"I, Pencil" Turns 50 from Cafe Hayek by Don Boudreaux
This month marks the 50th anniversary of the original publication of one of the most insightful economics essays ever penned -- "I, Pencil." It wasn't written by a professional economist; it was written by Leonard E. Read, founder and long-time president of the Foundation for Economic Education. Although Read was no professional economist, his understanding of the way market economies work, and his ability to explain that logic in clear and compelling terms, far surpasses that of all but a tiny handful of PhD-sporting economists.
I am a lead pencil—the ordinary wooden pencil familiar to all boys and girls and adults who can read and write. Writing is both my vocation and my avocation; that’s all I do. You may wonder why I should write a genealogy. Well, to begin with, my story is interesting. And, next, I am a mystery —more so than a tree or a sunset or even a flash of lightning. [...]
I, Pencil, am a complex combination of miracles: a tree, zinc, copper, graphite, and so on. But to these miracles which manifest themselves in Nature an even more extraordinary miracle has been added: the configuration of creative human energies—millions of tiny know-hows configurating naturally and spontaneously in response to human necessity and desire and in the absence of any human masterminding! Since only God can make a tree, I insist that only God could make me. Man can no more direct these millions of know-hows to bring me into being than he can put molecules together to create a tree.
The above is what I meant when writing, “If you can become aware of the miraculousness which I symbolize, you can help save the freedom mankind is so unhappily losing.” For, if one is aware that these know-hows will naturally, yes, automatically, arrange themselves into creative and productive patterns in response to human necessity and demand— that is, in the absence of governmental or any other coercive master-minding—then one will possess an absolutely essential ingredient for freedom: a faith in free people. Freedom is impossible without this faith.
Once government has had a monopoly of a creative activity such, for instance, as the delivery of the mails, most individuals will believe that the mails could not be efficiently delivered by men acting freely. And here is the reason: Each one acknowledges that he himself doesn’t know how to do all the things incident to mail delivery. He also recognizes that no other individual could do it. These assumptions are correct. No individual possesses enough know-how to perform a nation’s mail delivery any more than any individual possesses enough know-how to make a pencil. Now, in the absence of faith in free people—in the unawareness that millions of tiny know-hows would naturally and miraculously form and cooperate to satisfy this necessity—the individual cannot help but reach the erroneous conclusion that mail can be delivered only by governmental “masterminding.”
If I, Pencil, were the only item that could offer testimony on what men and women can accomplish when free to try, then those with little faith would have a fair case. However, there is testimony galore; it’s all about us and on every hand. Mail delivery is exceedingly simple when compared, for instance, to the making of an automobile or a calculating machine or a grain combine or a milling machine or to tens of thousands of other things. Delivery? Why, in this area where men have been left free to try, they deliver the human voice around the world in less than one second; they deliver an event visually and in motion to any person’s home when it is happening; they deliver 150 passengers from Seattle to Baltimore in less than four hours; they deliver gas from Texas to one’s range or furnace in New York at unbelievably low rates and without subsidy; they deliver each four pounds of oil from the Persian Gulf to our Eastern Seaboard—halfway around the world—for less money than the government charges for delivering a one-ounce letter across the street!
The lesson I have to teach is this: Leave all creative energies uninhibited. Merely organize society to act in harmony with this lesson. Let society’s legal apparatus remove all obstacles the best it can. Permit these creative know-hows freely to flow. Have faith that free men and women will respond to the Invisible Hand. This faith will be confirmed. I, Pencil, seemingly simple though I am, offer the miracle of my creation as testimony that this is a practical faith, as practical as the sun, the rain, a cedar tree, the good earth.
Neoclassical theories Do Not Explain How Modern Economies Function
from Adam Smith's Lost Legacy by Gavin Kennedy
So, in the abstract world of neoclassical markets, they introduced into them a mystical, abstract, and wholly imaginary force that is their sole claim to the relevance of their abstractions for the real world, namely that “an invisible hand”, disembodied, ubiquitous and multi-talented, ‘leads’ each and every player to do exactly what they are required to do by a mysterious force (some actually credit it to God!) that guides their every transaction, of which there must be trillions taking place each working hour, irrespective of the outcomes, into a utopian perfect harmony. Not only is this wishful thinking; it is contrary to ordinary facts.
It’s nonsense, but unlike the harmless fun of the myth of Santa Clause visiting each child with presents once a year, the myth of an invisible hand is pernicious when economists, who should know better, come to believe that it exists as the guiding principle of markets.
I have sometimes felt, when addressing my peers with the gist of my paper on the invisible hand myth (downloadable from the Lost Legacy home page), that I am spoiling their party by pointing out that, like Santa Clause, it is a myth.
First of all, Adam Smith did not relate his use of the metaphor of ‘an invisible hand’ to market transactions; this was an invention of neoclassical theorists, aided by propagandists (some paid, others out of their misguided, convictions) for the activities of large corporations, which corner markets and act non-competitively, and in some cases destructively.