It's become something of a fad to advocate for the exclusive purchase of local goods when possible. It's easy to see why this idea is popular people naturally favor things that are close to home. Economically, this idea appears to make a lot of sense, as well, because if local businesses receive your money rather than national or foreign businesses, the local business owners will in turn spend their money locally. Friends and family living nearby benefit from the increased economic livelihood everyone's a winner, except for the multinational business whose products you refused. It's even good for the environment, many supporters say.
However, it's important to think about why you even have to convince people to buy local. Local products tend to be more expensive than those produced by large companies. This implies that the production costs for locally made goods are higher than those for nationally made goods, meaning that their business is less efficient. This can be for many reasons including higher local wages and prices, higher input costs and lack of economies of scale. Regardless, it means that assuming the quality of the products produced by local businesses and large companies is the same, the economy is wasting resources by allocating funds to these less efficient enterprises.
Consider an auto worker with a broken computer. He works an eight-hour shift and makes $20 per hour in the factory but could take the day off to fix his computer instead. He reasons that it makes more sense to pay a local computer specialist $100 to fix his machine because he can spend his time more profitably building cars instead. The situation of the auto worker in this case is analogous to the situation of a community, region or nation. Because some people and places are better at producing certain products than others, it makes sense for people, localities and even countries to collectively specialize in doing what they do best. If a town can either make $2 million worth of shoes or grow $1 million worth of corn, it makes sense for that town to make shoes instead.
Advocates of local farming initiatives would say that it makes more sense for that community to spend its time growing enough corn for itself, rather than buying food from farmers in the next town over. However, that community must spend less time making shoes and as a result, its total product is of less monetary value; in other words, the community has become poorer since some of its residents decided to devote their time to growing crops.
The same advocates would argue that making purchases from local business is more environmentally friendly than buying from businesses far away because doing so cuts down on transportation distances, and thus reduces greenhouse gas emissions. However, in the case of organic farming, local farmers tend to use more land to produce their product than standard agribusiness farms; one could hardly say that using more land is environmentally friendly. That doesn't do any favors for the transportation-related argument, either when local farms eat up more land, people have to drive farther to carry out everyday tasks, increasing greenhouse gas emissions.
There are, of course, legitimate reasons to buy more expensive local products instead of brand-name ones. The best of these is that they actually offer you a better product local restaurants are, quite often, vastly superior to national chains in terms of quality, and fresh local produce may very well taste better (though a Stanford University study suggests it's not necessarily any better for you). Maybe you don't necessarily like Dirt Cowboy any more than Starbucks, but go there because your friend works there, or because the workers there make more money and that's a cause you support or both. These are all perfectly sensible economic reasons to buy local. But don't buy from local business out of some sense of economic self-righteousness you're only helping perpetuate less efficient business, making the local and national economy poorer as a result.
