Spectrum of Economic Systems

Differences Between Economic Systems

Economic systems

An economic system can be defined as a mechanism (system) that deals with the basic economic problems such as what, how and for whom to produce in a particular society.

Traditional Economy

These are the communities where people live their lives according to their ancestors. The way of life remains unchanged for centuries. In this type of economy people live according to old age customs- doing things the way they had always been done.

Features of traditional economies

·        The basic economic problems of what, how and whom to produce are not seem to be a problem as they have already been set by the ancestors long ago.

·        Found in rural, under-developed countries–

• Pygmies of Congo
• Eskimos & Indian tribes 
• Aborigines of Australia
• African Tribes

1. Customs govern the economic decisions that are made.
2. Farming, hunting and gathering are done the same way as the generation before.
3. Economic activities are centered around the family or ethnic unit.
4. Men and women are given different economic roles and tasks.
5. If exchange is necessary, barter system will be used.
6. Occupation will be inherited from father to son. That means a farmer’s son would be a farmer while a hunter’s son should be a hunter.

Advantages

• People have specific roles;
• Security in the way things are done

Disadvantages

• Technology is not used
• Difficult to improve