Tuesday, December 8, 2009

On "I, Pencil"

Leonard Read's classic essay "I, Pencil" is deceptively simple. It exposes something that benefits us daily but that we rarely perceive: the power of the market to produce goods and services, not by demanding that they be produced, but by allowing people to act freely along every step of the way. Of course the example of a pencil is merely incidental. This could have been the story of a million other products that are readily available to us, thanks to the power of the free market to effectively allocate resources. The point is that the process is decentralized and spontaneous. Every worker in the making of a pencil is working for themselves, not for the goal of making a pencil. To them, the pay they receive is worth the labor they put in. Each party benefits, and nobody is coerced. Not only is voluntary action the most morally acceptable, but it provides the best incentives for people to produce the most at the lowest cost. If we zoom out from any one of these single transactions, we would see a growing web of interaction which, as a whole, creates our entire economy. The beauty of this system, and what makes it so easily taken for granted, is the fact that it arises naturally when people are simply allowed to trade with each other on their own terms and not according to any particular scheme or design.
This is not easily grasped by most casual observers of economics. In his essay, "Why I Am No Longer A 'Brain-Dead Liberal'," the playwright David Mamet explains that, like most government apologists, he once saw the state as the solution to society's problems. If only it could have a little more control of our affairs, it could set them in the right order for us. It took him 60 years of experience before he came to realize this simple truth: that people are self-interested and that "...the world in which I actually functioned day to day was made up of people, most of whom were reasonably trying to maximize their comfort by getting along with each other." Along with this realization, Mamet came to see the idealistic goals of most government schemes as naive and misguided since they only disrupt the spontaneous and voluntary system of free enterprise and result in unforeseen harm. From the increasingly statist flavor of modern politics, more and more government plans promise to correct the imperfections of our world (healthcare for all, affordable housing, protection of domestic markets). The truth is that the world in which we live is not perfect, but it is generally best served by getting out of the way and letting people handle their problems themselves.

by Brian Bisek