Buying Local

by Russ Roberts on April 5, 2007

in Podcast, Trade

In the latest EconTalk podcast, Mike Munger and I discuss the division of labor. On April 16th (with John Bogle on the 9th), Don (co-host here at the Cafe) and I discuss the virtues of "buying local," a topic closely related to the division of labor. But in the meanwhile, here is a magnificent illustration (HT: Tim and someone else, please forgive me) of how the division of labor and buying local intersect. It’s the story of a class project to produce a man’s suit using pieces produced within a 100-mile radius of home. Not quite local, but local enough. Wired reports on the result:

The suit took a team of 20 artisans several months to produce — 500
man-hours of work in total — and the finished product wears its rustic
origins on its sleeve.

Self-sufficiency is the road to poverty.

As for the quality of the suit, check out these pictures.

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{ 32 comments }

david smith April 5, 2007 at 10:49 am

If you go see the suit, be sure to read the comments. Some of them are quite interesting.

Ryan Fuller April 5, 2007 at 12:07 pm

"Buy American" is another way of saying "Buy stuff even if it sucks". The "100 mile suit" shows that the more local you insist on getting, the more your stuff is going to suck. Seems like there's something to this whole 'specialization and trade' thing after all. :)

Brian Moore April 5, 2007 at 12:25 pm

Wait, they spun the "100 mile suit" as a positive? Not, "look how much this thing sucks, why would we ever do this?"

Brad Hutchings April 5, 2007 at 2:18 pm

All this talk of trade and specialization… I want to connect it to the field I'm trained in: computer science. To me, it looks like it should match up with "divide and conquer" algorithms. An example of one is "Merge Sort", a way to efficiently sort a bunch of numbers. Let's say you have 100 numbers to sort. Divide the list in half, sort those, then merge the lists together. To sort each list of 50, divide into lists of 25, sort, merge. Do that divide step down to list sizes of 2 or 3 (which you can do by hand). Anyway, for large list sizes, this turns out to be provably the best (in worst case) sorting method (within a constant factor of steps). It is a so-called "O(n log n)" sorting algorithm. The key to the analysis is the efficiency of the merge step, which takes roughly the same number of operations as there are items in two lists to be merged. However, when you think about it, that merging is basically all of the work.

So then I think about specialization and trade and a giant Merge Sort of goods. The "merging" is the transportation of raw materials, value added goods, and finished goods. The cheaper you can move things around, the less expensive it is for someone to create something new and move it to end-user markets. But if you insist on building from raw materials to finished goods in one place, you get gross inefficiencies. It becomes like a standard Insertion Sort (which you probably use to sort your bridge or pinochle hands), fairly inefficient for large enough inputs, what computer scientists call "O(n^2)".

What I'm getting at is… Instead of just observing how specialization and trade work, could we actually prove its relative efficiency if we had the right mathematical framework?

Al April 5, 2007 at 2:43 pm

I don't understand- why does a hippie need a suit? Shouldn't that be made out of hemp? Ah hemp, a scarce resource with- ahem- alternative uses . . .

Francois Tremblay April 5, 2007 at 4:08 pm

Brad that sounds like a great idea!

Mikie V April 5, 2007 at 4:14 pm

Brad,

I like the idea but I am wondering if using weighted graphs and measuring their reliability would be more expressive.

Ray G April 5, 2007 at 6:36 pm

The raw material was the kicker, though the machinery would be a pain too.

Tracking the products to their origins wouldn't be impossible, just more work than a bunch of designs students are up for.

I'm a production planner in a good sized aerospace firm, and I can track quite a bit of stuff in my head right now. The smallest details would take awhile, but it's not impossible.

And, having been to a design school in my bohemian capitalist days, I know the typical art student. They would rather not know how many people were "exploited" so that they might enjoy their overpriced mall rags.

shecky April 5, 2007 at 6:58 pm

The biggest lesson to be learned is that this experiment could not be undertaken without the phrase "Filthy fucking hippies" appearing in the comments.

Jason April 5, 2007 at 10:54 pm

I was relieved that the comments on the Wired blog were heavily slanted toward ridiculing the results of the project. It certainly helps that the final product was awful.

This comment by "St Wendeler" summed up my thoughts:

"…No, I completely understand the resources I use. However, I am not ashamed or feel that I have wronged the planet in some way. In fact, I feel that I've benefited the planet and humanity, since free trade benefits all parties. The 100-mile effort described in this exercise required more energy and resulted in a less desirable garment. Meanwhile, a finely designed suit made from natural and/or synthetic materials from around the wool (sic) would take far less time and cost far less than this piece of junk."

Xmas April 5, 2007 at 11:20 pm

500 man-hours in the US. Using skilled workers. I think I'd lowball the cost of that labor at $10 per hour.

That's at least a $5000 dollar outfit we're looking at there. That's the wholesale price. I bet that suit would have at least a 50% mark-up on the wholesale side.

ben April 6, 2007 at 1:46 am

Nice example of the power of division of labour, although the 500 hours is high I think because it includes the fixed cost of sourcing materials. I wonder how much time a second garment would take?

colson April 6, 2007 at 6:12 am

Well – seeings how they sheered three or four sheep to do it, they'll have to find some more sheep and, yet again, source the wool. Even at $5.15 per hour – the general labor monetary cost of the suit would run ~$2575. I do like how they seemingly skipped over the shirt but did the underoos (they look itchy) and socks.

Of course, usually what is created for the runway or for costume is hardly what the end consumer will wear. I could be the ready-to-wear line would just be some burlap and twine.

Xmas April 6, 2007 at 6:35 am

You know, there has got to be more in the way of local materials available within 100 miles of Philly.

Maybe a couple of Alpacas at least.

Tim April 6, 2007 at 6:50 am

I came across this example of how e-bay is changing our local and non-local marketplaces recently. It's about using e-bay to purchase office supplies. See here.

Ray April 6, 2007 at 8:08 am

Talk about a 'straw man' example – wow you're really stretching it.

Daniel April 6, 2007 at 8:28 am

"Last year, Cobb asked her students at Drexel University to trace the provenance of their clothes. When the task proved impossible, she realized how far removed we are from what we wear."

I forget the title, but there's a book that tracks a t-shirt from the cotton farmer all the way to the used clothing markets in Africa. Cobb and her students should have just gone to the library.

Chris Meisenzahl April 6, 2007 at 8:47 am

It was me that sent that, glad you liked it. ;-)

ben April 6, 2007 at 3:33 pm

From the article:

"Last year, Cobb asked her students at Drexel University to trace the provenance of their clothes. When the task proved impossible, she realized how far removed we are from what we wear."

This is an example of defining an arbitrary measure of what is acceptable and then, when finding a breach of that measure, declaring outrage and demanding action. At least in this case it was her own time she was wasting. The usual inclination is to waste everybody else's.

David Johnson April 6, 2007 at 11:41 pm

Too bad this was done for a design class, because it would make a GREAT econ 101 project. In fact, some professor ought to do this the next available semester. Simplify it though, so it won't bankrupt the students. How about a class project to make a… pencil?

Ryan Fuller April 7, 2007 at 12:01 am

"How about a class project to make a… pencil?"

Whoa, that's *way* more complex than just putting together a hippie suit. :)

http://www.econlib.org/LIBRARY/Essays/rdPncl1.html

Person April 7, 2007 at 12:10 am

Disclaimers:

I support elimination of all tariffs and artificial barriers to international trade.

I think most people who revel in self-sufficiency are idiots who don't understand the concept of an "opportunity cost".

NEVERTHELESS, this whole thing seems stupid, misleading, and strawmanish. For a fair comparison, you'd have to take someone already skilled in the hardest part (probably the tailor), and work from there with local materials. The suit as is looks like an amateurish job. There's no way that's characteristic of what it's like in a serious transition to locally-made clothing. Historical weavers did a lot better.

If you want to show why international division of labor is so great, explain why the retail price of a new dress shirt is still $35+tax, rather than the $5 (manufacturing + shipping + huge profit margin) it should cost at this point.

Don't botch a tailoring job and use it as proof of a broader theory.

ben April 7, 2007 at 6:17 am

Person

The more I think about it the more I agree this example of division of labour is flakey.

I have to take issue with your complaint about the $5 cost of a $35 shirt for two reasons. First, those comparisons inevitably miss fixed costs and probably a good deal of the marginal costs of distribution and retailing. Second, markup doesn't have anything to do with division of labour. It is competition which determines that. Division of labour drives cost, not markup.

Greg April 8, 2007 at 10:15 am

I believe you are thinking about The Travels of a T-Shirt in the Global Economy: An Economist Examines the Markets, Power, and Politics of World Trade
by Pietra Rivoli

I use this as a supplemental text in my lower level International Trade class.

Vinay Gupta April 8, 2007 at 12:06 pm

Yeah, I found myself looking at this and wondering what the hell was wrong with these people. If you'd tried this in Scotland, for example, you'd have got a nice tweed suit and, just possibly, flax linens.

I think it was partly just trying to do something in entirely the wrong place – like if they'd tried this in Iowa, it would have been made of corn.

Eric H April 8, 2007 at 5:50 pm

I have to agree with Vinay, Ben, and Person. The problem here is the people doing it, not the attempt at local manufacture. If they had even the faintest idea of how to source, they could have produced professional looking results. Off the top of my head, there is an example near them of a high quality local producer. It's located about 70 miles away in a place called Lancaster County. They don't make the most fashionable things, but they are sustainable and almost certainly very rugged.

"Local" doesn't have to mean "crap" any more than "import" has to mean "high quality".

Ryan Fuller April 8, 2007 at 7:26 pm

""Local" doesn't have to mean "crap" any more than "import" has to mean "high quality"."

Actually, the whole "comparative advantage" thing means that you're either getting worse quality for the same cost, or paying more to get the same quality.

That is, unless your local area happens to have a comparative advantage in the item in question, but then you wouldn't have to bother with a "buy local" policy in the first place. Just buy the best, regardless of where it's made.

Kathleen April 8, 2007 at 9:16 pm

Person said:

"NEVERTHELESS, this whole thing seems stupid, misleading, and strawmanish. For a fair comparison, you'd have to take someone already skilled in the hardest part (probably the tailor), and work from there with local materials. The suit as is looks like an amateurish job. There's no way that's characteristic of what it's like in a serious transition to locally-made clothing. Historical weavers did a lot better….Don't botch a tailoring job and use it as proof of a broader theory."

Very good! Actually, the person with the hardest job, the one with the greatest control over the quality of the finished product is a a pattern maker. As it happens, I am a suit pattern maker. I've worked in apparel manufacturing for over 27 years.

Cobb's exercise was a bad example. It looked so bad because she didn't want to hire professionals (many theatre profs consider themselves an authority on apparel production -don't ask me why). She hired a shoemaker, why not professional weavers, or heck, just buy it from local producers (woolrich, the amish)? Then, she could have hired a real designer (who would have put the buttons on the correct side of the garment for one), a real pattern maker and a real sample maker instead of cobbling a bunch of what was described as "artisans" together. The result was amateur because it was put together by amateurs. [The terms artisan and craftsman are used entirely too loosely these days.] By no means does this mean that sustainable apparel has to look this ugly! Like anything -the shoemaker for example- you just hire people who know what they're doing. Easy, although it's harder to separate the wheat from the chaff these days without samples. Usually, if they have an "artist's statement" you can safely eliminate them from consideration. But, if you want to control every step of the process, well, then you get the result you see there.

I see a lot of designers who do the same sort of thing, control wise, not hiring the right people to do something because they think they know it all. This is a useful example of the problems created by control freaks run amok. That's what this really illustrates, poor sourcing by someone who wasn't qualified to run the project and that's it.

Ryan Fuller said
That is, unless your local area happens to have a comparative advantage in the item in question, but then you wouldn't have to bother with a "buy local" policy in the first place. Just buy the best, regardless of where it's made.

See, that's the thing that makes this even uglier. That part of PA has a comparative advantage!!! Down to including the skilled professionals. I think it was more important for her to control the vertical process. You know, give her arty friends something "real" to do. They can't be making a living at this.

ben April 9, 2007 at 9:29 am

"That is, unless your local area happens to have a comparative advantage in the item in question"

But comparative advantage exists at a level way below a finished suit. Think of Friedman's pencil example in his Free to Choose series. He starts by saying nobody in the world knows how to make a pencil. He goes through each part of the pencil and lists some small fraction of the ideas a humble pencil embodies. Same goes for a suit. You might get comparative advantage in an area in the production of one of the kinds of thread in a suit, but it unlikely you would also find in the same area advantage in its stiching, the production of all other materials, the integration of the suit, the design, branding, marketing, distribution, retailing, etc. And each of those categories undoubtedly has several if not dozens of specializations.

I think this is the value of the suit example, it shows the near-miracles the price system can achieve and the size of its advantage over rival production systems.

Kathleen April 9, 2007 at 8:25 pm

Re: comparative advantage.
(I work in the apparel industry, I am a suit pattern maker. I specialize in suit production).
Sitting here thinking about this I've decided that out of all the areas in the United States in which to produce wool over garments such as this, you couldn't find a better place than within 100 miles of Philadelphia. Woolrich has been headquartered there for what, over 100 years? Not only are the raw materials readily available, the spinning and weaving facility and what not, but you have the personnel, the brains to bring this to bear.

The other thing about this, is that insomuch that Cobb mentioned the division of labor, she didn't employ the tactic herself (beyond hiring the shoemaker) and she could have. It isn't necessary to go across an ocean when a trip across town would suffice.

And the calender (18 months) and the costs were ludicrous. If you have yourself set up properly, it's a matter of days (starting from staples e.g. fiber) to a finished product. However, I can understand how it'd take students and art majors months to figure it out. For the life of me, I will never understand how a theatre professor considers themselves a master of apparel production. The results -at least in this case- speak for themselves. A 100 mile suit can look like anything you'd find off the peg -100 miles around Philadelphia. We couldn't do that within 100 miles of many other places in the US but certainly there.

True_Liberal April 15, 2007 at 10:56 am

Ryan says: "Just buy the best, regardless of where it's made."

More to the point: Just buy the best VALUE, regardless of where it's made (/mined/harvested/…).

Without this paradigm, there'd be no real point to importation.

Mark Herpel August 23, 2009 at 3:03 pm

This is a good argument, I’ve already read it on three other blogs today alone. But shopping locally, doesn’t mean buying EVERYTHING from local sellers. Gasoline, flat screen TVs, medicines, cars, computers etc. You can’t buy everything you need from local producers and I don’t care where you live this is not possible. This argument is constantly used to ‘disprove’ the positive effects of shopping locally but it’s not 100% accurate. If you have a choice, local produce or WalMart’s Mexican imports, can you re-arrange your discussion only to include duplicate goods? The argument I always make is going out to lunch, buy the burger from McDonald’s or Bob’s sandwich shop? Bob has a local bank account, and gets his beef and fixin’s from local buyers. McDonald’s ships in big bags of frozen beef and lettuce from 4 states over. A 10% shift away from the chains like this to the locally owned and operated stores works well to bolster local business. You can’t use the same argument for a Ferrari or a Sony Laptop, (where you buy it local or chain) You can’t buy everything from local producers. Mark

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