David Nicklaus on “Buy Local”
Illinois produces corn for the rest of the world, and Illinoisans buy vegetables and fruit from places like California and Mexico. That arrangement creates wealth for all sides — producers make the highest possible profits, and consumers buy at the lowest possible prices. Reversing the arrangement, therefore – growing more vegetables in Illinois and making Californians grow their own corn – would make all sides worse off.
Nicklaus sounds exasperated that this economic fallacy is being dressed up by advocates as a “stimulus.” But it’s not surprising, because the run-of-the-mill stimulus plans operate on much the same principle. They encourage production that wouldn’t have happened without a directive from the state, ignoring comparative advantage and the market’s precise timing. And when stimulus advocates predict huge gains in wealth, they leave out the loss of what all those resources would have been used for if the stimulus hadn’t interfered.
Some of the typical stimulus plans are better than the locavores’ schemes because they don’t take resources so far away from their ideal uses in a free market. Building a bridge may be expensive, but some people can use the bridge for its intended purpose. Building a greenhouse to grow bananas in Illinois is like planting dollars in the ground and hoping they’ll grow into tropical fruit. It’s waste without any redeeming qualities.