Traditional Economy

Of the various types of economies in the world today, market economy - which is predominantly a capitalist economy, and mixed economy - which has a blend of capitalism and socialism, are perhaps the most popular ones. On the other end of the spectrum, lies the traditional economy - a type of economy which has been virtually phased out as a result of extensive economic growth and development.

Traditional Economy Explained

In economics, an underdeveloped economy wherein people still use primitive tools and resort to age-old methods of harvesting is referred to as traditional economy. One of the most salient feature of this type of economy is very little or total absence of economic growth. There do exist some definitions which stress on the fact that it is an economy which is entirely dependent on its agricultural sector, and therefore it can be also known as subsistence economy. While that is the generally accepted definition, socialist economists believe that it can only be considered complete when you add to it the fact that these economies have a well rooted social setup.

In a broad sense, the term is most often used by member states of developed economies to refer to those economies which are considered to be underdeveloped. The concept, which was quite popular in older times when most of the countries were dependent on agriculture, fizzled out as these countries inched towards development. As a country with traditional economy inches towards development, it morphs into one of the various other types of economy. As we mentioned earlier, this term is considered to be very vague and unspecific, and therefore you are less likely to see its application in the fields of economics today.

Examples

There is no purely traditional economy in the world as of today, but there do exist some regions of the world which continue to practice agriculture and allied activities for a living. Many people - especially those from the developed countries, are prompt to enlist countries from south Asia and Africa as traditional economies which is technically incorrect. This is an apt example of member states of developed economies using this term for underdeveloped (and sometimes developing) countries.

Most of the countries in the world today fall in the category of developing countries, and even those which are underdeveloped do not technically qualify to be called traditional economies as traditional agriculture is not their sole means of living any more. Even those countries wherein agriculture sector has a crucial role to play, the primitive techniques have been replaced by modern techniques which result in more production and add to the overall economic growth. As far as those countries wherein a significant portion of the population continues to practice primitive techniques of agriculture are concerned, the list includes names such as Bangladesh, Burma, Malawi, Myanmar, etc.

Note that the countries enlisted above do not qualify to be referred to as developed economies on the basis of the fact that a few regions continue to practice primitive techniques of living. Most of the countries in the world today have a mixed economy - wherein agriculture, in its modern avatar, has a crucial role to play.