It’s easy to conceive of a country’s economy regarding how much money its citizens have. Modern economies are quantified by GDP (Gross Domestic Product), GNP (Gross National Product), and GDP Per Capita.
On the other hand, an economy is more than just a measure of how much money individuals make.
For example, a market economy refers to a system in which the creation of things is directly linked to what people want and are ready to pay for those items.
There is no use in creating products that people don’t like or manufacturing items over what people desire. Market economies function on this basis. People’s behavior influences suppliers’ goods (spending habits, preferences, demands, etc.)
There are many ways people’s behavior is portrayed in the market of products when we speak about different economies like a capitalist, communist or socialist economy. People in a communist economy are provided with all of their needs by the state, which owns and controls the means of production.
In a communist society, people don’t want labor to make money to purchase things; instead, they work to make the state-run more smoothly. Rather than relying on their wishes or market forces, they depend on the state to define what is accessible.
The means of production in a capitalist economy are controlled by individuals with the financial resources to put their money into commercial endeavors. A free-market economy is one in which the market determines what individuals make in a truly capitalist economy.
For companies to continue producing milk if people no longer consume it, they must first persuade consumers of the health advantages of milk. Two things determine what individuals buy: what they want and how much money they spend.
What Exactly Is The Traditional Economy?
Looking at the conventional economy brings the concept that an economy is more about people’s conduct than money production into a closer perspective. Rather than using a conventional form of money like the dollar, individuals in a traditional economy trade their things for one another.
Traditional economies are based more on family relationships and the natural world than on currency.
People’s market behavior is influenced more by their interactions with other market participants than their desire to acquire the products they want.
Youngsters raised on a farm in a traditional economy, rearing cattle, are more likely to become farmers themselves. As a result, they’ll trade milk for items like fabrics for clothing and eggs and veggies for sustenance.
Because of their close links to family and the community, the people with whom they barter will not be the same as those with whom their parents dealt.
The benefits of traditional economies are many. In addition to being more environmentally friendly, they create relatively little trash.
A third reason is that since they are so focused on human interactions, individuals can see how they contribute to the community’s general well-being instead of feeling “alienated” (performing work when you do not see its significance).
However, since these economies are so heavily reliant on connections, the whole economic system may be disrupted if relationships go bad, as they frequently do.
A small disagreement may quickly escalate into a family feud if it isn’t handled properly by someone with authority and a strong sense of tradition.
One of the drawbacks of traditional economies is that they are heavily reliant on the weather. One lousy harvest or one catastrophic event, such as a storm, tsunami, or earthquake, may lead to famine and hunger without outside intervention.
The traditional economy may easily become a cash economy and lose its individuality when influenced by outsiders, such as humanitarian organizations or government authorities.
Countries With Traditional Economies
The World Bank, for example, uses common labels like communist or capitalist to define nations, making it difficult to determine whether countries still have conventional economies.
However, traditional economies still exist in many nations, regardless of whether they are labeled communist, capitalist, or socialist.
For example, consider Brazil, which has both a state-run and market-driven economy. However, pockets of indigenous people in Brazil, notably in the Amazon jungle, are not part of this economy.
Their economy relies on the things they make, most of which are made by hand and traded with neighbors.
Almost 70% of Haitians live in rural regions and rely on subsistence farming. Villages in Yemen’s hilly highlands, the poorest in the Middle East, rely more on agricultural items than currency to trade.
Alaskan, Canadian, and Greenlandic indigenous peoples still depend primarily on hunting, gathering, and hand-made items as the major source of economic production in the Arctic areas.
As a general rule, they just produce enough for themselves and their families, and then some more to trade with their neighbors. The traditional economies of many peoples in Africa, Asia, and the Pacific Islands are still in use today.
Mixed economies happen when traditional economies begin to integrate with monetary economies. Two or more economic models are combined in a mixed economy, as in socialism and capitalism or capitalism and traditionalism, as in the examples given above.
Using cash to pay for goods and services outside of one’s local area of influence is common in traditional mixed economies. Family and community relationships still play an important role in determining their behavior in the market.
Also See: Tier 1 Countries 2022
Economists may soon notice that individuals in cash-based economies increasingly rely on barter to get what they want. Instead, we’ll have a deeper appreciation for the things we can’t purchase with cash.