The Basic Economic Questions
The traditional economic system answers the three basic economic questions of what is produced, how it is produced and to whom is it produced very plainly.
- What: Food, water, clothing and other basic resources.
- How: Hunting, gathering, agriculture and fishing.
- To Whom: Themselves and their tribes.
People in this economic system are trained to be able to hunt, gather, fish, farm, and make and use tools. They use a certain combination of those skills to get food and clothing for themselves and their tribes and then teach these skills to the next generation. This economic system is largely guided by tradition. As for trade, a barter system is used to trade goods over currency.
- Everyone knows their role in the economy
- Sustains the environment. For example, following herds of animals and making sure they are not hunted to extinction in the area.
- When distributing resources, everyone knows what their share of the resources may be.
- Very vulnerable to changes in weather.
- Very vulnerable to economies with superior resources.
- Since the traditional economy goes by tradition, it is not very flexible to change.
- Limited choices of the kinds of resources people can obtain.
- Very low or no technological advancement.
The Inuits of Canada are an example of a society that uses the traditional economic system. Other countries that use the traditional economic system include parts of Asia, the Middle East, Africa and South America. Haiti is another example of a traditional economic system. The reason why the earthquake in 2010 affected them so much is because the majority of Haiti's population rely on farming.