A traditional economy is a system in which history traditions, customs and beliefs based in long lasting experience, drive economic choices and activities such as production or distribution. Traditional economies are based on subsistence activities: agriculture, animal husbandry, hunting, fishing, etc. Nowadays this system can be found in developing countries with emerging economies. Traditional economies are considered the starting point of all economies. At some moment, when certain conditions are met, development will be triggered, which means that there will be a transition from this kind of economy to a modern one.
Advantages
Usually in traditional economies there are no conflicts between their agents, as they all share in common the same traditions and beliefs that guide the economy. They also know perfectly what they can obtain and they do not rebel if the results are bad because they trust in this traditional mechanisms that have properly conducted their socities for centuries. Moreover, these economies are usually small and not harmful for the environment.
Disadvantages
Traditional economies can be severely affected by natural conditions, such as weather. Weather can determine whether the harvests are good or not, and if the answer is no this can lead to lack of food and people dying for starvation. Hence, there is a limit on population growth in these economies, as there is only the amount of people that their production systems can feed. Moreover, they are badly affected by more modern economies from developed countries that consume the raw materials on which traditional economies depend.