Local multipliers
Feb. 21st, 2003 10:32 am![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
purpletigronSay you are worried about the strength of your local economy. You wonder what impact your spending patterns, and those of your neighbours, are having. So, you try to work out, on average, what percentage of your money you each spend locally. Maybe it is 80% - for every 10 pounds, dollars, euros or whatever, you spend 8 in local businesses, and 2 on imported goods. Or maybe it is 20% - 8 out of every 10 pounds you earn goes straight out of the local area.
So, what's the overall impact? Well, mathematically, the trick is to sum an infinite geometric series. Economically, it's a bit like compound interest. In any case, every time the person you buy from, spends locally, the local economy benefits. So, what fraction of your money do you spend locally?
If it's about 20%, and you are typical, then the overall benefit to your local economy of your income is about 1.25 times the money you spend.
If it's about 80%, the benefit jumps to about a factor of 5 times what you start of spending.
If it's about 90%, we're screaming up to a factor of 10.
Isn't maths good? Aren't local economies wonderful?
(Thoughts inspired by the New Economics Foundation's recent Local Multiplier 3 paper, which you can download in full for free (PDF format).)
So, what's the overall impact? Well, mathematically, the trick is to sum an infinite geometric series. Economically, it's a bit like compound interest. In any case, every time the person you buy from, spends locally, the local economy benefits. So, what fraction of your money do you spend locally?
If it's about 20%, and you are typical, then the overall benefit to your local economy of your income is about 1.25 times the money you spend.
If it's about 80%, the benefit jumps to about a factor of 5 times what you start of spending.
If it's about 90%, we're screaming up to a factor of 10.
Isn't maths good? Aren't local economies wonderful?
(Thoughts inspired by the New Economics Foundation's recent Local Multiplier 3 paper, which you can download in full for free (PDF format).)
