a traditional economic system focuses exclusively on goods and services that are directly related to its beliefs, customs, and traditions. it relies heavily on individuals and doesn’t usually show a significant degree of specialization and division of labor. in other words, traditional economic systems are the most basic and ancient type of economies.
large parts of the world still qualify as traditional economies, primarily rural areas of second- or third-world countries, where most economic activity revolves around farming and other traditional activities. these economies often suffer from a lack of resources. either because those resources don’t naturally occur in the region or because other, more powerful economies restrict access to them.
hence, traditional economies are usually not capable of generating the same amount of output or surplus that other types of economies can produce. however, the relatively primitive processes are often much more sustainable, and the low output results in much less waste than we see in any command, market, or mixed economy.
command economic system
a command economic system is characterized by a dominant centralized power (usually the government) that controls a large part of all economic activity. this type of economy is most commonly found in communist countries. it is sometimes also referred to as a planned economic system because most production decisions are made by the government (i.e., planned), and there is no free market at play.
economies that have access to large amounts of valuable resources are especially prone to establish a command economic system. in those cases, the government steps in to regulate the resources and most processes surrounding them. in practice, the centralized control aspect usually only covers the most valuable resources within the economy (e.g., oil, gold). other parts, such as agriculture are often left to be regulated by the general population.
a command economic system can work well in theory, as long as the government uses its power in the best interest of society. however, this is, unfortunately, not always the case. in addition to that, command economies are less flexible than the other systems and react slower to changes, because of their centralized nature.
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