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Questions to someone with more economics knowledge than me: I understand the sentiment and intuitive reasoning behind this argument (I find myself thinking it

Questions to someone with more economics knowledge than me: I understand the sentiment and intuitive reasoning behind this argument (I find myself thinking it every week when I go to the local farmers' market!), but is there evidence that "buying local" actually increases the local standard of living? And a followup: if it does increase the local standard of living, would this behavior, if duplicated in all communities in the world, increase the average standard of living in the world? Some conflicting (and probably all wrong) intuitions I have for different sides of these questions: Pro local: The notion of keeping money circulating locally makes sense. If money is a sort of proxy for productivity, then money leaving the community is productivity leaving the community. Anti local: If I pay more for Local Larry's eggs and Down-the-road Dave's cabbage (etc.), then to maintain my standard of living at a constant level, I have to charge more for whatever service I provide the community. And recursively, everyone else has to as well. It seems like, at best, we just wind up at the same standard of living we started at (and at worst, lower). Pro local: If money is a proxy for productivity, and buying non-local means trading productivity to some large corporation in exchange for some good or service, and that corporation will disproportionately funnel that money to the already-wealthy who can afford to save that money (productivity) for a rainy day, then we have effectively contributed to removing productivity from the economy.

kuschku 9y ago
A good argument is the question what happens with the money. For example, assume Facebook replaces a local competitor. Now instead of the profit going to owners, which spend it locally, on philanthropic projects, or just high quality goods, instead it goes to Mark Zuckerberg, who spends it in the US, on US brands, and to fund US charities, in best case. If you currently live outside the US, outside SV and NYC, you’d very likely gain an advantage if everyone would buy local. The skyscrapers of NYC, and the philanthropic projects in these regions of the US, are funded with money that was extracted all over the globe, but will probably never leave the US again.
- mseebach 9y ago
  You need to see a layer deeper than that. The opportunity cost of the tens of thousands of highly qualifies engineers required to build and run dozens of national/regional Facebooks rather than doing something else is absolutely huge.
  - icebraining 9y ago
    Free software can help with that. In my past two jobs, I've worked with a business platform which we adapt for our clients by developing custom modules, and there's a decent community of small companies from over the world which sell mostly to their internal markets but share modules under Free licenses. Of course, nobody is getting rich from this, but there are many of us making a very decent living.
    - mseebach 9y ago
      It's not about that. It's about choosing not to use an existing, appropriate solution because it is not being developed and run locally. There can be valid regulatory or security reasons to choose that, I'm only considering the "keeping money local" argument.
      - icebraining 9y ago
        My point is that you can keep money local without having to develop everything locally.
mseebach 9y ago
It only intuitively makes sense -- there are quite a few assumptions. The local product is typically more expensive because it's production is less efficient (if it wasn't, it would just compete with the non-local product at regular market conditions). Being less efficient means using more inputs per output, so what is the local farmers inputs, and -- crucially -- where are those inputs made? Is he using his not-locally-made tractor less efficiently? Is he paying a mortgage to a non-local financial institution? Is he sourcing his feed, seeds, fertilizer, fuel etc locally? And of his profit, how much of it is he spending locally? These are difficult numbers to work out exactly, but it's not difficult to see that they have to be in a pretty thigh range for your local-premium to actually, on the net, drain resources from the community, compared to you just eating cheaper meals a bit more frequently. The main type of input that most obviously support the local community is labor, and most modern products, particularly agriculturally, are rather light on labor, so you might end up supporting one job at the farm in favor of three jobs at the diner. Especially if the farm-job is held by a "highly educated, ex-urban, first-time farmer" and the diner-jobs by single moms, it's getting morally quite dubious. But to wrap this up, local to non-local is rarely apples to apples. Just as with organic, there's probably a very substantial overlap with meeting a demand for products that are simply better (and thus more expensive), with the nominal quality (local, organic) actually being secondary.
- jcbrand 9y ago
  > The local product is typically more expensive because it's production is less efficient I agree with the gist of what you're saying, but I think you're leaving out some details. We know that other non-local products can be made cheaper because they are in localities that are lax on labor laws and environmental protection. So the notion that it's simply about efficiency is in my opinion a bit reductionistic. As an example, to make my point... I would use a different word than "efficiency" to describe someone who uses slave-labor to push costs down. So when buying local, at least you know which standards the producers are held to. It's the same with Bio/Organic/Free-trade products.
  - mseebach 9y ago
    For the purposes of this discussion, tax is a cost like any other, and subject to the same considerations: Where and on what is that money then spent? If it's spent on a Halliburton-produced armoured vehicle for the local police departments war on drugs, you and the community are probably better off buying non-local from a low-tax locality.
deleted 9y ago
[deleted]
whytaka 9y ago
Gains from trade is maximized when traders specialize in their most productive work. When profit is reinvested, it raises the standard of living. - Econ 101 If for any reason, you truly value your neighbourhood chicken farmer Bob's livelihood though, there's no better means of buying Bob's well-being than giving money straight to Bob. You would have to reimagine the idea of "a high standard of living" to include the comfort of knowing that Bob's well-being is sustained. Of course it would be at the cost of excluding the welfare of people outside of your monkeysphere.
- koverstreet 9y ago
  You might be taking spherical cows too far.
  - whytaka 9y ago
    I don't know what you mean.
    - jacobush 9y ago
      You are over-simplifying, he says.
- tspike 9y ago
  Negative externalities are rarely fully accounted for with this model. If you ignore the non monetary impacts, specialization wins every time.
sliverstorm 9y ago
Pro-local: attempts to directly avoid problems of trade imbalance and wealth sequestration in imperfect markets Anti-local: a perfectly functioning market doesn't have those problems It's basically protectionism with all the same arguments for and against. Less economically optimal, but protects you from market malfunction and bad actors.
icc97 9y ago
There's quite a lot of economics behind this for local currencies e.g. The Brixton Pound [0]. The number of times that currency gets re-used (keeps flowing in the system) is very important, that is the person you pay, uses that to pay for something else locally rather than just sticking it in their bank or sending it overseas. Susan Steed, one of the co-founders of the Brixton Pound explains a bit more in this TEDx video [1] [0]: http://brixtonpound.org/ http://brixtonpound.org/ [1]: https://youtu.be/l_F0xBABI7c?t=7m6s https://youtu.be/l_F0xBABI7c?t=7m6s

kuschku 9y ago

A good argument is the question what happens with the money. For example, assume Facebook replaces a local competitor. Now instead of the profit going to owners, which spend it locally, on philanthropic projects, or just high quality goods, instead it goes to Mark Zuckerberg, who spends it in the US, on US brands, and to fund US charities, in best case. If you currently live outside the US, outside SV and NYC, you’d very likely gain an advantage if everyone would buy local. The skyscrapers of NYC, and the philanthropic projects in these regions of the US, are funded with money that was extracted all over the globe, but will probably never leave the US again.

mseebach 9y ago
You need to see a layer deeper than that. The opportunity cost of the tens of thousands of highly qualifies engineers required to build and run dozens of national/regional Facebooks rather than doing something else is absolutely huge.
- icebraining 9y ago
  Free software can help with that. In my past two jobs, I've worked with a business platform which we adapt for our clients by developing custom modules, and there's a decent community of small companies from over the world which sell mostly to their internal markets but share modules under Free licenses. Of course, nobody is getting rich from this, but there are many of us making a very decent living.
  - mseebach 9y ago
    It's not about that. It's about choosing not to use an existing, appropriate solution because it is not being developed and run locally. There can be valid regulatory or security reasons to choose that, I'm only considering the "keeping money local" argument.
    - icebraining 9y ago
      My point is that you can keep money local without having to develop everything locally.

mseebach 9y ago

It only intuitively makes sense -- there are quite a few assumptions. The local product is typically more expensive because it's production is less efficient (if it wasn't, it would just compete with the non-local product at regular market conditions). Being less efficient means using more inputs per output, so what is the local farmers inputs, and -- crucially -- where are those inputs made? Is he using his not-locally-made tractor less efficiently? Is he paying a mortgage to a non-local financial institution? Is he sourcing his feed, seeds, fertilizer, fuel etc locally? And of his profit, how much of it is he spending locally? These are difficult numbers to work out exactly, but it's not difficult to see that they have to be in a pretty thigh range for your local-premium to actually, on the net, drain resources from the community, compared to you just eating cheaper meals a bit more frequently. The main type of input that most obviously support the local community is labor, and most modern products, particularly agriculturally, are rather light on labor, so you might end up supporting one job at the farm in favor of three jobs at the diner. Especially if the farm-job is held by a "highly educated, ex-urban, first-time farmer" and the diner-jobs by single moms, it's getting morally quite dubious. But to wrap this up, local to non-local is rarely apples to apples. Just as with organic, there's probably a very substantial overlap with meeting a demand for products that are simply better (and thus more expensive), with the nominal quality (local, organic) actually being secondary.

jcbrand 9y ago
> The local product is typically more expensive because it's production is less efficient I agree with the gist of what you're saying, but I think you're leaving out some details. We know that other non-local products can be made cheaper because they are in localities that are lax on labor laws and environmental protection. So the notion that it's simply about efficiency is in my opinion a bit reductionistic. As an example, to make my point... I would use a different word than "efficiency" to describe someone who uses slave-labor to push costs down. So when buying local, at least you know which standards the producers are held to. It's the same with Bio/Organic/Free-trade products.
- mseebach 9y ago
  For the purposes of this discussion, tax is a cost like any other, and subject to the same considerations: Where and on what is that money then spent? If it's spent on a Halliburton-produced armoured vehicle for the local police departments war on drugs, you and the community are probably better off buying non-local from a low-tax locality.

deleted 9y ago

[deleted]

whytaka 9y ago

Gains from trade is maximized when traders specialize in their most productive work. When profit is reinvested, it raises the standard of living. - Econ 101 If for any reason, you truly value your neighbourhood chicken farmer Bob's livelihood though, there's no better means of buying Bob's well-being than giving money straight to Bob. You would have to reimagine the idea of "a high standard of living" to include the comfort of knowing that Bob's well-being is sustained. Of course it would be at the cost of excluding the welfare of people outside of your monkeysphere.

koverstreet 9y ago
You might be taking spherical cows too far.
- whytaka 9y ago
  I don't know what you mean.
  - jacobush 9y ago
    You are over-simplifying, he says.
tspike 9y ago
Negative externalities are rarely fully accounted for with this model. If you ignore the non monetary impacts, specialization wins every time.

sliverstorm 9y ago

Pro-local: attempts to directly avoid problems of trade imbalance and wealth sequestration in imperfect markets Anti-local: a perfectly functioning market doesn't have those problems It's basically protectionism with all the same arguments for and against. Less economically optimal, but protects you from market malfunction and bad actors.

icc97 9y ago

There's quite a lot of economics behind this for local currencies e.g. The Brixton Pound [0]. The number of times that currency gets re-used (keeps flowing in the system) is very important, that is the person you pay, uses that to pay for something else locally rather than just sticking it in their bank or sending it overseas. Susan Steed, one of the co-founders of the Brixton Pound explains a bit more in this TEDx video [1] [0]: http://brixtonpound.org/ http://brixtonpound.org/ [1]: https://youtu.be/l_F0xBABI7c?t=7m6s https://youtu.be/l_F0xBABI7c?t=7m6s