What is Traditional Economy? 

A traditional economy is a system where goods production and distribution are driven by time-honored beliefs, customs, culture, and traditions. These countries rely mostly on agriculture, gathering, hunting, and fishing. The barter system is characteristic of traditional economies. 

It marks the evolution of the market economy—historically, every country developed out of some form of the traditional economy. Contemporarily though, most traditional countries have transformed into mixed economies. Traditional countries miss out on trade relations, exchange of culture, and scientific development. 

Table of contents 

  • Traditional Economy Definition 
  • Traditional Economy Explained 
  • Traditional Economy Characteristics 
  • Example 
  • Advantages 
  • Disadvantages 
  • Frequently Asked Questions (FAQs) 
  • Recommended Articles 

Key Takeaways 

  • In a traditional economy, people are rooted in history, tradition, customs, and beliefs. Traditions dictate methods of goods production and distribution. 
  • In subsistent economies, production is aimed at self-sustenance—they consume whatever they produce. Trade is minimal. 
  • In conventional economies, natives make a living out of skills acquired from family and community. Over centuries, these communities have become highly skilled in a particular niche. 
  • In 2022, the traditional economic system can be seen in nations like Brazil, Alaska, Canada, Yemen, Haiti, and Greenland. 

Traditional Economy Explained 

A traditional economy is seen in a country that holds on to its history, customs, beliefs, and traditions. In traditional countries, most of the population is employed in the economic activity of their ancestors. It is an economic system based on agriculture, fishing, and hunting. 

In such economies, community structure and family sentiments greatly influence national production and distribution. Some of these economies still follow archaic business models like the barter system—exchanging commodities for commodities. Traditional business structures are not designed around parameters like GDPGDP per capita, or GNP

But, all modern markets, i.e., capitalist, socialist, communist, and mixed economies, have their roots in the traditional economy. Traditional economies are less developed—they follow ancient methods for distribution. As a result, most traditional nations are often labeled underdeveloped or developing. 

Globally, there is a perception that traditional countries value traditions and history over economic growth

Traditional Economy Characteristics 

To understand the traditional economic system, we must distinguish it from the other economic systems. Traditional economy characteristics are as follows: 

  • The nation’s production and distribution are based on people’s customs, history, traditions, and beliefs. 
  • In traditional countries, history, beliefs, and traditions often outweigh economic growth. 
  • Traditional economic activities include activities like agriculture, hunting, fishing, gathering, and cattle rearing. 
  • Historically, a group of people engaged in farming or hunting ended up settling—gradually, It became a society. 
  • In subsistent economies, production is aimed at self-sustenance—they consumed whatever they produced and relied mostly on barter systems. Trading was meant to be minimal. 
  • Parallels have been drawn between traditional economic systems and underdeveloped or developing nations. 


In 2022, The World Population Review labeled Brazil, Haiti, Alaska, Yemen, Canada, and Greenland as traditional economies. Most conventional economic systems are found in Asia, Africa, Latin America, and the Middle East. 

Brazil is a mixed economy driven by state regulations and market demand. However, a large population of the Amazon rainforest in Brazil still makes a living by producing the same goods which their ancestors did. They even exchange these goods for other commodities with their neighbors. 


A traditional economic system has the following advantages: 

  • Keeps the Traditions and Customs Alive: In traditional countries, people preserve skills and art within respective communities, tribes, and families. 
  • No Wastage of Goods: Since the goods are produced only to meet the requirements of the community, tribe, or family, there is no surplus. 
  • Have Scope for Evolution: This economic structure has the potential to adapt—imbibing traits of different economic structures. In fact, all modern economic systems have evolved out of the traditional system. 
  • Environmentally Friendly: Due to the limited use of technology, the conventional methods of conducting economic activities are less harmful to nature and the environment. 
  • Skilled and Talented People: Natives make a living out of skills acquired from family and community. Over centuries, these communities have become highly skilled in a particular niche. 
  • Role Clarity and Satisfaction: Individuals who run family trades are successors—they inherit both responsibilities and skills. They are introduced into the business from a very young age. Also, they are satisfied with whatever they do and earn out of it. 
  • Safe from Global Problems: Self-sustained economies often remain disconnected from the outside world—they can avoid various infectious diseases spread globally. 


Traditional economy disadvantages are as follows: 

  • Starvation: People may starve from food shortage if there is a lack of agricultural, hunting, or fishing produce. 
  • Risk of ExploitationDeveloped economies often invade underdeveloped economies to exploit the land and natural resources. 
  • Extinction of Natural Resources: Economies that are highly dependent on natural reserves for food, shelter, and clothing fail to develop alternative sources. They risk natural resources becoming scarce. 
  • Limited Growth Opportunities: These economies focus on preserving tradition and customs—development of new production and distribution methods take a bask seat. Economic progress is stagnant. 
  • Poor Medical Amenities: Due to limited exposure to the outside world, conventional economies lack modern medical facilities. As a result, infant mortality rates are high, and average life expectancy is very low.   
  • No Global Interaction: By being disconnected from other economies, traditional countries miss out on trade relations, exchange of culture, and the development of new techniques. 
  • Technologically Backward: Traditional countries rely heavily on an old-school production. They miss out on new techniques that can increase production, leisure time, and cost-efficiency. 

Frequently Asked Questions (FAQs) 

What is a traditional economy? 

A traditional economy is a system where people’s customs, traditions, history, and beliefs stimulate the production and distribution of goods and services. The exchange of commodities takes place through the barter system.  

What does the traditional economy produce? 

It produces enough goods and services to fulfill the needs of the community or tribe. In conventional economies, farming, hunting, fishing, herding, and gathering are major contributors. 

What is the goal of a traditional economy? 

Its main objective is to keep the culture, beliefs, and traditions of a community or family alive—by following primitive economic activities and the barter system. 

Recommended Articles 

This has been a guide to what is Traditional Economy. We discuss the traditional economy system, definition, characteristics, countries, examples, advantages & disadvantages.  

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