13 Traditional Economy Advantages and Disadvantages

In a traditional economy, the customs, beliefs, and traditions of the society will shape the goods and services that are being produced. They will also shape the rules and laws that are in place for the distribution of the goods and services and the manner in how they are delivered. It is an economy that is often utilized by societies that are rural or agricultural.

With the traditional economy advantages and disadvantages, there are no changes to how it operates. It is often thought of as a primitive-type economic system because there is no effort at evolution or improvement. It is simply a repetitive cycle that meets basic needs while providing basic benefits.

Here are the key points to consider with the traditional economy.

List of Traditional Economy Advantages

1. A traditional economy is a family-based or tribe-based economy.
The traditional economy is localized and serves as a guide for people to complete their daily responsibilities. It is a place where the experience of an elder is handed down to the worker so the job can be completed based on time-honored traditions.

2. It is an economy that keeps things simple.
Individuals have specific roles to play within a traditional economy. Because the focus is on meeting needs, people work within their role to ensure specific quotas are met. Very little trade is required in such an economy, which means all resources can be put toward meeting the needs that are required for survival. Skills are passed down from one generations to the next to maintain specific skills that allow for the economy’s continued survival.

3. Traditional economies work with the natural environment.
In the traditional economy, the goods and services that are produced are based on what is available in a specific geographic area. It creates a self-sustaining economy where the focus is to meet basic needs through what can be obtained by the natural environment. Instead of drilling or digging a well, the traditional economy might take water from a mountain stream.

4. It places an importance on community groups.
Every person plays a vital role within the traditional economy. There must be support for one another because each person or group has a specific skill set that is required for the whole community to be successful. This limits greed or selfishness because everyone has a similar goal to survive, so there is limited competition for resources.

5. It reinforces the concept of personal pride.
Traditional economies make it easier to take pride in one’s work. You can see the direct results of your labor and what can be produced from it. Although the lifestyle in this type of economy might be considered “rugged” or “difficult,” it can also be satisfying because the result of a day’s work is satisfaction in knowing that life for the community will continue.

6. Traditional economies tend to follow the same evolutionary course.
Once a traditional economy can settle down, they can begin improving processes so that a greater surplus can be generated annually. That surplus can then be used for bartering. When trade opportunities begin to expand, the traditional economy will form some type of currency that can be used inside and outside the economy. This allows trade opportunities to expand as the surplus expands, encouraging further growth.


List of Traditional Economy Disadvantages

1. It isolates the people within that economy.
The traditional economy isolates people instead of bringing them together. The experiences that work on one field may not apply to a field on the other side of the country. Different weather patterns, soil conditions, and seed availability can change what experience is handed down by an elder or supervisor. That means each traditional economy must remain local and that limits economic growth opportunities. Each family or group is working to meet their specific needs and nothing more.

2. Large outside economies can overwhelm a traditional economy.
Traditional economies are focused on small groups, such a family living together to produce all the goods and services they need. If a larger outside economy decides it needs those resources, it can be difficult, if not impossible, for the traditional economy to protect itself. This process overwhelms the traditional economy and forces those who are in it to adapt to the new economic structures.

3. It offers few choices.
What the modern world thinks of advancement opportunities doesn’t exist within the traditional economy. If your father is a farmer in a traditional economy, then the expectation is that you will learn from your father and become a farmer one day too. Then your children will also be farmers. That means there are few choices within this economy structure to dream bigger. Change of any type tends to be strongly resisted because change threatens survival.

4. There may be a lower overall quality of life.
Modern amenities are not always present within a traditional economy. There may be a lack of medical care available to the economy. Sanitation technologies may not be available. This creates a circumstance where an individual in the traditional economy may have their life or livelihood threatened when an individual in a larger, modernized economy can receive a needed treatment and continue with their day.

5. It creates specific health risks.
With the isolation that a traditional economy provides, specific health risks which apply to that community alone increase. An example of this are the genetic diseases that affect Jewish populations. The Ashkenazi Jewish families have a 38-disease panel for testing to prevent a serious genetic disorder or disease from affecting their children. An estimated 33% of the Ashkenazi population is a carrier of at least 1 of 19 Jewish genetic diseases.

6. Unpredictability creates survival uncertainties.
In the traditional economy, migration is a common occurrence. Circumstances can be unpredictable. If there is a drought that stops food production, then the family must move or rely on stored resources until the drought stops. Many traditional economies are nomadic, moving to where the resources happen to be, so that survival can continue. Even then, an unpredictable weather event, earthquake, or other natural disaster can immediately devastate the traditional economy and put its livelihood in jeopardy.

7. Bartering is a requirement.
Trade does not regularly occur within a traditional economy. When it does occur, it relies on bartering. That means trade can only occur between groups that are not competing with one another. A group of berry gatherers would trade with a group of hunters so that both could receive a better lifestyle than if the trade did not happen.

The traditional economy advantages and disadvantages show us that it can be a foundation for growth when a group can settle down and focus on skill development. For societies that are forced to be nomadic, growth tends to stall and that limits opportunities. It is an economy that can be helpful, but open to being quickly overwhelmed by others.


Blog Post Author Credentials
Louise Gaille is the author of this post. She received her B.A. in Economics from the University of Washington. In addition to being a seasoned writer, Louise has almost a decade of experience in Banking and Finance. If you have any suggestions on how to make this post better, then go here to contact our team.