What “Buy Local” Campaigns Get Wrong

The economic thinking behind “buy local” campaigns is typically terrible. One such example is the claim that a dollar “circulates more” when you spend it locally. The rate of circulation of a dollar doesn’t create any wealth. Try it out: circulate a dollar among a group of friends and feel your standard of living stay the same. In general, “buy local” activism commits the broken-window fallacy: ignoring opportunity costs. Spending more on the same product because it’s local means you can’t spend on other things that make you happy. And you are part of the local economy!

At e3ne.org, I have a longer critique of the fallacies behind “buy local” and “buy American” campaigns. An excerpt:

[I]magine that everyone bought local, all the time. Cars, airplanes, software, clothing, food… everything would have to be made and exchanged in the town where you live. What would happen to everyone’s standard of living? It would fall dramatically. (How many skilled airplane manufacturers does your town have?) The same principle applies at the national level, or any other geographic level you choose. If you buy everything within that circumscribed area and exclude everything outside it, your community will be worse off than it would be if it bought from any willing seller.

Now, that’s an extreme example, but it illustrates the principle. Some things are impossible to make locally (airplanes). Other things are difficult and costly to make locally (shipping and retailing of plastic bins). A few things will be most efficiently and affordably made locally, and you will want to buy them locally without having to be goaded into doing so – they’ll simply be the best products for the price. Goading your community into buying shoddier or more costly products just because they’re local or American or whatever just makes your community poorer.

Read more.

3 thoughts on “What “Buy Local” Campaigns Get Wrong

  1. I think that this description grossly mischaracterizes the efforts to buy locally. Buying locally is an effort to enhance the communities in which people live. It is an ethical choice to divert prosperity from those who have a ridiculously huge amount of wealth, often through legally and morally questionable methods, to neighbors and friends who may not. Anyone who lives in a community where the only immediately viable jobs are terrible transient minimum wage service positions in chain stores but then buys goods at Wal-Mart which has been shown to bribe its way into communities through disgusting collaborations with city officials is guilty of helping ruin their own neighborhood. Say what you want about being more expensive – of course I can spend absurd amounts of money on local goods but I can much more easily do that with big-box stores. Local produce in my farmers market is extremely LESS expensive – and extremely higher quality – than buying vegetables that were harvested too early and are bruised and damaged and flavorless in Wal-Mart. Wal-Mart actually has to throw away a ridiculous amount of its “fresh” food, because it is already basically spoiled before it’s purchased.

    But even though I do not hold back in judging people for buying from terrible large companies, it is still mostly the fault of GOVERNMENT that buying local is a challenge. Government colludes with huge businesses on a federal, state, and local level to make it as unfairly difficult for small producers to produce anything. If there were no taxes and no regulations, I could easily open a small business from home and have income from people right in my neighborhood, who would save time and gas compared to being obliterated with stinky marketing at Wal-Mart and spending time walking on their awful concrete floors. Everyone would benefit from more local trade, but that would only happen if government intervention and collusion stopped!

    1. If you’re buying locally because it’s the best product, that’s fine! But then you don’t need to browbeat people into buying locally, because they will do it naturally out of self-interest.

      If you want to help people in your community, that’s great. The best way to do that is to let them buy the best products at the best prices, and if they still need help, to give them cash. Why encourage your neighbor to make shoddy, expensive candles (for example) instead of working at the factory or, yes, at Wal-Mart? And if Wal-Mart doesn’t pay much, you can always supplement her salary with cash. You’ll still both be better off than if you buy her inferior candles as a way of trying to support her.

      By the way, local mom’n’pop retailers pay their workers less than big box chains: http://qz.com/309426/big-box-stores-pay-higher-wages-than-you-think/

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