Comment by bobmarino

Well, to address your main objection then that “the movement to buy/invest locally goes against all of economic theory.” That is not a correct statement. I would first point out that the quote from my first reply, which discusses the benefits of small businesses on local economies, is taken from the FDIC 2012 Community Banking Study. The study’s authors are trained, mainstream economists who based their conclusions on empirical evidence. Now, even if you stay within the bounds of pure neoclassical theory (which it sounds like you ascribe to) it remains the case that maximum utility (net benefit) accrues to localities when there is a preference for the goods and services of small, local-based firms over larger firms. This is mainly due to the local multiplier effect, the tendency of smaller firms to plow back a greater percent of their revenue into the local economy in the form of secondary vendor purchases than larger firms. Smaller firms typically use a local account, a local attorney, a local design firm, etc. In contrast, larger firms are much more likely to utilize larger, more distant firms resulting in money being transferred outside of the community. Lastly, in addition to the economic case, there are important cultural and political arguments for supporting small businesses and buying locally. One of the respondents touched upon an important cultural factor, avoiding cultural hegemony. As for a political argument, studies have also shown that communities with strong local businesses ownership tend to have greater civic engagement as measured by voter turnout and membership in civic organizations and community groups.