One of the most compelling economic myths is that of “buy local.” On its face it seems a rather compelling argument: spending money locally keeps local businesses going and keeps that money in the community. Such a policy is easy to praise because we see the positive effects, but what we don’t see (the “unseen” harm referred to by Bastiat) is the sales that did not go somewhere else… and those sales result in less income for “non-locals” by which they can come and buy “local” from us. So, there might be a small temporary uptick in the local economy, but eventually equilibrium is restored. The root of this myth is predicated on a jingoistic guilt trip. The “localness” of a business is elevated to being the sole consideration in one’s buying decisions (e.g. “buy “American” not because it’s the best, but because, well,it’s your patriotic duty!”).
The jingoism argument is that people should buy only goods and services sold within that community. The problem is that “community” is a completely arbitrary distinction. For example, we are told we should “buy American” because it’s good for America. But then we’re told we should buy“Georgian” because it’s good for the state. Then we’re told we should strive to buy “Morgan” because it’s good for the county. Then we’re told we should buy“Madison” because it’s good for the city. So, if we follow this argument to its logical conclusion, then we should then further strive to only buy goods from people that live in our neighborhood, right? And one step further would mean we should only buy goods made by our family members. And finally, finally, the best would naturally be if we only did everything for ourselves. Crazy result,right? This is why it is important that if you are going to make an argument,you understand the logic of the argument and test all scenarios using that logic. If the outcome is deleterious at the end of the logic chain then it must be deleterious along the chain.
You can’t be “buy American” and “buy Georgian” at the same time. Buying from Idaho would be buying American but not buying Georgian, so clearly you can’t buy from Idaho. Oh, right it’s ok to buy “non-locally” if whatever you want isn’t made “locally”. So, if it is sold in Alabama and Georgia, then the more desirable path is to buy from Georgia? Unfortunately this argument presupposes an impossible world. It assumes a world where Business A in Alabama and Business G in Georgia make absolutely identical products, provide an identical level of service and provide identical pricing(free shipping). If every metric of the two businesses were absolutely identical then there’s no upside or downside to buying local. The outcome is neutral because in this hypothetical Utopian scenario it also means an Alabama resident has no more impetus to buy local or from Georgia than does the Georgia resident. But, since there has never been and will never be identical businesses competing, we should make our buying decisions not on an arbitrary metric like geographical coordinates, but rather on differences in what or how something is being sold. Choose based on quality, service, or price, not on arbitrary characteristics.
Exhortations to purchase based solely on arbitrary traits of the business (location, gender, race, religion, etc.) are actually discrimination. It is just as discriminating to choose to only associate with others because of an arbitrary trait as it is to choose to not associate because of that trait. And while I will defend one’s right to associate as they see fit, I also have an obligation to point out the flaws in the arguments made to support those decisions. If a “local” business is so uncompetitive that the only way it can gain sales is to participate in jingoistic appeals, then perhaps it should go out of business to make room for the next guy who can sell a product so good nobody cares about where it’s located.
FOLLOWUP – I received a Letter to the Editor on this column in the Morgan County Citizen which you can see here. Here is my response:
In response to Joe Houston: I am puzzled. You claim to disagree with my editorial and yet offer no argument (other than dismissive phrases) to specific points raised. Your attempt at refutation is to merely cite positive economic effects as though they are the direct result of “buy local” when in fact they are the result of increased sales. “Buy local” followed to its logical conclusion in all communities cannot increase sales. If you gain $100 in new local sales but lose $100 in non-local sales (because the non-locals are now buying in their local community) what have you gained? The laudable effects outlined in your letter can be achieved through growth based on competition and not on illusory gains dependent on appeals to loyalty. Don’t misunderstand: I’m not saying to NOT buy local, but rather that buying decisions should be based on price, service or convenience and not SOLELY on arbitrary distinctions like geographical coordinates.