- demonstrate that paying a non-local business money in exchange for a good or service does not mean those dollars you pay are "lost" to the local community.
- The reason is that every dollar spent on an import into the local economy results in a dollar coming back in the form of an export from the local economy.
- If this were not true, then the local community would eventually run out of currency or acquire all the currency in the world.
In an ideal world, everything you consume would be produced locally—that is what the U.S. Secretary of Agriculture said in 2010. If this "ideal world" arrives, I hope small-town folks don't want high-definition televisions.1
Boone Pickens wants us to shun foreign oil and run cars on natural gas instead. We should do this, he says, because, "Over 700 billion dollars are leaving this country to foreign nations every year...[and is] The largest transfer of wealth in the history of mankind."2 He is wrong. That 700 billion dollars returns to the U.S. in the form of exports. No wealth is lost.
North Carolina State University tells us to buy local food so that we can, "build North Carolina's local food economy by joining the campaign and encouraging your family, friends and neighbors to do the same."3 What the statement doesn't say is that abstaining from trade with other regions (when such trade is possible) reduces North Carolina's wealth, even if it helps certain North Carolina farmers. Paying more money for the same food that happens to be produced locally is a subsidy, not an economic stimulus.
The locavore movement seems everywhere and is consistently marketed as an economic stimulus. There is even a movie about it. Because it is really the opposite of a stimulus, and because that claim may not be obvious to you, understanding this article is important for our the well-being of ourselves and others.
What if you were told that you support your community regardless of whether you buy local or non-local food? If you pay a dollar for local food, it stays local. If you pay a dollar to a non-local person for food, that dollar comes back to your community. So long as people are free to buy and sell where they like, the exports from a region always equals the imports. This has been known since the eighteenth century, when the relation was first discovered by Scottish Philosopher David Hume. This is a counter-intuitive result, I admit, so I have prepared a relatively short video to both motivate the topic and illustrate the fact that exports always equals imports.
First a quick proof can be offerred. Suppose trade did not balance, in that exports (number of dollars flowing into the economy) did not equal imports (number of dollars flowing out of the economy). It would then be true that every year one region is gaining dollar bills and one region is losing dollar bills. If this persisted, one region would eventually have all the dollar bills and one region would have none. Never do we see one region carting dollar bills around in wheelbarrows and another region without any dollars to spend (this is metaphorical, as the dollars could be electronic, in banking accounts).
What keeps this from happening? The answer is: consumers prefering to buy at lower prices and producers preferring to sell at high prices. Consider the table below where a quick story of trade between Kansas and Nebraska is told, illustrating exports always equals imports.
| Nebraska (NE) | Kansas (KS) | |
| at first | NE exports but doesn't import | KS imports but doesn't export |
| which means | dollars enter NE, no dollars leave NE | dollars leave KS, no dollars enter KS |
| which means | prices in NE rise | prices in KS fall |
| because | NE has more dollars | KS has less dollars |
| which causes | NE consumers see lower prices in KS | KS producers see higher prices in NE |
| and then | NE consumers to go buy stuff in KS | KS producers to go sell stuff in NE |
| which means | NE imports again, dollars leave NE | KS exports again, dollars enter KS |
| and exports again equal imports | ||
Note: this illustration assumes both economies are in equilibrium, which means we are looking at the economies over a long time period. |
||
Because exports must always equal imports, anytime you spend money non-locally that money returns to your local economy in the form of an export. Is this confusing? I found found people do have a hard time understanding this argument, but I have also found that no economist has ever debunked it, and hopefully the video below will provide further help.
Given exports always equal imports, the wealth of a region will depend on the amount of goods and services consumers are able to purchase. Deliberately paying more money for the same quality product that happens to be produced locally means there is less money left for other things. This is reduction in wealth, and unless local food is purchased because it is cheaper or higher quality, the local food movement can only reduce the wealth of the community. For more information on how trade increases wealth, see this Seeds article.
Being an economist requires you to rain on people's parade, and yes, I am going to argue that locally produced food may use more fossil fuels than food produced thousands of miles a way. There is a lot more going on than just the number of miles from farm to consumer. Fossil fuel use at the farm matters, and the more efficient a farm the less fossil fuels it would use. I expect sheep production in New Zealand is more efficient than sheep production in Mississippi, and perhaps better for the environment. For the environment's sake, we may with to import some foods from thousands of miles away.
To help you think through these issues, a short instructional video is below. The theme of the video is that one cannot say whether local or non-local food entails more fossil fuel use, and it will vary across location and food type. Hence, if you really want to curb fossil fuels, don't target it indirectly by becoming a locavore. You may end up harming the environment.
(1) The Washington Post. February 11, 2009. "Tom Vilsack, The New Face of Agriculture." Accessed September 3, 2012 at http://www.washingtonpost.com/wp-dyn/content/story/2009/02/10/ST2009021002624.html
(2) T. Boone Pickens TV Commercial. YouTube.com. Video sponsored by Boone Pickens to promote the Pickens Plan. Accessed April 14, 2012 at http://www.youtube.com/watch?v=R2bOug1d20c.
(3) The 10% Campaign. Center for Environmental Farming Systems. North Carolina State University. Accessed April 14, 2012 at http://www.cefs.ncsu.edu/whatwedo/foodsystems/10percent.html.
See this article I cowrote for the Library of Economics and Liberty: The Locavore's Dilemma: Why Pineapples Shouldn't Be Grown in North Dakota.
Bestselling author Michael Pollan once recommended requiring school lunches include a portion of food grown within 100 miles of school. What are the negative consequences that could result from such a decree? Are there better ways of achieving the assumed goals of such a policy?
- As the videos in this article show, it cannot help but will instead harm the local economy.
- Also, this article showed how this shift towards local foods could increase fossil fuel use and harm the environment.
- Many regions cannot grow fresh fruits and vegetables, or can only do so for parts of the year. Such a limitation on school lunch providers is likely to decrease the food variety offered to students, and it is easy to envision this limitation making it harder to provide healthy foods.
- Having to divert part of the school food budget towards local foods will increase the cost of food acquisition, which means there is less money available to spend on fresh fruits and vegetables. Again, this could result in less healthy food in cafeterias.
- If what you want is healthier lunches in schools, pass laws requiring healthier foods and/or give the schools more money to buy healthy foods. Then, let the school system determine how that money should be spent for the benefit of the kids. I can assure they know better than politicians, and especially book authors. If better food for kids is what you want, why pursue it indirectly through local foods?
