The fact that I make X here while pay is 4X in SF is the only proof needed to show job markets and pay levels are local.

If a SF company wants to hire me remotely, I'll take the job at 1.5X, so they won't pay more than that. The simple reason is this: If I don't want the job at 1.5X the local pay, I my neighbor does, and he's every bit as good an engineer as I am. When they do hire me at 1.5X my current pay, they have bought my skill at the local market rate.

You make a good point: as an employee you are not the product, you are part of a team — and the team is just one ingredient in the manufacturing of a product. An important ingredient, but not the whole story nonetheless.

Taking that further: as a human you are also part of the physical community that you live in. A developer in a small town might help out the local library, whereas a developer in a big city might organize tech meet-ups to help their peers.

I'm not saying one situation is better than the other, but I can imagine not just different price points, but also different valuations for equal skill depending on location.