival, thus eliminating the feeling of hostility that may arise from people competing for resources. In a traditional economy, everything is used for product and there is no waste or surplus. The production of goods in made to the demands of the community and surplus can be used for outside trading.


Traditional economies are very vulnerable to changes in nature, especially the weather. For this reason, traditional economies limit population growth. When the harvest or hunting is poor, people starve. They are also more vulnerable to market or command economies that have superior resources to wage war or take away needed natural resources.


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