More on the Absurdity of "Localization"

by Don Boudreaux on November 24, 2007

in Food and Drink, Myths and Fallacies, Standard of Living

Warren Meyer over at Coyote Blog adds positively to the debate over "localization."  Here’s the bulk:

[Localization] is absolutely absurd, for any number of reasons.  I’ll just list three:

    • It doesn’t work.  The total energy used for transport, say of
      food products, is a small percentage of the total energy used in the
      total production process.  The energy transportation budget is
      generally smaller than efficiency gains from scale or from optimizing
      location.  For example, a wheat farm in Arizona on 50 acres is going to
      use a lot more energy (and water, and fertilizer, and manpower) than a
      wheat farm on a thousand acres in North Dakota.
    • It leads to poverty.  Our modern society, our lifestyles, our
      lifespans all are a result of the fantastic increases in efficiency we
      have reaped from the division of labor.  A push to localize all
      production reverses the division of labor.  Many products, such as
      semiconductors, become outright impossible on a local scale.
    • It leads to starvation.  It is hard for us to imagine famine in the
      wealthy nations of the world.  Crop failures in one part of the world
      are replaced with crops from other parts of the world.  But as recently
      as the 19th century, France, then the wealthiest nation on earth but
      reliant on local agriculture, experienced frequent crop failures and
      outright starvation.

More on the food-miles stupidity here.  And an interesting study that shows that processed foods greatly reduces waste and trash to landfills was here.

Update: More on food miles here at Reason

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SaulOhio November 24, 2007 at 7:37 am

All great information, all wasted because the people who believe in "sustainability" and environmentalism are religious dogmatists. All the evidence in the world isn't going to phase them one bit.

Mesa Econoguy November 24, 2007 at 10:04 am

Here’s why it’s really dumb:

Division of labor: the price of goods & services take into account all the necessary inputs to construct whatever you’re trying to make/do/try.

Comparative advantage: the above leads to various innovations and specialization based on incentive, allowing different economic entities to specialize in different areas. It’s why we trade.

“Localization” seeks to negate both fundamental economic principles. Okay, good luck with that.

Nice job Coyote. Not bad for a local guy.

Mesa Econoguy November 24, 2007 at 10:09 am

And Paul Krugman’s still a moron.

cjc November 24, 2007 at 10:42 am

A: OMG!!! Moving that bunch of grapes resulted X pounds of carbon being produced!!!

B: But host costly is that carbon?

A: OMG!!! All that carbon!!!

B: Best estimate is that that carbon costs about $0.05.

A: –

Actually, there are valid arguments for locally grown foods, but these have more to do with taste than anything else. I'd rather have a locally produced tomato that tastes tomato-y rather that something that's been hardened for transportation. Of course, I prefer not to go on a diet of tree bark this winter, so I'm quite pleased that mangoes from Brazil are available in January.

But these are gastronomical issues, and have little to do with the economics of food transport and vague notions of "sustainability" that rely on scare mongering metrics like "OMG the carbon!"

The Dirty Mac November 24, 2007 at 12:14 pm

M.E. – Could you repost that link?

Brad November 24, 2007 at 1:40 pm

You all know how a big mission of this blog is to get more people to think like economists? I'd rather that everyone think like entrepreneurs, with economic reasoning a quiver in the entrepreneurial arrow. Entrepreneurial reasoning 101 is (a) identify an opportunity, usually an inefficiency, and (b) go do it better. I have a lot of friends who would like to be entrepreneurs. They come to me with an idea that's very simple on the surface along with the claim that it's an easy thing to do and an implied request for help. My canned response is if it's that easy, wouldn't someone already have done it? Or if nobody's done it and it's that easy, why are YOU wasting your time telling me about it instead of working on it?

Let's apply to the buy local crowd. I want to give them full credit for entrepreneurial thought even if their economics is just plain wrong. The obvious inefficiency they see is transport. But there's one that's not so obvious too. That is the balance between the emotional "positive" of "local" and the intellectual "positive" of distributed economy. They rely on the disconnect most people experience between seeing WalMart's low prices and understanding how the achieve them, particularly how distantly produced goods are produced more efficiently.

Our canned answer to the buy local crowd has been to make the intellectual case for trade, boosting its positive. But what if we had another answer to the buy local crowd? Nobody else seems to like our strawberries. Why should we? These local producers are the same idiots I sit in traffic with all day, the same losers who are drunk at the baseball game, the same nutcases who make their dogs wear sweaters and bandanas. The same people who think that 300 feet prior to an intersection, there's an invisible right lane 2 inches wider than their vehicle that they can use. The same people leave unattended candles on their front porches on windy nights, with all respect to my next door neighbor… That's how buy local will peter out.

Mesa Econoguy November 24, 2007 at 2:35 pm

Sorry – Bill Gates screwed us again.

Here it is (Professor Robert's post from a few days ago):

Mathieu Bédard November 25, 2007 at 12:31 pm

Those are great blog entries indeed! Thanks for the heads up!

vidyohs November 25, 2007 at 8:26 pm

Ummmm Brad,
Would you like to try this one again. LOL!

"I'd rather that everyone think like entrepreneurs, with economic reasoning a quiver in the entrepreneurial arrow."

You got your metaphor bassackwards.

Jay November 27, 2007 at 8:55 am

Didn't Chairman Mao try protectionism and localization of agriculture? Didn't enough Chinese starve to death in 1960 to make people realize this is the most foolish thing they've ever read?

Nate November 30, 2007 at 12:14 pm

Speaking of cars, why do we have so many?

Subsidization of roads…

Imagine if the railroad industry had been subsidized equally(or neither had been subsidized in a perfect world). You could easily pull your car onto a train, walk to a passenger car and goto sleep, and arrive at your destination across the country in the same amount of time, with a ticket that cost half the amount you would have spent in gas, and absolutely none of the hazards and hassle of driving.

DCLA November 30, 2007 at 1:58 pm

Transportation of food accounts for 25% of all heavy commercial trucking in the UK, that is not trivial. It is only the "green zombies" who suggest localization of everything is an answer…since that is obviously impossible. Additionally, the cost of the fossil fuels depended on for transport and fertilizer (85% of the cost is Natural Gas) is increasing, to assume it will plateau at some level at which the energy cost remains insignificant relatively to the gains from scale is short-sighted.

Saildog December 1, 2007 at 12:13 am

I have read quite a lot of economics in my time at university, the latest being resource economics. Quite a few prominent economists such as Hartwick and Daly tried to grapple with the problem of finite resources in the 1960's and 1970's.

The problem is that they are finite, which sort of negates one of the fundamental bedrocks of all modern economic thinking: the notion that all natural resources are infinite, a notion that has been argued over in one form or another for going on 400 years. In fact the process can be traced back to Galileo's arguments with the Roman Catholic Church about whether the earth revolved around the sun or vice versa.

This struggle over supremacy between God, nature and man was "won" by man and the Baconian view that man should reign supreme over nature and use such from nature as he pleases provides the origin of this infinite resource concept.

Of course with a total population of less than 1bn people, the idea that resources are infinite has some validity. Externalities such as excess CO2 are also irrelevant.

But when you have nearly 7bn people to feed those Malthusian limits are becoming apparent. He was right: exponential growth is OK, only so long as food supply also grows exponentially. Now food supply growth has stalled. The USDA is reporting the lowest grain stocks ever; and per capita food production is down about 25% from its peak in the early 1990's. This has occurred at an unfortunate time and there are a litany of major problems that must be overcome if growth is to continue: There is an energy crisis, both as regards its procurement (oil) and its use (coal). Water resources are stretched. 20% of arable land has been lost. Per ha yields have stopped growing. Fisheries are collapsing. Food prices are up in every market. On top of all this agricutural effort is being diverted to inefficient biofuel production. Even the natural price inspired turn to alternatives is thus problematic.

My own take on all this is that economic thinking is stymied and tired, stuck in a dogmatic stance that is more political than based on a realistic perception of the world around us. In particular, economics has failed to incorporate the laws of thermodynamics into any of its thinking. This has lead to a complete lack of understanding of the role of energy in our economic systems. Energy can be defined as "the ability to do work" and thus the value added by such work has not been recognized. The second law of thermodynamics (entropy) is really about scarcity. It is a fundamental law that is unbending and absolute. It will always apply, and it is patently absurd that the entire discipline of economics, which at its core is a discipline that seeks to explain the allocation of scarce resources, takes no account of entropy.

The result is that energy has been wasted on a grand scale. If its value had been recognized, the SUV is a product would not exist; and transport would be utilitarian, not a fashion statement. We would not have the absurdity of flying tuna or stawberries half way round the world, or people going for lunch in Venice when they live in London. Is it really the division of labour that has yielded us all this wealth? Or has been the availability of cheap energy?

Now mankind, having allowed himself to become totally reliant on oil is struggling to maintain production against the tyranny of field depletion (3m barrels per day at least, every year) and the unyielding 1st and 2nd laws of thermodynamics. Elswhere in this site the authors argue that oil reserves have been maintained or even grown. So what? Reseves are a very poor indicator of future production. What matters is flows and it is flows that are struggling. If anybody on this site thinks that the flows can simply be turned up, you have a whole lot of unhelpful trends working against you.

And relocalization will occur, because we will soon recognize the true value of energy.

BTW SaulOhio, Brundtland defined sustainable development as development that meets the needs of those who live in the present without compromising the ability of those who will live in the future to provide for their own needs. Do you have children? I would say that free market dogma can cloud rational thought every bit as much as religion.

The issue here is dogma. Try and keep an open mind.

David December 1, 2007 at 11:25 pm

From SaulOhio's post:

"Division of labor: the price of goods & services take into account all the necessary inputs to construct whatever you’re trying to make/do/try."

Only we don't take into account the true costs. The fossil fuels used to support todays intensive "efficient" agriculture (fertiliser, mechanisation, transport) are finite and irreplaceable.

It's like burning diamonds just to get cheap food for a few years.

If we continue down this path we will find locally produced food is better than no food, just like people in todays poorer countries.

Hopefully we can work out a way to sustain efficient specialised food production using renewables. But patting ourselves on the back and congratulating ourselves for how clever we are today is not the way.

mopey December 3, 2007 at 2:12 am

When there is little or no oil, or $400/barrel oil, suddenly manual labor begins to look very good in agriculture.

Manual labor probably won't look as good as a battery powered tractors/trucks charged by stored energy from windmills and barns covered in solar panels. Finite and irreplaceable are not words I would use. btw fertilizer can be replaced as well. Yes, costs will probably go up and people will put effort into gardens and local food might be cheaper than tangerines from Spain but I really doubt we will all be living in a Thunderdome.

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