"I, Pencil" Revisited

NOTE: Here's the PDF of the 50th Anniversary Edition with a new introduction.

by Sheldon Richman | January 16, 2009

Leonard Read’s classic essay, “I, Pencil,” which is now 50 years old, is justly celebrated as the best short introduction to the division of labor and undesigned order ever written. Read saw an “extraordinary miracle … [in] 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 master-minding!”

His subject and its relation to freedom and prosperity were certainly worth capturing in such a clever, pleasing, and illuminating essay, which is why it is one of the best-known works in the popular free-market literature.

But there’s another lesson in “I, Pencil” that has been largely overlooked, perhaps by Read himself. “I, Pencil” is also an excellent primer in the Austrian approach to capital theory. It’s worth looking at Read’s essay in that light.

Early on, Read’s pencil describes his family tree, beginning with the cedars grown in northern California and Oregon that provide the wooden slats. But he doesn’t really start with the trees. He notes that turning trees into pencils requires “saws and trucks and rope and the countless other gear used in harvesting and carting the cedar logs to the railroad siding” and those things have to be produced before a pencil can be produced. “Think of all the persons and the numberless skills that went into their fabrication: the mining of ore, the making of steel and its refinement into saws, axes, motors; the growing of hemp and bringing it through all the stages to heavy and strong rope; the logging camps with their beds and mess halls, the cookery and the raising of all the foods. Why, untold thousands of persons had a hand in every cup of coffee the loggers drink!”

What emerges here is what Austrian economists call a structure of production. This structure is characterized by two closely related elements: multiple stages (distinguished by their “distance” from the consumer) and time. The pencil that eventually emerges at the end of the process must first proceed, in various states of incompleteness, through a series of stations at which components are transformed in ways consistent with making pencils. The stations themselves have to be prepared through earlier stages of production. Thus before trees can be cut down and turned into wooden slats, saws, trucks, rope, railroad cars, and other things must be produced first. Before steel can be used to make saws, trucks, and railroad cars, iron ore must be mined and processed. And so on. The same kind of description can be provided for each component of the pencil: the paint, the graphite, the compound that comprises the eraser, the brass ferule that holds the eraser.

Tracing the pencil’s genealogy back to iron, zinc, copper, and graphite mines; hemp plants; rubber trees; castor beans; and much more demonstrates the “roundaboutness” of... Read more>>>>