Gristmill ran a rejoinder to the post I linked to last week advocating a localized, greener economy. The author, Ryan Avent, takes issue with the “buy local” mantra, arguing that local economies would reduce standards of living and that international trade and markets are compatible with reducing our ecological footprint.

I’m not confident in my ability to adjudicate this dispute, but I am reminded of something in Peter Singer and Jim Mason’s The Ethics of What We Eat. Singer and Mason examine the eating habits of several American families in order to determine what the most “ethical” diet is, with respect to things like environmental damage, worker’s rights, animal well-being, etc.

One of the points they make is that it’s very difficult, if not impossible, for most individuals to actually make an accurate assessment of the impact the food they buy has on the environment. For instance, food imported from halfway around the world might nevertheless have been produced in a less intensive way than more local products and may have been transported in a way (by ship, e.g.) that actually creates a smaller carbon footprint than, say, food trucked in from elsewhere in the country.

But if free-market economics has taught us anything, it’s that the market is a vast transmitter of information. The price of goods reflects the cost of their production and make available knowledge that no single person possesses and that this enables a spontaneous order to emerge as people adjust to fluctuations in prices.

However, as things stand now, many costs, such as environmental ones, aren’t incorporated into the prices of things we buy. But there are ways of rectifying this. A carbon tax, for instance, would mean that the CO2 emissions were reflected in the price of things we buy, so there would be no need for us to try and determine the exact conditions under which they were produced, at least with respect to this one area.

A similar approach is reflected in various labelling schemes like those proposed by Jeff Leslie and Cass Sunstein for creating markets in animal welfare. This involves using the market rather than fighting against it. While their plan requires that consumers are willing to seek out animal products produced in a more humane fashion, it still works on the same principle of making information available to the consumer at the point of purchase, and works within the market rather than against it.

Now, it’s possible that a carbon tax would actually result in more local production simply because products shipped in from around the world could become prohibitively expensive. At the very least it would seem to create incentives for more local production of a lot of things. But deciding how to produce things in an ecologically sounder way would be left up to the market, that is, people making use of the widely dispersed knowledge and information it makes available.