Q&A: What effect might States asking their citizens to invest and spend in own States?

Question by felixnovak80: What effect might States asking their citizens to invest and spend in own States?

A movement"-State Firsters", asking respective State's citizens to invest and spend in their own States, with intent that doing so would help their economies, appears to be in the offing (State of Michigan being one of them). It seems that implementing such a policy would be impossible since the 50 States are reliant on one anoters economic and societal product Ref: Interstate Commerce Commission.




Best answer:

Answer by TheCommonYak
This 'solution' seems to be proposed by those who really don't understand economics very well. It is unlikely that they could implement it, and if implemented, it would not be effective in helping the state's economies, as intended. It just doesn't make any sense.

Practically speaking:

a) Politically, they can't tell us what to do with our money, due to the government not really having any say in our private spending habits. We do not have an authoritarian form of government, despite what George Bush seemed to think.

b) This criteria of buying from "your state" or even "your country" goes against free market ideas and how our economic system is supposed to work; firms would not be competing not on the quality of their product or service, but on where they are located. Suboptimal allocation of scarce resources happens when you support inferior firms, as might happen if you were restricted to purchasing or investing in firms in a particular geographic area.

c) Due to the effects of globalization, it is nearly impossible to invest and spend exclusively in your own country, much less your own state. Most products rely on raw materials shipped from many locations around the world, and are assembled in various places with relatively complicated systems to ship the product to retailers in many different places. We would never be able to purchase another complicated or specialized item, such as a computer, or car, since no one place would be able to lay exclusive claim to all the materials and labor that went into producing the product.

The free market system is good at generating wealth in the long run, lets use it the way it works best. Let consumers purchase the best product available, rather than restricting them to purchase from corporations that operate solely within a particular state's boundaries.

Know better? Leave your own answer in the comments!