The March 2001 Freeman contains a column in which I extend the lesson of Leonard Read’s remarkable essay “I, Pencil.” My column is below the fold.
Leonard Read’s most celebrated essay is his brilliant “I, Pencil.” Even Milton Friedman—no slouch at bringing economics to life—acknowledges a debt to Read for demonstrating so vividly the enormous amount of human cooperation routinely achieved by free markets. “I, Pencil” makes clear that the knowledge and cooperation of literally millions of people are necessary to produce even a product as mundane as the pencil. This knowledge is so vast and so detailed that no human being or committee of human beings could ever hope to possess it whole. (You can read “I, Pencil” online at www.fee.org/about/ipencil.html.)
If prosperity is to continue, there is no alternative to relying on the decentralized decision-making and actions of countless specialists operating within the rules of private property. Only free markets elicit all the knowledge necessary to produce the goods and services we take for granted in modern society.
The importance of the “I, Pencil” thesis cannot be overstated.
There is, though, an even deeper point. While “I, Pencil” highlights the necessity of relying on millions of individual specialists to contribute their unique slivers of knowledge to the production process, the essay begins in midstream. All the tasks required to produce pencils already exist. For example, the necessity of exploring for graphite has been figured out, as have the precise methods for carrying out this exploration. All that’s required is that people who specialize in such exploration be motivated to perform the task. The same is true for each of the millions of other tasks required for making pencils—felling cedar trees; transporting the wood and other inputs to the pencil factory; insuring the factory against fire and theft; operating the machine that produces erasers; finding the dyes to color the paint that will coat the pencils; and on and on and on.
Each of these productive steps began as a creative spark in someone’s mind. Even the step that seems to us today to be most banal (perhaps making the casing out of wood) required someone, at some time in the past, to see for the first time in human history that wood is useful for human needs. “Seeing” this possibility was an instance of human creativity. This creative person figured out for the first time that a tree is useful if felled and cut into useable pieces.
The identity of this great benefactor of humankind is forever lost in the deep mists of history. Perhaps if he or she had not had that creative insight, someone else only one hour later would have had it. Or perhaps not. Humans are not born with the a priori knowledge that trees can supply useful products.
Perhaps this creative insight would never have otherwise happened. Or perhaps it would have happened, but only centuries or millennia later than it actually did. We don’t know. All we do know is that it did happen, that we are today still benefiting from this occurrence, and that it was indeed a creative spark.
Nor are humans born with the a priori knowledge of how to chop trees down. To fell trees requires the use of a tool that originated as someone’s creative idea. As obvious as an ax is to us today, there was a time in our history when the very idea of an ax had yet to occur to anyone. Someone, somewhere, at some time first conceived of an ax. Without human creativity, axes would never exist.
The same truth holds for all the pieces of a pencil and for each of the innumerable tasks necessary to produce them. Each pencil represents more than just the vast knowledge distributed among countless individuals. Each pencil represents countless individuals’ creativity. No matter how simple any one of these tasks or features of a pencil might seem to us today, there was a time in human history when no one had thought of its possibility or of practical means of achieving it. Making marks with graphite; mixing graphite with clay; refining petroleum or linseed oil so that it serves as the base of enamel paint; fastening an eraser to the pencil shaft; producing an electrolysis machine that transforms bauxite, alumina, and myriad other raw materials into aluminum that can be molded into the ferrule that fastens the eraser to the pencil shaft; making the pencil shaft octagonal so that it’s comfortable to use but will not roll off a table—the list of creative insights represented by the pencil is endless.
This realization suggests an even deeper point. Every material that we today classify as a resource was at one time in our history worthless or downright undesirable. Not until human creativity goes to work does any physical thing become useful and valuable. Resources don’t exist without human creativity.
Consider, for example, petroleum. People living in what is now Pennsylvania in, say, the year 1200 likely considered the crude oil that bubbled up in streams a nuisance: it likely contaminated their drinking water. Better for them that it disappear. Oil certainly was no great source of wealth to American Indians.
Crude oil became a resource only when someone first creatively figured out that it can be used to satisfy human wants. And even then our ability to use it became a reality only because many other people creatively devised each of the various tools and processes necessary for extracting and refining crude oil.
Indeed, that seemingly most obvious resource, land, was for most of human history almost valueless. Humans have been around for 50,000 years. And yet agriculture is only 10,000 years old. Thus, for 80 percent of our existence we were unaware of the benefits of planting and tending crops as a means of feeding ourselves.
The late Julian Simon never tired of reminding us that the human mind is the ultimate resource.* All the nonhuman things that we call “resources” are useful and valuable only because human creativity made them that way.
Human creativity is the only input to our prosperity that is indispensable. If tomorrow all crude oil dissolves, all computer software is erased by a virus, and all trees turn to stone, human creativity will find substitutes for these things. The short-run hardship might be real, but it would be neither permanent nor devastating. Not so if human creativity abruptly stops. Such a tragedy would mean not only no further advance for humanity; it would also mean rapid regress. The reason is that creativity is necessary for us to handle change and ignorance. Because tomorrow will be a bit different from today, and because we cannot fully anticipate all that we will encounter, creativity is necessary to deal with these surprises.
Anything that hampers human creativity is thus a curse to all humankind. Anything that encourages human creativity is a boon.
*Julian L. Simon, The Ultimate Resource 2 (Princeton, N.J.: Princeton University Press, 1996).
