How are economic decisions made in traditional economies?

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The phrase "traditional economy" usually refers to a society in which economic decisions are based primarily on custom or, as the name suggests, tradition. There are not very many traditional economies left in the world, and those that exist are very small in scale, usually having made a deliberate choice...

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The phrase "traditional economy" usually refers to a society in which economic decisions are based primarily on custom or, as the name suggests, tradition. There are not very many traditional economies left in the world, and those that exist are very small in scale, usually having made a deliberate choice to live as they do. Historically, traditional economies were hunter-gatherer societies. In these societies, economic decisions were not made by market principles of supply and demand nor by the state, which really does not exist in this kind of society. Rather, individuals simply did what their parents did—there were few options available. People farmed (though this should not be confused with large-scale intensive market-driven agriculture), hunted, raised animals, and gathered foodstuffs for subsistence. Economic exchanges took the form of barter rather than cash or credit transactions. Economic activity was managed by leaders or elders who made their decisions—allotting land and resources, settling disputes, and other functions—based on customs and traditions. Elders, chiefs, and other leaders were tasked with making decisions that benefited their people as a whole.

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     In a traditional economy there are two types of economic decisions being made and they often conflict.  There are governmental economic concerns which focus on the well being of the country infrastructure and economy. The other are public sector economics which include businesses and individuals. They can be sub divided into different categories but traditionally they are each after the same thing: more money. 

     Governmental economic decisions are based largely on the best outcome for the government. This includes governments often making loans or grants which are toxic, meaning the potential for a return is almost nonexistent. This is done when the danger of not making the decision would be a greater harm to the whole economy. For an example the bail out loans were made to the banks and auto industry. The loans were detrimental to the government coffers yet the resulting instability is an even greater danger. 

     Business economic decisions are generally made with the survival and profitability of the company in mind. Rarely will companies make decisions which intentionally harm them unless they needed to in order to save themselves. Downsizing can damage sales and hurt market share but allow the company to operate during a recession. However typically businesses will make decisions based strictly on the bottom line where profits rule the day. Companies will do cost analysis to determine if the decision makes economic sense. 

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