√ Definition of Traditional Economic System, History & Characteristics (Complete)
Definition of Traditional Economic System, History & Characteristics (Complete) – In this discussion we will explain about the traditional economic system. Which includes the understanding of the traditional economic system, the history of the traditional economic system, the characteristics of the system traditional economics, the advantages and disadvantages of the traditional economic system with complete and easy discussion understood.
Definition of Traditional Economic System, History & Characteristics (Complete)
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Definition of Traditional Economic System
The traditional economic system is an economic system in which economic activity is carried out as the goal is to meet the needs of life using habits or traditions passed down from generation to generation previously. Conceptually, the traditional economic system is an economic system based on customary traditions and customs.
In the traditional economic system, important sources of the economy that are the mainstay are natural products and the family acting as a producer as well as a consumer or in another language the family tries to achieve its needs Alone.
The traditional economic system is run simply because it only has natural capital and labor with the payment system used is by barter (exchange of goods). In the traditional economic system, the people behave as producers and consumers at the same time, because to obtain goods they have to produce other goods to be exchanged.
The government's role in the traditional economic system is only as a guardian of public order and is not directly involved in ongoing economic activity.
This kind of economic system is rarely applied, only a small number of countries adhere to it this traditional economic system, as in some countries in Central Africa, some countries in Oceania.
History of Traditional Economic Systems
The traditional economic system may have existed since human ad, but initially each human only consumed the goods they produced themselves, so they were not involved with someone or another group and do not recognize the barter system, maybe because of reason and ideas and also the needs that continue to increase with the development era.
Humans felt a shortage with the system used at that time, then a barter system appeared which was considered able to fulfill it other needs that cannot be produced by themselves, such as fishermen exchanging the caught fish for rice from farmers. This system is called the Traditional Economic System.
Over time, this system continues to be used and passed on to the next generation. But now it's rare for us to find traditional economic systems around us. This is because human development creates a new system that is felt to be more effective and efficient, causing the traditional economic system to be abandoned. Today this system can be found in rural communities in developing countries.
Characteristics of a Traditional Economic System
There are characteristics or characteristics of the traditional economic system, namely:
- There is no or there is no clear division of labor in the community
- Production results and product distribution systems are formed from habits or traditions
- The type of production is adjusted to the needs of each household
- Fulfillment of needs is done by barter system or exchange of goods
- Community life is kinship
- Land and nature are sources of life and sources of prosperity.
Advantages of the Traditional Economic System
There are advantages of the traditional economic system, namely as follows:
- The bonds between individuals and the sense of kinship in society are very strong.
- There is equal distribution of income, so that the social class gap between rich and poor is not visible
- Economic activity is based on honesty, not profit-seeking, so there are no fraudulent parties in the economic activity
- There is no market monopoly by the government because the government is not directly involved in the economic system, free from economic problems such as inflation, unemployment and others.
Disadvantages of Traditional Economic Systems
In addition to the advantages, there are also disadvantages of the traditional economic system, namely:
- Economic growth is so slow because it is very dependent on nature, so production results will be limited, so that not all community needs can be met.
- There is no standard value in exchanging an item
- Competition that is not tight makes the quality of goods lower and difficult to develop
- The mindset of the people is not developing because change is considered taboo.
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