What's wrong with the "Buy Local" movement

As the Internet's home for criticism of the "Buy Local," I often find myself telling the same story over and over again.

There is a movement that promises communities wealth if they simply agree to restrict their purchases to local merchants. The argument is that this will encourage job growth within the community. In addition, the local merchants will spend that money again in the community, creating a cycle of wealth creation.

This idea, which I call "localism," sounds like a good common sense solution. Unfortunately, it defies a number of basic economic concepts. It is akin to mercantilism, only instead of restricting the economy to the nation, localists want to restrict them to the immediate community.

Wealth is created by efficient productivity and the gains from trade. As Adam Smith observed, it makes more sense for two nations to each specialize in separate industries and trade with one another. David Ricardo added the brilliant idea of comparative advantage, where people will work in industries where they are the most efficient as compared to others. This is the framework of modern economics.

The problem is not that localists have discovered a flaw in the economic framework and have moved past it. Instead, they are ignorant of the economic framework and make arguments that fail to acknowledge it exists.

Localists are willing to pay more for something, and produce something less efficiently, than they could get imported to them. They pay close attention to how much money the merchants are collecting, but they ignore how much money the customers are shelling out. The jobs that will be created will not be enough to offset the higher prices. You will end up with a community that has a lot of cash on hand, but the money will have very little buying power because of the price hikes.

By their logic you should ban all automated farm machinery - from tractors to harvesting equipment. You would indeed see more agriculture jobs. However, that is not a rational thing to do. The price of food would go up, jobs would be lost in other industries, and the standard of living would go down.

This is a very big subject, and you will find it approached from a lot of different angles. I started paying attention to this issue in early 2008 and was not swayed by the arguments. A simple Google search of the words "buy local" and "economist" turned up criticism from economists- not support. However, localists often treat their economic scheme like a religion and do not listen to heretics or scientists.

There are plenty of sources that criticize the environmental claims of localism, but I'm not aware of anyone else who is dedicated to exposing localism as an economic pseudoscience. There are other people making this claim, but not in an ongoing fashion. I welcome like-minded people to let me know they're out there.