Sunday, January 04, 2015

The Twisted Economics of Local Food

There was recently a really good article from Real Clear Politics requiring the fad/trend of buying local, 'Buying Local' is Really Bad Economics:

"Today, champions of the buy local movement often follow the same faulty economic reasoning: nobody wins unless somebody loses and "I'd rather have the person who looks like me, lives by me, and talks like me win, so I'm going to buy from him." What's sad about this thinking isn't just that it draws arbitrary moral distinctions between humans based on physical traits and location, but it undermines the openness to trade and commercial interaction that has made so many people better off."

The law of comparative advantage implies that things should be produced by those that can produce it with the lowest opportunity cost. For food this might imply utilizing more efficient and environmentally sustainable supply chains (created by companies like ADM, Cargill, Wal-Mart, CSXetc.). But economics also requires us to consider all benefits of a transaction, so even if a local product might have a higher price tag, or be more resource intensive to produce, it might have some unique intrinsic value (like the superior taste of a local beer) that outweighs these other concerns. The article itself is controversial because it implies that sometimes the 'intrinsic' value of buying local for the sake of buying local (a fad) can take on an elitist tone, impoverishing disadvantaged workers (often different races and cultures) in developing countries, and possibly impose greater costs to the environment just to satisfy the fad tastes and preferences of wealthy middle class Americans.

Environmentalists and social justice advocates are quick to condemn red meat or SUVs or other aspects of Western culture and consumerism, but some how give the 'buying local' movement a free pass. In fact, some even bend over backwards to argue that buying local is even actually better for the environment and promotes social justice, eliminates food deserts and makes healthy foods more affordable etc. Based on similar arguments, governments and school systems even utilize taxpayer dollars to source local food, or pass laws that promote consumption. That's pretty twisted economics.

But be clear, there is nothing wrong about having preferences toward local food or products. Economics has nothing to say about interpersonal comparisons of utility, and economists view each person as being the best arbiter of what's best for themselves. I have the opinion that the market will coordinate everyone's behavior to provide the optimal level of whatever types of food options individuals prefer, and local food certainly has a niche to fill. That's why I feel no sense of hypocrisy when I frequent the local farmer's market sporting a Monsanto cap. And, my favorite restaurants are local businesses that often source local produce and meats. If I had the time and resources, I might even start a beef operation that sources local beef to such places. But I would be in the wrong to force others to indulge my preferences through subsidies, taxes, or regulations. 

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