Why Buy Local?

From Warren C. Gibson of The Freeman. Warren Gibson teaches engineering at Santa Clara University and economics at San Jose State University.

"Why did Safeway have to ruin a perfectly pleasant shopping trip?

I like my local Safeway grocery store a lot. (I can even get sardines at midnight.) But while I was enjoying my regular routine, appreciating the quality and variety of groceries, an annoying announcement came on over the sound system touting their “locally grown” produce section. We should buy stuff from that section, they said, because doing so “helps our local community.”

I understand that Safeway and its competitors do such promotions because they think it will be good for business, as it may well be. There’s nothing wrong with that. But let’s see if we can make sense of their claim about helping the local community.

To begin with, only individuals can be helped or hurt. Unless the store’s claim is that every individual within a certain radius of its location is helped, it makes no sense to talk of “the community.” We need to sort out which individuals are helped or hurt when we “buy local.”

Why ask for help?

The reason must be that they can’t compete with bigger firms on price, quality, or both. That’s likely, because they lack economies of scale. The burden of fixed costs weighs heavier on small farms, per unit of production.

Another possibility is the cost of water, a big deal in California these days. But whatever the underlying reasons, local farmers must come up short on price, quality, or both, or they wouldn’t need help.

Why offer help?

The next question is why they deserve help. If I patronize my neighbor’s children’s lemonade stand, a desire to help is foremost in my mind, not the lemonade per se. The same is likely true of people who want to buy locally grown produce. They want to help local growers because they see them as neighbors, although in my area the nearest farms are 30 miles away.

People are entitled to hold romantic notions about local growers. But they should ask themselves the next question: What are the costs? They should heed Frédéric Bastiat’s injunction to pay attention to what is unseen, not just what is seen. Business shifted toward local growers is taken away from larger, more efficient firms. The result is an overall decline in economic efficiency as resources are shifted from more efficient suppliers to less efficient local growers.

Many people view these large firms as faceless and vaguely sinister corporations. But the managers and stockholders and employees of these firms are people, too. They have faces and they are somebody’s neighbors. And this is just as true for growers in the developing world as it is for domestic suppliers. The same goes for the vast network of vendors who deal with the large produce firms.

Hampered food markets

A further question to ask is whether there are government interventions that play a role here. Large firms often wield a lot of lobbying power, which they use to gain special favors. The solution to this problem is not to buy locally but to remove the regulatory strictures that are the root of corporate rent seeking.

Zoning restrictions sometimes play a role. I live in a heavily built-up area, but vast areas of the coastal side of my county are devoted to agriculture because zoning laws forbid landowners from using their land for anything else. Its most productive use would likely be housing. The best way to help the local growers in this case would be to remove the zoning restrictions so they can get out of agriculture.

Hard sell

Government interventions aside, my story is a metaphor for the parochial thinking that makes international free trade, a notion supported by the vast majority of economists, such a hard sell. We tend to be suspicious of foreigners and biased in favor of our neighbors. We see losses when foreign competitors underbid local suppliers but fail to see the more-than-offsetting benefits of better, cheaper imports because those benefits are widely dispersed. And curtailing of free trade intensifies jingoism and even military conflict.

Supper at our house tonight will feature fresh packaged lettuce from a subsidiary of Chiquita Brands, Inc., a large multinational firm. The lettuce might have come from 75 miles away but it could also be from one of their farms in Mexico or Ohio or Arizona. Next time I’m in Safeway, I’ll look at what their local competitors offer, but unless I see better value for my money, I’ll stick with Chiquita."