Don Boudreaux always gets to the heart of these issues.
Suppose, for example, that shirts can be made in one of two ways. The first is by hand. It costs a shirt maker using this method–regardless of how many shirts he produces–$250 to produce each shirt. Working full-time producing shirts by hand, the shirt-maker can produce 10 shirts each month. The second way to produce shirts is in a highly mechanized factory. If the factory runs at a peak capacity of a million shirts monthly, each shirt costs $5 to make. But because building and equipping the factory requires a huge initial investment, operating the factory at less-than-full capacity causes the cost of each shirt to rise. The reason for this increase is that producing fewer shirts denies the shirt-maker the opportunity to spread the investment cost over maximum output. The smaller the factory’s output, the higher the cost of each shirt.
Which method of production would a shirt-maker use? The answer depends on the size of his market. If a shirt-maker expected to serve a market of millions of people, he would use the factory method. But if he expected to serve a market of only a few dozen potential customers, he would produce shirts by hand. If each shirt-maker had access only to small markets, the price of shirts would be higher than it would if shirt-makers had access to larger markets.
If you want your shirts to be manufactured using primitive technology so that they cost a lot, then buy local.