The Babylonian economy was rooted in its agricultural production and extensive networks of trade. The Babylonian empire was situated in the Fertile Crescent, and as such, farmers were able to produce a surplus of food. Civilizations of the time in the area were building nation-states based on agricultural surplus and a mix of barter and precious metal–based trade. Food surpluses were stored and guarded by the King's military, and as such, the King maintained control over his subjects. Tax collectors were able to more easily extract taxes from subjects, as they grew crops like wheat and barley that were easy to count and demand a portion of. The Babylonian empire traded their surplus food stores with neighboring empires and nation-states and, in return, were able to import luxuries and raw materials that the region lacked. Babylonian artisans also traded along the well-established land and sea routes of the area, and loose and informal barter systems between artisans and small scale farmers were common.

The Babylonian empire is a potent example of how state-based hierarchies and thus, large-scale economies were often created through agriculture. As people became less nomadic and began farming, rulers gained control over surplus food. Standing armies were created who guarded the food stores and escorted traders along the trade routes. Empires created systems of brutal laws and used their enforcers to keep subjects in line, and subjects benefitted the empire by working to grow the food surpluses, create profitable crafts, or labor to build the actual infrastructure of the empire.

The Babylonians were very dependent on trade and agriculture. Their use of irrigation allowed them to enjoy a stable supply of water for crops in the Fertile Crescent. Babylon traded with kingdoms as far away as India. Trade took place via camel caravan or sailing vessels which were designed for the Mediterranean coastal trade.The Babylonian kings used their army to safeguard trade routes. The palace and temple were major centers of trade, and these two institutions also bought and sold goods. Private landowners were also involved in agricultural trade.

Babylonian kings used silver as a system of exchange, though a barter system was used most of the time. Kings set up a system of weights and measurements, and they used standardized weighting systems. One common tool of measurement looked like a stone duck—these appear in some museums today. The king could engage in price controls, but often the price of foodstuffs and commercial goods varied due to supply and demand.

Babylonian kings were known to pay ransoms when skilled artisans were kidnapped in wars. The Babylonian Empire benefited from having ready access to traders using the Nile and also the Middle East—this allowed the empire to enrich itself. Kings levied taxes in order to build infrastructure, temples, and armies. Soldiers were often used to guard trade routes. By focusing on trade and having a relatively large group of artisans, Babylon was able to use its economy to enrich its empire both culturally and politically.

The Babylonians had an agriculturally based economy. By being located in the Fertile Crescent with reliable water sources and a stratified society, this ancient civilization was able to produce enough food to feed themselves, plus extra for export. They traded extensively with the numerous city-states to their west that did not have as reliable sources of crops. A refined system of irrigation dikes and canals helped ensure that water was readily available to keep the agricultural system going. They also exported manufactured goods, such as household items, weapons, and jewelry. They imported large amounts of natural goods, such as timber and metals, as well as manufactured goods like ceramics.

To facilitate trade, the Babylonians developed a silver standard. They also built an extensive system of canals and roads to bring merchants in and out of their empire. They even had numerous fortified outposts to protect their trade interests from marauders.

Being at a crossroads between Egypt, Asia Minor, the Levant, the Indus River, and Phoenicia, the Babylonians were also well-situated on one of the world's greatest trade routes. Babylonia became a major trading hub, and merchants from all over the known world came there to trade. As a result, the Babylonian economy grew significantly.

The Babylonian economy relied on two principles:  agricultural surplus and trade.  The kingdom was very adept at controlling the waterways through irrigation and dyke systems.  The control of the rivers and the fertile river valleys allowed the Babylonians, in normal years, to have a healthy surplus of agricultural materials.  These materials ranged from fruits and vegetables to grains.  Food supplies were supplemented with animals like sheep and bovines.  Despite the agricultural surpluses that were created, the region lacked adequate resources to support a large kingdom.

With a lack of resources, the Babylonian economy relied on a strong trade network to supply materials that were lacking.  The Babylonians traded their surpluses of agricultural goods with far away lands, extending over 1,000 miles from the capital.  Goods such as copper, wood, gold, and manufactured items were supplied through trade.  These goods were utilized to make weapons as well as everyday items.