Traditional And Traditional Economic Systems

SCARCITY LEADS TO CHOICE INTRO AN ECONOMIC SYSTEM IS A WAY TO ADDRESS THE THREE FUNDAMENTAL QUESTIONS OF ECONOMICS. DIFFERENT ECONOMIC SYSTEMS ANSWER THESE QUESTIONS DIFFERENTLY. “Societies have developed different broad economic approaches to manage their resources”. (3) Economic systems are defined as organized ways in which a state or nation allocates its resources and apportions goods and services in the national community (1). They are the means by which countries and government distribute resources and trade goods and services (2). The main purpose of these systems is to control the four factors of production: land, labor, capital and entrepreneurship. Different economic systems view these factors distinctively, and therefore utilize

the way of life. In a traditional economy, production is determined by the people’s incomes and livelihood. (5) According to sources, a traditional economy is based on agriculture, fishing, hunting, and/or gathering. Traditional economic systems may function according to the barter system, rather than money, though this is not always the case. Traditional economies are usually employed in Third World countries, where citizens appear to be living in poverty even though their daily necessities are met. Such locations include: Africa, Asia, Latin America and the Middle East, though traditional economies may be identified across the world. A modern-day example of a traditional economy would be the tea plantations in Southern India.

An obvious advantage concerns the economy’s productivity. This economy produces sufficient goods and services to meet the people’s needs, not necessarily their wants. Thus, it dramatically reduces the surplus that would’ve otherwise been generated. (8) One of the more profound advantages deals with the allocation of resources. (6) Since custom and tradition dictate this economy, each individual in a traditional economy fully comprehends their role in society, with regards to their job, their compensation, the economy’s resources and how these resources will be distributed among the group. (5) Being aware of this information makes each person feel validated and dignifies each individual’s contribution and efforts to the economy. (8) Thus, individual efforts and teamwork collaborations will be see better results due to their better performance. Also, being aware of the resources gives each individual a sense of appreciation for their factors of production, land and otherwise. (5) Moreover, their positive utilization of land and their knowledge of their resources ultimately leads to less destruction and harm to the environment. (5) Less environmental damage essentially qualifies environmental sustainability, and therefore retains this type of economy.