What Is a Custom-Based Economy?

A custom-based economy, also known as a traditional economy, is an economic system that is based on combinations of either agriculture, fishing, hunting or gathering. The economic system heavily relies on customs and tradition and may use a barter system instead of money.

As of 2015, a majority of custom-based economies are found in Third World countries, such as those located in Asia, Latin America and Africa. Societies operating in this type of economy appear to live in poverty, despite having their daily needs routinely met. Custom-based economies generally transition into market, mixed or command economies once they interact with the concept of cash.

A custom-based economy is generally transparent, as the distribution of traded resources is widely known. This type of economy is also more sustainable, as it causes less destruction to the environment compared to modern economic systems.

Communities operating in a custom-based economy are very vulnerable and sensitive to changes in the local and natural environment. Changes in weather or poor hunting results can cause the population to starve because of a lack of food. A custom-based economy is also more vulnerable in conflicts, as a market or command economic system generally has better resources for war.