What is a local ecomony

A good friend (and Ordinary Gentleman) called me this morning, asking about what a local economy was and if it was even possible in this day and age. I told him I would be happy to provide him with a Wendell Berry essay that would explain it, but after having to cut our discussion short upon the arrival of a fellow who was going to relieve me of some old truck parts cluttering my shop, I sat down and decided to pen a few thoughts of my own rather than let Mr. Berry speak for me.
First off, I think a bit of the confusion about the new path James and I are tenatively turning towards is making the discussion difficult. Agrarianism is less a political statement or a "program" so much as a philosophy of life. As such I don't have a good answer for what should be done about deforestation in China, since despite the interconnectedness of osciety, that still remains a problem for the Chinese to solve (in much the same fashion as I would not want the Chinese trying to solve our problems here). Agrarianism teaches that all matters are best dealt with locally, by those who will have to live with the consequences.
The idea of a local economy in simple terms means that self-sufficiency should be the goal of every level of the economy. So each house-hold should strive to be as self sufficient as possible, each town should be as self-sufficient as possible, each region, state, nation, and so on. This self-sufficiency accomplishes several things. First off it keeps the profits from any business enterprise closer to their source of origen. It would go a long way to eliminate the "economic colonialism" that exemplifies most extractive businesses. After all, when was the last time someone saw a wealthy or prosperous mining or logging town? The second advantage is related to the first. When businesses are local in scale, they have an incentive to be good stewards. A locally owned logging operation would understand the need to manage the forests it cuts, to ensure its continued existence. Large scale industrial logging operations can come in and clear cut an area and move on, as they have no loyalty to a place, and once the forests in one area are logged those who live there are of little use or concern.
Of course the only practical objection to all of this (objections based on ideas that "you can't stop progress" and "this way of doing things is inevitable" being entirely metaphysical) is that such an economy would cause most consumer goods to drasticly increase in cost. To this I would point out, that in a way this would be a good thing, as it might cause us to spend our money more wisely. But more importantly, the increased costs would more fully reflect the true cost of an item. Modern business practices only focus on what is quantifiable here and now, there is little or no consideration for the hidden costs of industrial consumerism, both in those costs that cannot be measured in concrete numbers, as well as those costs that are being deferred to future generations. It is this cost that will be payed (with interest) by future generations that a local economy is most concerned with.