by Ross Korves
Ross Korves is an economic policy analyst in Illinois.
Anti-globalists and environmentalists often decry the increasingly complex interactions between producers and consumers. They prefer that people buy products grown or made closer to home even when they cost substantially more than goods transported longer distances.
Take, for example, Locavores, a San Francisco-based “group of concerned culinary adventurers” who try to only eat foods that were grown within a hundred miles of that city. This summer the group suggested that people try to go the entire month of August without buying food produced more than that distance from home.
Locavores obviously has not heard of “roundabout methods of production” as described by Austrian economist Eugen von Bouml;hm-Bawerk in the late 1800s. He concluded that productivity increases often result from more time-consuming methods of production. (See Economics for Real People by Gene Callahan, pp. 133-37, for a short explanation of the concept.)
The only reason a longer production process would be adopted is because it is more economically efficient than the alternatives. In a developed economy most of the direct approaches to increased productivity have already been tried and only the roundabout ones remain to be pursued.
The Locavores claim that our food travels an average of 1,500 miles en route to our homes. They do not cite a source, but that seems reasonable to me. Sound economic reasons have caused food-supply chains to lengthen over the past 50 years. Most of the population growth of the United States over that time has been in the coastal states, while much of the best farmland is in the heartland of the country. People have chosen to live in suburbs with more living space, which means that land which 50 years ago could have grown locally produced food now is unavailable for food production.
As family incomes have gone up over that time, we have sought out more varied diets. People in Boston have grown accustomed to Florida orange juice and California whole oranges. We also want oranges 365 days a year, not just as a Christmas treat, as was common a few generations ago. Chilean grapes are available in my suburban-Chicago grocery store in the middle of the winter. Consumers in Minneapolis would have a pretty bland diet in January if all their food came from within a hundred miles.
The supply chain has also lengthened because North Dakota is simply a better place to grow high-protein wheat for pasta than is Florida. Economies of scale in production and processing also create longer supply chains. Many places in the country could grow processing pumpkins, but about 60 percent of the harvested acreage is in central Illinois because that provides the greatest economic efficiencies.
What is true in the United States is even truer in the rest of the world. Our country is blessed with some of the best farmland in the world, a varied climate, and a large population. Try anything close to the locavore approach in Tokyo or Helsinki, and it would be a disaster.
The Locavores website makes obvious that their concerns are broader than just eating locally to get fresh food. The members believe that corporations are the principal beneficiaries of the global food system rather than family farms, local businesses, and consumers. In reality, corporations serve as a vital link between crop and livestock producers and consumers. A family hog farmer in central Nebraska needs some type of business, such as a corporation, to transform a hog into a pork crop and transport it to consumers on the West Coast. Local firms in central Nebraska would be out of business without an intermediary linking farmers to consumers in far off cities.
All of this is not to say that locally produced food does not often taste better or that consumers should not buy locally if it fits their eating habits. The cucumbers and tomatoes from my backyard were great this summer, but I like those things more than just a few months a year. Locally produced tomatoes are sold in the summer at a busy intersection near my house, but that is the only vegetable available.
Public-policy activists who are skeptical of roundabout production methods can play an important role in ensuring economic efficiency by not supporting government policies that distort market prices for goods and services. Both producers and consumers respond to price signals. The only way to judge which of two supply chains is the most efficient at using resources is to have market prices that reflect the cost of the goods and services used in production, processing, storage, and transportation. Government policies that hold input prices artificially high or low for food production or transportation services will distort market signals and cause resources to be wasted.
The shortest distance between two points is still a straight line, but the lowest cost production process is often roundabout.