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This question comes from someone who suggested brushing my teeth benefits the economy because it reduces demand for dentists, lowering the price. However, when I think more generally of making my own shoes/clothing my decrease in "clothing-services" leads to an increase in demand for the raw materials, in this case fabric. (I am ignoring the time it takes to learn how to make clothing.) Or suppose everyone simultaneously decided restaurants were unhealthy and started cooking at home; the restaurant industry would collapse, but would agriculture stay the same?

Is the economy the same, worse, or better when a consumer switches from buying a good to buying the raw materials for that good to manufacture it themselves?

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  • $\begingroup$ Unless you are incredibly efficient at any one of or all of those activities, the engaging in any one or all of those activities is likely a misallocation of talent. Also, whatever strain your endeavor of self-sufficiency removes from the economy is likely far outweighed by the loss of productivity. One way to think of this is to consider what happens to the economy if everyone returns to self-sustaining life styles. The fundamental idea of specialization is lost - we would have a massively inefficient society. $\endgroup$ – 123 Apr 14 '17 at 1:51
  • $\begingroup$ The main question is not about everybody becoming self-sufficient in multiple goods, but about a single consumer choosing to produce a single good from its raw materials, and what that entails. I may have been confusing by positing the example with the restaurant, I was trying to illustrate the point about my actions resulting in merely shifting demand from one industry to another. $\endgroup$ – SerPolybius Apr 14 '17 at 5:40
  • $\begingroup$ Neither is my answer. The point of that is to make the outcome of such actions more obvious. It is just an extreme case meant to obviate the issue with reducing efficiencies. It is akin to the idea of making a proposition universal to determine whether or not that proposition is inherently immoral. $\endgroup$ – 123 Apr 14 '17 at 16:14
  • $\begingroup$ I'm voting to close this question as it's unclear what exactly is being asked. But there are some interesting issues raised, eg 1) under what circumstances if any it can be rational (for individuals) or welfare-raising (for society), rather than a misallocation of talent, for individuals to make goods themselves, and 2) if many individuals do so, how could that affect the composition of demand. I would encourage you therefore to consider asking a more precise question. $\endgroup$ – Adam Bailey Apr 14 '17 at 18:34
  • $\begingroup$ I don't know how I can rephrase it to be clearer. Should I edit the post or use different terminology like you suggest? $\endgroup$ – SerPolybius Apr 14 '17 at 21:14
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The consequences "on society" of you changing any consumption/production choice you make is zero. Assuming that all the markets you interact with (shoes, clothes, etc) are competitive, your contribution to the demand and supply of a good/service is neglectible. Therefore, market equilibrium (price/quantity) will not change.

The story is of course different if everyone, or a "sizable" amount of people does change their decisions. Demand and supply of goods and services will be altered, just as the supply and demand of all the inputs used to produce such goods. Since a lot of goods and services are related in one way or another, either as complements or substitutes, the consequences could be felt accross the whole economy. How far this goes, depend on the number of people changing their actions, and the relation between goods, services and inputs. In short, your actions will have a general equilibrium effect.

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  • $\begingroup$ If I understand this, brushing my teeth will shift the dentist demand curve to lower the price while changing the demand curve of toothpaste. But then that will shift the curves of the raw materials of toothpaste which will shift others curves throughout the whole economy? $\endgroup$ – SerPolybius Apr 14 '17 at 18:12
  • $\begingroup$ @SerPolybius Exactly. You are affecting both substitutes and complements of all goods/services related to outputs or inputs. But again, if only you do this, the effect is negligible. So nothing will really happen. Think of someone dying. This person's death has no consequence in the economy. $\endgroup$ – luchonacho Apr 15 '17 at 8:45
  • $\begingroup$ @SerPolybius Let me know if I can improve my answer in any way. $\endgroup$ – luchonacho Aug 23 '17 at 12:27

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