The merits of ethical consumption vs. consuming less?

Factual Questions
1

I got into a near-argument with a friend yesterday. We were discussing the merits of supporting local suppliers and ecological production methods versus minimizing consumption and buying always the cheapest stuff - this in the context of ‘saving the world’, or which would be more efficient in preventing the oncoming ecological and economical disaster we both seem to think imminent.

Her idea was that, er, well, I’m not exactly very clear on it. So I’ll just ditch the ecological viewpoint, and will be very grateful for anyone who’s able to provide it for me.

My big supposition is this: when buying a “green” label, I’m really only buying feel good for me: there’s the pleasure of spending added with the pleasure of a decidedly nicer product. What do I base this thought on?

Well. Buying a more ecological product is good, right? You support ecologically sustainable production methods and all that. But consuming less is also good, isn’t it? Less stuff being processed and moving around and so on. And these two don’t necessarily exclude one another.

But. (And this is the bit where I like to think I’m showing some original thought) Once I’ve minimized my consumption, I have the choice of spending less money or spending more: the cheapest liter of milk costs 50 cents (euro), mid-range is around 0.75. Ecological milk costs over one euro.

My point is that once you let it out of your hands, the money will stop nowhere. The money I’m paying doesn’t go directly to the bank account of the quaint cow-rearing rustic somewhere in the purest of the pure Finnish countryside. There’s no telling where it will end up after the grocery store - other than the certainty that it’s in the circulation. And the circulation = consumption. I like to think I’m not terribly in the wrong if I suppose that more money = more consumption. And wasn’t more consumption bad judging from an ecological viewpoint?

Needless to say I’m the one buying the cheapest liter of milk, while my opponent goes for the ecological. (Though the fact that I’m dirt poor and have no money on my bank account by the end of the month makes this exercise of thought kind of futile.)

But as far as mental acrobatics go, am I right or am I right? Do I slow down of this handbasket headed for hell by sparing and pinching, or am I in fact speeding it by supporting bigger companies that sell all that cheap milk?

2

Go live in a secret, force-field protected valley in Colorado with every like-minded thinker until our evil society collapses. Actively recruit and don’t worry when people start calling you The Destroyer.

3

Yes, well, Colorado’s awfully far away, and airfare prohibitively expensive, so I think I’ll have to stick with Inari or Pihtiputaa, or maybe Juuka.

But I would appreciate it very much if anyone had any idea of what would happen if large numbers of consumers would adopt either an ecological spending pattern (gladly shedding the extra monetary units it takes) or alternatively, would hang on to every penny.

It seems nearly self-evident if I look it that way, but I’d still appreciate some straight-faced input, as I think that evidence supports my supposition. I’d just like to be proven wrong.