Natural economy

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Natural economy is a type of economy in which money is not used in the transfer of resources among people. It is a system of allocating resources through direct bartering, entitlement by law, or sharing out according to traditional custom. In the more complex forms of natural economy, some goods may act as a referent for fair bartering, but generally currency plays only a small role in allocating resources. As a corollary, the majority of goods produced in a system of natural economy are not produced for the purpose of exchanging them, but for direct consumption by the producers (subsistence). As such, natural economies tend to be self-contained, where all the goods consumed are produced domestically.^[1]

The term has often been used in opposition to other forms of economy, most notably capitalism.^[1] Rosa Luxemburg believed that the destruction of the natural economy was a necessary condition for the development of capitalism.^[2] Karl Marx described the Inca Empire as a natural economy because it was both isolated and based around exchange rather than profit.^[3]

Other writers have used a more relative sense of natural economy. Belgian economic historian Henri Pirenne noted that medieval Europe has often been described as a natural economy despite the existence of money, since money played a much less significant role than in earlier or later periods.^[4]

References

^ ^a ^b Perrings, Charles (1985). "The Natural Economy Revisited". Economic Development and Cultural Change. 33 (4): 829–850. doi:10.1086/451497.
^ Luxemburg, Rosa (1951). The Accumulation of Capital. London: Routledge & Kegan Paul. p. 369.
^ Marx, Karl (1956). Capital, volume 2. Moscow: Progress Publishers. p. 67.
^ Pirenne, Henri (1936). Economic and Social History of Medieval Europe. London: Routledge & Kegan Paul. pp. 103–104.