Lesson of making a pencil applies to economic woes

Phyllis Hunsinger

Are you wondering why the economy is sputtering in trying to restart after the tremendous interruption to our collective lives by the COVID-19 virus?

Perhaps the best explanation for this exists in an essay published in 1958 by Leonard E. Read and titled “I, Pencil.” The essay is written from the point of view of the pencil, who acknowledges that because of its simplicity, the pencil is taken for granted. Yet, as the pencil states, “Not a single person on the face of this earth knows how to make me.” Wood, lacquer, printed labeling, graphite lead, a bit of metal and an eraser is all that meets the eye upon examination of the wooden pencil.

As Read explains, the family tree of the pencil begins with cedars from Northern California and Oregon. He describes the countless people making saws, trucks, ropes and other gear necessary for harvesting cedar logs. It takes many more people with numberless skills to mine ore, make steel, and fabricate and ship products. That’s not to mention mining graphite from Sri Lanka and mixing it with clay from Mississippi. Or producing the rubber-like product, factice, made from rapeseed oil from Indonesia mixed with sulfur chloride and pumice from Italy. The detail with which Read describes the creativity, labor, skills and resources that go into a pencil is astounding.

What’s even more astounding, Read writes, is that all of the cooperation required to manufacture a pencil is done without any central planning. There’s no mastermind directing actions. None of the people performs a task because they want to buy or own a pencil. Individuals act in their own interests. The millions of people involved in making pencils exchange abilities and knowledge for goods and services they need or want.

The lesson from “I, Pencil,” is universal and can be seen in action throughout our free market economy. Left to their own creativity and labor, people exchange resources and knowledge for goods and services. When these exchanges are uninterrupted, the resulting commerce expands as if the work of an “invisible hand,” which Adam Smith described in “The Wealth of Nations.” This is true of uninterrupted supply chains, voluntary exchanges and the division of knowledge.

Restarting an economy is far more difficult than turning one off. “I, Pencil” shows how the pencil is created by millions of creative people, each contributing abilities and knowledge despite not knowing how to produce the final product. This division of labor is what makes possible our incredibly diverse economy. Relationships among the various producers must be developed, resources identified, market analyses completed and appropriate workers hired. When this process is interrupted, as it was with the coronavirus pandemic, the economy must be rebuilt. It’s impossible to shut everything down and then expect to say the word and everything will be as before. 

The lesson from “I, Pencil” is that faith in a free people allows the creative knowhow and productive patterns to respond automatically to the needs of humanity. The lesson from the pandemic is the engine of voluntary exchange and the freedom to respond to needs has been crippled by an unprecedented government overreaction to a health crisis.