Only Liberty Can Produce a Pencil

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Back in 1958, Leonard E. Read wrote what has become the most popular essay ever written in defense of the free market. It was better than Frederic Bastiat’s 1850 essay on a broken window as destructive, not productive. It was as clever as Bastiat’s humorous petition of the candlemakers calling for laws against the ruinous competition from the sun. Milton Friedman recommended it highly.

Leonard Read’s delightful story, “I, Pencil,” has become a classic, and deservedly so. I know of no other piece of literature that so succinctly, persuasively, and effectively illustrates the meaning of both Adam Smith’s invisible hand – the possibility of cooperation without coercion – and Friedrich Hayek’s emphasis on the importance of dispersed knowledge and the role of the price system in communicating information that “will make the individuals do the desirable things without anyone having to tell them what to do.”

For over half a century, this essay has stuck in the collective craw of Keynesians, who regard the free market as in need of government regulation and extensive government ownership of natural resources. But Keynesians tend to write turgid, incomprehensible articles. They do not have the gift of satire. One Keynesian has attempted to refute Read’s essay by an appeal to government ownership of forests and government regulation of industry. This is what made pencils possible, he says.

So, I have updated Read’s essay.

WE, PENCILSOur Family Tree, as Told to Gary North

My grandfather told Leonard Read the story of his family tree back in 1958. Despite being notoriously sharp, he was a kindly fellow, always trying to make his point without sticking it to anyone. So, he neglected to mention certain aspects of the family tree that nobody in the family has been proud of. I have decided to be more forthright.

Grandfather began with the obvious. We pencils spend most of our time helping people discover the obvious.

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.

Grandfather always liked to be humble. But he was really proud of his heritage. We all are. He explained why.

I, Pencil, simple though I appear to be, merit your wonder and awe, a claim I shall attempt to prove. In fact, if you can understand me – no, that’s too much to ask of anyone – if you can become aware of the miraculousness which I symbolize, you can help save the freedom mankind is so unhappily losing. I have a profound lesson to teach. And I can teach this lesson better than can an automobile or an airplane or a mechanical dishwasher because – well, because I am seemingly so simple.

Simple? Yet, not a single person on the face of this earth knows how to make me. This sounds fantastic, doesn’t it? Especially when it is realized that there are about one and one-half billion of my kind produced in the U.S.A. each year.

We pencils are really highly complex, but we look simple. What is true of us is true of everything that looks simple right down to a biological cell. Everything is irreducibly complex. But grandfather had a way with words.

My family tree begins with what in fact is a tree, a cedar of straight grain that grows in Northern California and Oregon. Now contemplate all the saws and trucks and rope and the countless other gear used in harvesting and carting the cedar logs to the railroad siding. 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!

Once grandfather got going, nobody could get him to stop. He really knew how to lay it on! When it comes to hidden complexity, he always said, “If you’ve got it, flaunt it!”

The logs are shipped to a mill in San Leandro, California. Can you imagine the individuals who make flat cars and rails and railroad engines and who construct and install the communication systems incidental thereto? These legions are among my antecedents.

Consider the millwork in San Leandro. The cedar logs are cut into small, pencil length slats less than one-fourth of an inch in thickness. These are kiln dried and then tinted for the same reason women put rouge on their faces. People prefer that I look pretty, not a pallid white. The slats are waxed and kiln dried again. How many skills went into the making of the tint and the kilns, into supplying the heat, the light and power, the belts, motors, and all the other things a mill requires? Sweepers in the mill among my ancestors? Yes, and included are the men who poured the concrete for the dam of a Pacific Gas & Electric Company hydroplant which supplies the mill’s power!

Don’t overlook the ancestors present and distant who have a hand in transporting sixty carloads of slats across the nation.

Once in the pencil factory – $4,000,000 in machinery and building, all capital accumulated by thrifty and saving parents of mine – each slat is given eight grooves by a complex machine, after which another machine lays leads in every other slat, applies glue, and places another slat – atop – a lead sandwich, so to speak. Seven brothers and I are mechanically carved from this “wood-clinched” sandwich.

My “lead” itself – it contains no lead at all – is complex. The graphite is mined in Ceylon [Sri Lanka]. Consider these 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.

OK, enough’s enough. You get the idea. This complexity is beyond the power of anyone to explain, let alone centrally plan.

Here is an astounding fact: Neither the worker in the oil field nor the chemist nor the digger of graphite or clay nor any who mans or makes the ships or trains or trucks nor the one who runs the machine that does the knurling on my bit of metal nor the president of the company performs his singular task because he wants me. Each one wants me less, perhaps, than does a child in the first grade. Indeed, there are some among this vast multitude who never saw a pencil nor would they know how to use one. Their motivation is other than me. Perhaps it is something like this: Each of these millions sees that he can thus exchange his tiny know-how for the goods and services he needs or wants. I may or may not be among these items.

Grandfather was always self-effacing. He admitted that most of these workers were not interested in owning more pencils. Yet, because they could trade their labor for money, they worked hard to create bits and pieces of the components that make a pencil.

There is a fact still more astounding: The absence of a master mind, of anyone dictating or forcibly directing these countless actions which bring me into being. No trace of such a person can be found. Instead, we find the Invisible Hand at work. This is the mystery to which I earlier referred.

It has been said that “only God can make a tree.” Why do we agree with this? Isn’t it because we realize that we ourselves could not make one? Indeed, can we even describe a tree? We cannot, except in superficial terms. We can say, for instance, that a certain molecular configuration manifests itself as a tree. But what mind is there among men that could even record, let alone direct, the constant changes in molecules that transpire in the life span of a tree? Such a feat is utterly unthinkable!

Most pencils like to believe in miracles. Pencils are just like people in this regard. And a pencil would be a miracle indeed, if there were no voluntary cooperation among people, no contracts, and no exchange. But, when you get down to it, everyone who has any simple item in his pocket has a pocket full of miracles.

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.

Grandfather was never one to waste an important point. (I’ve got a million of ’em!)

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 masterminding – then one will possess an absolutely essential ingredient for freedom: a faith in free people. Freedom is impossible without this faith.

All of us family members agree with grandfather’s assessment of our genealogy. But there is a strange thing. We still find that people find it difficult to accept our genealogy.


Every family has a dark side to it if you look back far enough. Grandfather admitted it up front, but passed over it quickly. He mentioned that he came from either northern California or Oregon. He wasn’t sure which. Our family branch – get it? Like I said, I’ve got a million of ’em – grew up on land owned by the U.S. government. Some of the family members were owned by the U.S. Forest Service. The others were owned by the Bureau of Land Management. The two agencies have never cooperated very well. When you talk about turf wars in government, it’s literal in their case.

Back in 1935, Forest Service adopted a policy of putting out all fires within a few hours of their discovery. This was adopted by the National Park Service, a third government agency overseeing timber.

In 1972, the National Park Service reversed the older policy, adopting the “let it burn” approach. But this was adopted after almost 40 years of fire-free growth of trees and underbrush. Then, in 1988, about 800,000 acres of Yellowstone Park burned to the ground. “Ashes to ashes, dust to dust. The National Park Service policies giveth, and the National Park Service policies taketh away. Blessed be the name of the National Park Service” (except inside the Bureau of Land Management).

The U.S. government owns 30% of the nation’s land. The U.S. government owns anywhere from 40% to 85% of all land in the dozen Western states. This does not include land owned by state and local governments.

The government leases timber land to private corporations that have no stake in the future of the land. They never know if they will be top bidders in 25 years. So, they strip as much of the land as the agencies allow.

Employees of these agencies have no direct stake in the profitability of the corporations, so they do not make their decisions based on customer demand. They make their decisions in terms of adding more power to their agencies.

This leads to irrationally priced wood. This has been a problem with family members in our lineage. We never really know what we’re worth. It’s bad for a pencil’s self-image, let me tell you. For all I know, I am the offspring of some Swiss bank payoff to a government bureaucrat by a corporate deal-maker.

Our family is not one of the main branches. The main branches in the West are in Washington State. The trees there are managed on privately owned land. Weyerhaeuser has owned the land ever since 1900. It is the largest privately owned forest of timber on earth.

Then there is Georgia Pacific. It owns huge tracts of land in the southeast. It is owned by Koch Industries, a privately held corporation. From 1927 to 2005, it was a publicly traded company. Today, outsiders have little say in how the timber is managed. Pricing is set between customers who buy wood products and corporate entrepreneurs who get the best prices customers offer. The corporate owners have personal economic incentives to keep the trees healthy and growing. They want to keep making profitable deals.

A pencil who can trace his lineage back to one of these firms knows what he is worth. He knows he’s legitimate.

People who are involved in making the components of pencils in the United States are the graduates of tax-funded schools. They used pencils in their youth, but the skills they needed to learn pencil-making used to be taught at home by mothers in about five years or fewer. After that, students can educate themselves. Anyone who doubts this needs to investigate Dr. Art Robinson’s curriculum.

Some managers need to know how to read and do basic arithmetic. These skills are available through curriculum materials that are free of charge online today. The model is Khan Academy. The next generation of pencils will be better than ever. They will be computer designed.

As for illiterate workers outside the United States who helped make me, they picked up the necessary skills through apprenticeship. This was funded by their employers, not taxpayers.

The components that made me what I am were shipped by rail. These were built with government money in the late 1860s. But the trees where the really successful family members grow up are in Washington State. They were sold to Weyerhaeuser in 1900 by James J. Hill, who built the Great Northern Railway without government money.

Of course, patents were the basis of some ancient developments that shaped pencils way back when. The patent system confers monopoly grants of privilege to inventors for a few years. Whenever it has not existed, innovation has been much more rapid. That’s rarely talked about these days.

Corporations have contributed to the creation of my family tree, but these are no more the product of state action than churches are. There is limited liability protection for both, according to voluntary agreement.

My family tree, just like yours, is the product of mostly voluntary agreements. From time to time over the last 150 years, people with badges and guns have intervened to tell other people making pencil parts what to do. They always do this on the basis of their perceived self-interest. I think there would be a lot more pencils serving a lot more users if people with badges and guns had just stayed out of it. They are all pen users. Don’t put your trust in pen users.

If you understand the genealogy of a pencil, you should be immunized against Marxism, Keynesianism, and the other isms that teach that central planning is required to enjoy the blessings of liberty.

Sadly, the story of I, Pencil is not taught in tax-funded schools. It is not taught in state-accredited universities. It is taught online.

August 31, 2011

Gary North [send him mail] is the author of Mises on Money. Visit He is also the author of a free 20-volume series, An Economic Commentary on the Bible.

Copyright © 2011 Gary North