Oct 30 2008

“Self-sufficiency is the road to poverty”

Published by at 12:30 am under Opportunity cost,Specialization,Trade

Shop Talk – Buying local, good idea?

I live two lives. In one, I’m an international school teacher who has lived and taught in three countries, travels around the world for work and play and flies 50,000 miles a year to and from the US, Europe and Asia. In my other life, I am a small town guy, who enjoys working in his yard in his mountain cabin tucked back in the woods of remote Northern Idaho, which is not so much a state as a “state of mind”, as the locals like to say.

When I’m in my “other” life as a small town homeowner, i.e. during my long summer breaks, I like to slow things down and reflect on the state of the world around me. I start to notice things about the local economy that seem so minute in the world of international travel that occupies 10 months of my year. I notice that twice a week farmers come to my small town of Sandpoint, Idaho, to sell their produce, bread, honey, arts and crafts, eggs and even meat. I notice that the buffalo, elk and cattle roaming the valley below my mountain cabin can be bought ready to grill and eat from the local butcher shop. I notice the local brewery, Laughing Dog, where I can buy my home town brew. I notice the natural foods market, where my wife and I do all of our shopping, and where many of the items for sale were grown locally or in the greater Pacific Northwest region.

I notice that, if one so wished to do so, one could sustain oneself almost entirely on locally or regionally grown food items. Compared to the lives of so many Americans, whose foods are so heavily processed, often times shipped from around the country or even the world, the choices available to those who chose to “buy local” seem so simple and straightforward, the benefits so obvious.

So the question is, why don’t more people eat locally? According to economist Russell Roberts, the reason we don’t all survive entirely on locally grown food is that, simply stated, the cost of doing so is too high.

In the article below, a Vermont magazine discusses he “buy-local” movement going on in communities across America today with Russ Roberts, whose enthusiasm for buying local is tempered by his economic rationale rooted in the basic economic principles of opportunity cost, specialization, and the gains from trade.

SEVEN DAYS: You’ve said that the buy-local movement has a “superficial appeal.”

RUSSELL ROBERTS: The emotional, nonmonetary appeal of “buy local” is very clear. It’s nice to buy things from people you know, and often that interaction of shopping and trading with people you know enhances the quality of life.

But there’s a cost to it, and when we say, “Let’s buy the local apples rather than the apples from New Zealand,” the cost is hidden, because apples are only a very small part of our economic life. If we tried to replicate that strategy over a wide range of products, the cost would be much more apparent.

SD: Environmentalists like Bill McKibben say the cost of some products doesn’t reflect their true environmental cost –

RR: And I think that’s true, by the way –

SD: But a lot of people would say the idea of “true environmental cost” is diametrically opposed to your idea about true cost.

RR: It’s a good observation. Rather than saying the true cost, it would have been better for me to say the full cost. Right now, if you buy local produce instead of produce that comes from across the country or across the ocean, the cost is pretty clear: It’s a little more expensive, usually. Sometimes the quality is higher, so you say, “Well, I think it’s a bargain after all.” Sometimes it’s not, so you say, “Well, it’s worth it, ’cause it’s local.”

I don’t know if people think through how those costs would add up if you tried to buy more locally than just food . . . I think it’s a question of magnitudes. There’s no doubt that when you make economic decisions based just on price, you’re not getting the full picture, which is the environmental critique. But I think it’s also true that when you purchase one item or category of items, such as food, locally, you don’t think about what the full cost would be if you did that more aggressively across a wider range of products.

SD: You’ve said self-sufficiency is the “road to poverty.” Does that relate to this discussion?

RR: Absolutely. That’s a quote from my first book, The Choice: A Fable of Free Trade and Protectionism . . . I think the word self-sufficiency has an emotionally attractive ring to it: We don’t want to depend on others; we want to be self-sufficient; we certainly want our children at some point to grow up and become self-sufficient, rather than depending on us as parents. So self-sufficiency is generally seen as a goal, but in economic activity and in trade generally, no one really has self-sufficiency as a goal.

Discussion Questions:

  1. Why does self-sufficiency lead to poverty?
  2. What is the “true environmental cost” of buying certain products, namely cheap, imported food and consumer goods?
  3. What is the opportunity cost of “buying local”, whether it be food or other consumer items?

25 responses so far

25 Responses to ““Self-sufficiency is the road to poverty””

  1. Steve Latteron 30 Oct 2008 at 6:06 pm

    Jason,

    You have a really cool, interesting, and diverse life!

    Thanks for running such a great blog site!

    Have a great, productive time at the Econ conference in Richmond this weekend!

    Steve

  2. Maddi Diamondon 31 Oct 2008 at 3:33 am

    I agree with Russel Roberts. Self sufficientcy is basically going against the economic policies which cause economic growth and all that nations these days are apiring towards. Though it is sentimental to take something out of and help your community by purchasing their goods, it is more costly to the consumer, and though this is seemingly small, the costs add up to a substantial amount. Not only this, but there is a decrease in variation; I myself like to choose from a range of dinners, from a mostly-natural chicken and veggie dish which one might purchase from the community, but also imported curry pastes and thai vegetables from my favourite import store (plus they are cheaper than the swiss make-your-own-curry packs. I save money AND purchase whatever i feel will make me happiest. Not only consumers loose from self sufficiency; consumers who wish to be self-sufficient, are depriving other nations chances to profit in the good which they are best fitted to producing, their comparative advantage. Also, these nations may make cheaper, but also better quality products than those sold locally, yet another thing the consumer is missing out on by being "self sufficient"

  3. Alex Telfordon 31 Oct 2008 at 5:10 am

    This is reminiscent of the organic foods movement, although "naturally" grown produce is a nice idea it's not nearly as cost-efficient or environmentally friendly as its reputation would suggest. According to (http://www.american.com/archive/2008/june-06-08/the-problem-with-organic-food) "Organic agriculture has been growing rapidly in recent years—by a factor of 10 from 1992 to 2005" even though organic produce tends to have higher prices as well as using more land per unit of food produced, while not being able to benefit from economies of scale as much as industrial agriculture is able to. Organic agriculture seems to undermine the green revolution and the work of people like Norman Borlaug, the pace of agricultural development is a major factor in sustaining the rapid growth of human population – it doesn't make sense to return to older less efficient methods of farming.

  4. Elisabeth Spielbichlon 31 Oct 2008 at 6:26 am

    Self-Sufficiency may not necessarily lead to poverty but it is hard to obtain. When a country is self sufficient, they can provide everything themselves with the resources that they have. However, not every country has every basic resource. For example, Singapore cannot be self sufficient. They do not have the basic resources, like water. They rely on Malaysia to supply them with water.

    However, there are benefits to being self sufficient. For example, if you were trading with this other country and all of the sudden you are in war with your trading partner, well then you wouldn't want to trade with them anymore. By being self sufficient, you wouldn't rely on other countries to supply goods that you need. This is a form protectionism: being strategic.

  5. Jason Welkeron 31 Oct 2008 at 4:58 pm

    Good discussion, everyone. I like Alex's point that productivity in agriculture simply MUST be increased if we are to feed a growing world population. I do find this an interesting argument, however. I wonder if the rate of population growth (which most would say has been exponential and dangerous to human survival and survival of the planet) can be attributed to the rate of increase in farm productivity. In other words, is the world's population problem in reality a problem of TOO MUCH FOOD? It sounds almost evil, but I wonder if "going local" in food production, or at least turning more towards sustainable farming practices like organic, whether population growth could be brought under control by decreasing the rate of growth of the food supply.

    I once read a story about mice (I know, humans are not mice and it sounds perverse to compare humans to mice), that said that if you put two mice in a cage, a male and a female, and put enough food for four mice every day for a year, the chances are at the end of the year there will be four mice in the cage. Double the food and wait a few more months, and there will be eight mice. Double it again, 16 mice… you get the picture; population grows proportionally to the food supply. Continued increased in agricultural productivity will lead to continue increases in the world's population growth rates.

    True? or False?

  6. Alex Telfordon 31 Oct 2008 at 6:28 pm

    Agriculture is absolutely the reason human population is as high as it is, before organized farming I think the total world population was around 10 million – Agriculture allowed us to form settlements and move away from the nomadic hunter-gatherer lifestyle. Having sufficient food allowed us to spend less time out hunting and more time developing culturally, intellectually, etc. As agriculture develops we are able to support a larger and larger population; it's easy to say that our large population is straining the Earth's resources – however if we were to decrease agricultural production, who should be the ones left without enough to eat?

  7. Jason Welkeron 31 Oct 2008 at 6:45 pm

    I wouldn't propose decreasing agricultural production, perhaps just stabilizing it, in the hopes that population would then stabilize as well. When we study dumping in IB Econ year 2, we realize that this is a result of heavily subsidized farm industries in the rich west, combined with price controls, leading to huge surpluses which end up being dumped on African nations. This creates situations where in good crop years in the West, food is abundant and population growth high… but when a bad year comes along and the African nations dependent on cheap imported grain find themselves short of food, famine results. Over-production leads not just to rapid population growth, but to famine when the surpluses are not there.

    Stabilizing food production, focusing on a more sustainable system of agriculture "buying local" (which from my standpoint involves allowing African nations to develop their own agricultural sectore, in which they should have a comparative advantage if it weren't for rich world subsidies) and turning more towards organic methods of farming (less impact on the environment, less chance of surpluses that can be dumped), these are some of the steps the world can take to bring down not only the population growth rates in the developing world, but the likelihoods of famine as well.

    Interesting thought, and maybe I'm way off base: stabilize food production, avoid famine. Seems counter-intuitive, but I wonder?

  8. Myrthe van Vlieton 02 Nov 2008 at 9:20 pm

    Im not sure whether this is true, but if you helped developing countries out of famine and have them develop their own agricultural sector. Would this not be an initiative for developing people to produce more children? If you are a farmer, you would want more children to work on your farm so that you can increase your produce. If this were the case, would it not lead up to a increase in population in developing countries?

    As Elisabeth said if a country ends up in war with a country it has a FTA with. A country like Singapore who relies on Malaysia for water will most likely receive no water. It means that FTA's also stop countries from going to war with each other.

  9. Joelon 03 Nov 2008 at 12:36 am

    I do not see how self-sufficiency can lead to poverty, but I can see how it could lead to relative poverty. If you are self-sufficient, you can produce everything you need without having to trade. Fair enough if you are a country at war with the world. However, if you do not have comparative advantage the production of most of these goods, which is quite likely, you will be wasting a lot of time and a lot of the world's resources. Your economy, even a local one, could be producing so much more, and it could be receiving so much more in return. So in relation to other, more specialised economies, you are poor.

    The true environmental cost of producing locally versus importing from abroad is hard to match up. Lately there have been figures released about the importation of water bottles from fiji. Now we have to take into account the massive environmental impact of shipping these bottles. Yet depending on the domestic economy, fiji may be far more efficient at making bottled water, and perhaps the local economy creates more negative externalities in production for the environment because it is so inefficient at making bottled water. Small localities simply may not have the economies of scale to produce bottled water efficiently

    It might still pay off for the environment's sake to import goods, rather than to be self sufficient.

  10. Bjorn Borgerson 04 Nov 2008 at 5:55 pm

    When we talk about something being cheaper, we always think of the relative price between the products. Really, we are thinking about which product has the absolute price advantage for us. What these men are discussing is how the comparative advantage is important, and that trade can actually benefit both participating countries. Still it surprises me how some products can be sold so cheaply, since if we import apples from New Zealand, we must consider the cost of transport, which currently is admittedly becoming cheaper because of lower fuel costs, but still is significant. Though this story is not completely connected, I remember hearing about a country who sent their harvest (i think it was Potatoes) to northern Africa to have their skin taken off, and then have them returned to be processed back in the original country. This process was actually supposed to be cheaper, which I found very surprising… so maybe sulf-sufficient isn't the better way to go.

  11. Daniel D'Amicoon 07 Nov 2008 at 6:15 pm

    I believe self-sufficiency can lead to poverty because if you are self-sufficient then you can not trade. If you can't trade you have to make or get everything yourself. This means you can not specialize in something because if you do that you will be missing something you need. basically without trade every economy would be in poverty. They need to specialize to make it the most efficient trading system and make money. Specialization decreases time and and allows more to be made. This altogether increases the money made and helps countries that are not good at producing or getting a certain item that is needed to get this item.

  12. Ross Hutchisonon 17 Nov 2008 at 5:26 am

    It seems fairly well argued above that to an extent poverty can lead to poverty. Joel's idea of relative poverty was interesting, and it may have a deal of merit in it. To what extent are the self-sufficient really in poverty? Well it all depends on how long they will have been self-sufficient for. Periods of war always end and open up trade across borders again, but conscious and willing isolation and seclusion (for whatever reason) do not end easily. The poverty will set in over time.

    Interestingly, a recent Daily show had billionaire energy tycoon T. Boone. Pickens on to be interviewed. He spoke of the need for America to become energy self-sufficient, and the crowd applauded and cheered. There seemed something eerie about the whole idea. The notion of American superiority over the rest of the world, and the need for them alone to have access to this new energy. Picken's spoke of the need to move away from that "ay-rab oil". His reasoning was not one of environmental sustain, but of cold-hearted xenophobia. Self-sufficiency should never be the goal for a nation in this 21-century globalised world. Haven't we overcome the barriers of nations and isolationism?

  13. Dominic McNameeon 18 Nov 2008 at 6:28 am

    Self sufficiency leads to poverty because in the modern world it is not possible to produce all the necessities and luxury goods that we are used to on a local scale. And even if a country or area could obtain self sufficiency the cost of living would go up proportionally to the income of the people. If America were to try and manufacture all of its own goods then the amount of goods each American could afford would go down. This is because places like China and Vietnam can produce the same goods for a fraction of the cost and still save money when the transports and tariffs are included. However China also could not become self sufficient with going further into poverty. This is because it does not have the resources to produce the goods it sells to the rest of the world. This means it needs to import oil from the middle east and minerals from all around the world. Australia and America for example. With the money that Australia and America receive for selling China the raw materials they can then buy the finished good back. So Australia and America save money on production while China saves money on resources.

    In some cases buying locally does have its advantages. For example a Fender guitar made in S.E. Asia can be as cheap as $500 while a high end guitar also made by Fender, this time in America, can cost upwards of $5000. Most people would think this is a complete rip off and buy the cheap guitar. However those who are very dedicated and experienced can notice the small differences and find the made in America guitar to be better value. But if they continued buying the highest quality good for everything they would be broke pretty quickly. (Or their a rock star) This is the environmental cost, because it includes the cost of all goods in a persons environment.

    Buying local can mean that people pass up the opportunity to either buy more of the same good or multiple types of good with the same money. For example if you buy all your vegetables locally then you might have to pass up having that prime steak on Friday for a salad. Whereas if you buy the cheapest vegetables then you can afford to have that steak.

    Going back to the S.E. Asia and American Fender guitar point, if I were to buy the American one (I wish) then that would leave me with very little money to buy an amp to play it through. I might have to make to with a tiny little 10 watt practice amp. Whereas if I were to get the SE Asian one, I would be able to afford a very high quality 100 watt amp with an amazing set of speakers.

    (That was assuming I was American, I couldn't think of many internationally known Swiss or Australian guitar companies.)

  14. Palmi Angelovon 18 Nov 2008 at 6:48 pm

    Why does self-sufficiency lead to poverty?

    Obviously, this directly relates to our entire free trade unit thus far. The idea of self-sufficiency clearly does not follow the principles of comparative advantage, where each country (or possibly region) produces the good for which they have the lowest opportunity cost for production, and thus produce the most efficiently. The problem with the idea of self-sufficiency is that it is virtually impossible for one country to have comparative advantage in the production of everything. Depending on their distribution of the factors of production, land, labor, capital and enterprise, they will be better suited for producing one type of good rather than another.

    An example of this can be seen in africa. There is cheap and abundant labor, with a variety of natural resources, but hardly any capital and enterprise. Does africa produce technology? No. If Africa (forgive the generalization, I'd hate to pull a Palin). Anyway if Africa were to decide that it wants to be self-sufficient, it would have to start producing all these goods which it is illsuited for, such as computers, televisions etc. which it was previously purchasing from the least cost centers of production, China and Japan, thanks to trade. Producing such things locally/inefficiently and also limiting trade overseas – which would of course have to happen in order for "self sufficiency" to be able to take place – would cause a huge rise in prices, that the local population could not keep up with, leading to poverty.

    Overall, the road to self-sufficiency is one where the principles of free trade are shunned, and it comes with the great opportunity cost of losing the potential benefits and allocative efficiency that come with following the principle of comparative advantage.

  15. Lisa Gon 18 Nov 2008 at 8:12 pm

    As stated several time before, self-sufficiency leads to poverty; poverty in a sense of being poor in relation to all the other countries. However, as Ross pointed out, this in only happens after a certain amount of time. During wars, or natural disasters, countries have been forced to become self-sufficient, usually they beginning to produce food, not other commodities, in order to feed its population. In perpetration or during war more countries start to increase their agriculture, such as in Switzerland during WWI and WWII, all useable land was turned in farming land so that the Swiss people would not starve, as all the other countries around Switzerland were involved in a war. Switzerland is an interesting case, as it was forced to become self-sufficient, because it was land locked and had not access to other countries which were not involved in the war. But during this time period the economy did not grow. This indicates that self sufficiency does not promote economic grown or development.

    As we learned in class, trade leads to increase in global economic growth a revenue, therefore if a country does not trade it will not benefit from the gains of trade (competition and limited resource lead to lower production cost, of efficiency…). So if a country don’t trade without nations and attempt self sufficiency it will not prosper, have growth of industries or creation of new goods. Technology is not transferred; no competition or wealth is generated. Countries, however, cannot all ways gain from due to the location of the country (north/south, which decides which agricultural products can be grown), size of the land, geography and topography, distribution of labor and capital. The countries do not take advantage of the principle of comparative advantage, so they have to produce all good that their consumers need, so factors of production are forced into producing good for which they all ill suited for. If countries were to trade, they can specialize in producing a good for which they lower opportunity cost in. Overall, the countries will gain for specialization (as they can use the factor of productions for industries in which they will be efficient.

    For example, a country which does not trade could end up similar to North Korea (which has starving people, a large army which, a negative GDP value (-1.1%) and a GDP per capita of 1,700$). North Korea is a country which does not trade very much with any other countries. And it is considered to be in poverty, thus self sufficiency is not profitable and leads to poverty.

  16. Moritzon 19 Nov 2008 at 3:18 am

    The principle of self sufficiency would be a great theoretical idea. On a practical level it is not an economic principle anybody would think of but for the average person who only unconciously cares about the economy being able to produce everything themselves would be superb. However because we are Economics students we know that self-sufficiency would lead to poverty because there would be no more involvement (trade etc.) with other countries meaning the whole economic system would collapse. Most importantly self-sufficiency is not even possible because not every country has the resources it needs to supply itself, that is the reason why countries or firms trade.

    The true environmental cost of buying certain goods leads to the discussion of globalization that we had. Either your stance toward globalization is that it helps a country or that it harms the country. Developed countries move their factories into developing- or less developed countries because resources there are usually cheaper. Labour and land can be bought at a low price and therefore keep the firms production cost as low as possible. Now if you believe globalization harms the "invaded" country then the true environmental costs are the exploitation of workers who are being payed a very low wage, working in bad conditions. Environmentally seen this firms also produce a lot of pollution through the factory and the transport of their goods.

    If you believe that globalization helps the less developed/developing countries then you see the benefits that such a firm brings. These firms often provide the only source of emplyment for the people in that region and the wages are adapted to the countries standards. Through the firms the employees recieve training and then are capable of starting their own businisses. However this does not compensate for the environmental harms a firm does.

    The opportunity cost of buying goods locally is that if the "local" country does not have comparative advantage in producing that good then its resources are misallocated. This is the reason (some) economists are for trade because free trade means that every country produces what they are best at producing and there are no trade barriers that can stop a country from importing a cheap resource.

  17. Miguelon 19 Nov 2008 at 4:11 am

    Self sufficiency can lead to poverty. Although being self sufficient should work in theory as people have no choice but to buy locally produced products it does not work so well in theory. Without trade, the principle of comparative advantage does not take place and countries economies cannot grow. Also if all products are produced locally, then the local producers have no incentive to reduce costs and become efficient as they have no competition. This also harms the consumer as they have less choice and have to pay a higher price for their products.

    If countries do not specialize and use the principle of comparative advantage they cannot prosper economically, because they are not producing enough of the goods which they have the lowest opportunity cost to trade.

    The only reason that a country should become self sufficient is in case of a war.

  18. Liviaon 19 Nov 2008 at 6:04 am

    It is pretty obvious that if a country is self-sufficient it does not trade and therefore cannot enjoy its "ideal" benefits, like Russia from 1930-1939, when it was moving towards self sufficiency. Initially thinking about it, i did not think it was so bad. On a small and personal scale individuals can be self sufficient. You can have your own smallholding and be able to grow your own food and keep cattle or whatever you like. Will this affect the world? No, probably not. But done on a much larger scale, countries becoming self sufficient is different.

    I really enjoyed reading Elisabeth’s reply, I thought it was insightful. I overlooked the fact that if you do in fact isolate yourselves economically (but not trading) and have no means or resources of achieving self sufficiency, it is unlikely that countries will help. What I did not agree with was the point made about possible wars between two trading partners. It is possible, however say China and the US wanted to go to war, they both know that there would be much more to lose than to gain. Additionally I reckon that by excluding yourself economically you also exclude yourself politically, making you more of a possible factor to be triggered into entering a war. In that case, a country would be economically and politically isolated, in a war, and if they have not reached self sufficiency, it is unlikely that they will get far. For these reasons, self sufficiency would lead to poverty.

  19. Magdalenaon 20 Nov 2008 at 5:21 am

    Self-Sufficiency will in the long term lead to poverty since the country will be limited with what they can provide as goods and services since a country has a certain amount of resources and the market would therefore not have a variety of goods and services at all.

    What you have to take into consideration aswell with self-sufficiency is that the country will not then use the principle of comparative advantage where the goods or services are produced with the least opporunity cost, and therefore it will be hard for the country's economy to grow any further.

    To a respond to Lisas comment "During wars, or natural disasters, countries have been forced to become self-sufficient", that is only for a short period of time and does not take into consideration for the long run.

  20. Gorka Zubieteon 21 Nov 2008 at 4:38 am

    Livia stated that USSR (not Russia ;) ) was attempting to become self-sufficient in the years from 1930-39(key word being "attempting"). I agree with this statement however, you forget to mention that USSR was exporting tons and tons of grain (when its peasants were starving) to be able to fund the crazy industrialization that was taking place. Can we really say its self sufficient if its selling grain to get money to invest into capital? In my opinion, once you sell (even if you don't buy) you aren't self sufficient since you rely on that investment to allow industrilization to move forward. As I stated before, USSR ATTEMPTED to become self-sufficient, but even they had a bit of "trade" going on, their communist block collapsed due to immense poverty.

    Clearly, Self-suffiency is the road to poverty.

  21. Calvinon 21 Nov 2008 at 6:01 am

    I believe there needs to be a balance, as a nation, between self-sufficiency and trading with other nations.

    In our 21st century world trade has become extremely important, however we seem to forget something else that is also very important: our environement. We depend on our environement for our agriculture, but as we continue to demand cheaper goods from other parts of the world we are increasing the CO2 emissions in the atmosphere. Trade involves ways of transportation which produces carbon emissions. These damage our environement. Now I am not arguing that trade should not take place, i believe it needs to be regulated in the form that if a country can produce a part of its demand for a certain product domestically it should go ahead and produce this product domestically. This will reduce carbon emissions from transporation of these extremely cheap goods from abroad, and thus help preserve our planet we live on.

    I acknowledge the fact that this would have a possible negative effect on the world economy as resources may be misalocated, but i believe that it is a cost to society that is necessary for any future what so ever.

    However we must not fall into either extreme, as complete self sufficiency would lead to poverty, but importing cheap goods from abroad would have its toal on the environement.

    I believe there is simply no right or wrong in whether trade should continue or if nations should be selfsufficient.

  22. Deirdre Stensonon 21 Nov 2008 at 6:10 pm

    As often mentioned in class, economic isolation does not profit a nation, furthermore it hinders the overall growth and development of the nation’s economy. This is the case for nation’s of high economic growth as well as nations of the opposite. With this in mind, it is easy to understand why being self sufficient will not result in long term growth. Being self sufficient is unrealistic and idealistic. Being separated from the rest of the global market, will only isolate a nation further and remove itself from any previous connections it had in place beforehand.

    With buying cheap, imported goods it is often said that this will result in major damage to the environmental standpoint of the world, as the sheer force of moving these goods around the world will result directly in harmful effects upon the environment. However, many nations cannot afford to be self sufficient either and thus must buy imported goods, no matter the environmental cost.

    Furthermore, by buying domestically produced goods, one may be helping to keep alive an industry that does not have comparative advantage in the production of a good. Furthermore, this practice allow it will aid the short term stance of local consumers, will have an opposite effect for the nation overall. Even though this practice is a nice idea, I would say that overall it hinders and harms a nation’s economy rather than helping it.

  23. Christinaon 21 Nov 2008 at 8:38 pm

    I've read some of the comments above relating to "self-sufficiency leads to poverty" and most of the things I wanted to say have already been said; something I agree with for example is what Joel and Ross discussed, that self-sufficiency only leads to relative poverty. So to me this means poverty in relation to other countries. This is true as for a country to be self-sufficient it does indeed mean that it can survive on it's own. I'll comment on this through answering one of the discussion questions:

    What is the opportunity cost of “buying local”, whether it be food or other consumer items?

    As we've discussed several times in class, opportunity cost is the best alternative forgone. In other words, producing one good in cost of not producing another. This goes back to the basic concepts of trade. So let's say a self-sufficient country was to produce beef and watches. I'll take Switzerland (which indeed is NOT a self-sufficient country, but it can be a good example of the concept of opportunity cost). Switzerland produces both beef (due to those cows that wander through the fields) and it also produces very high quality watches. Then again, Switzerland has the option of producing only watches and not beef because it's neighbours also have cows that are brought up by lower-wage workers, so that Switzerland can simply import that beef for cheaper while using all those high-paid swiss cow-keepers (their name escapes me at the moment) to go produce more watches so that Switzerland can make even more profit from their valuable commodity. This way, the opportunity cost of growing 10 cows infront of producing 1watch would be gone. Switzerland would we able to produce 1watch in exchange for 20cows since other countries can "produce" them more efficiently.

    In other words, countries should not produce the goods for which they have to overpay their workers for if they can just purchase that commodity from a neighbouring country in exchange for something they have the benefit of producing at higher quality and at a lower opportunity cost, such as watches. Not only that, but trade of such products increases their popularity amongst other countries bringing tourists, allowing Switzerland to prosper further. So trade is not only a step towards more efficient economies, due to lower opportunity cost of not "buying local", but also a step towards peace.

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