I, Chinese Pencil

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Dani Rodrik, the Rafiq Hariri Professor of International Political Economy at the John F. Kennedy School of Government, Harvard University, tweets:

Friedman famously used the pencil as an example of the virtues of markets. A socialist/interventionist country (CHN) runs that industry now.

First of all, it wasn’t Milton Friedman that first pointed out the importance of markets by using the pencil as an example.

It was Leonard Read, who wrote about the manufacture of the pencil, in a piece called, I, Pencil. second. Note that Friedman in an afterword to the piece acknowledges Read as creator of the story.

Third, although Rodrik comments on the story, I doubt he has ever read it,(or he really has a problem with comprehension, if he did) since he smugly incorrectly states that the pencil is now made in China. It may be assembled in China, but the sense in which Read (and Friedman) look at the creation of the pencil goes way beyond where it is assembled.

As Read points out, the lead in the pencil may come from an entirely different country (In Read’s story Sri Lanka]

Read goes on:

Consider these [Sri Lankan]miners and those who make their many tools and the makers of the paper sacks in which the graphite is shipped and those who make the string that ties the sacks and those who put them aboard ships and those who make the ships. Even the lighthouse keepers along the way assisted in my birth – and the harbor pilots…

Then there’s [the pencil’s] crowning glory, inelegantly referred to in the trade as “the plug,” the part man uses to erase the errors he makes with me. An ingredient called “factice” is what does the erasing. It is a rubber-like product made by reacting rapeseed oil from the Dutch East Indies [Indonesia] with sulfur chloride. Rubber, contrary to the common notion, is only for binding purposes. Then, too, there are numerous vulcanizing and accelerating agents. The pumice comes from Italy; and the pigment which gives “the plug” its color is cadmium sulfide.

Fourth, although Rodrik call China a socialist/interventionist state, it is far from that. It is a mixed mayhem of parts government and parts private sector. The pencils are made by a wide variety of Chinese private sector manufacturers, including Tonglu Kechao Pen Co., Ltd., Fujian Best Stationery Co., Ltd., Jiangyin Ordg Trading Co., Ltd., and Harbin Hairun Pencil Co., Ltd.

Bottom line: Pencil assembly in China has nothing to do with the socialist/interventionist state Bottom line, and as read pointed out the fact holds that no one knows how to manufacture a pencil from start to finish. Rodrik has missed the complete point of Read’s story and attempts to smear it, without having an ounce of knowledge of what he is talking about.

If proof was ever needed of Friedrich Hayek’s assertion that knowledge is not dispersed evenly to all, Rodrik sure just proved that.

Reprinted with permission from Economic Policy Journal.

2011 Economic Policy Journal

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