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.”
    -INTRODUCTION: to I, Pencil (Milton Friedman)

For its sheer power to display in just a few pages the astounding fact that free markets successfully coordinate the actions of literally millions of people from around the world into a productive whole, nothing else written in economics compares to Leonard Read's celebrated essay, “I, Pencil.” This essay's power derives from Read's drawing from such a prosaic item an undeniable, profound, and spectacular conclusion: it takes the knowledge of countless people to produce a single pencil. No newcomer to economics who reads “I, Pencil” can fail to have a simplistic belief in the superiority of central planning or regulation deeply shaken. If I could choose one essay or book that everyone in the world would read, I would unhesitatingly choose “I, Pencil.” Among these readers, simplistic notions about the economy would be permanently transformed into a new and vastly more subtle—and correct—understanding.
    -Afterword to “I, Pencil” by Donald J. Boudreaux (OLL)

In 1945, whistling into the wind of the era’s faith in central planning, F. A. Hayek wrote one of his pivotal essays, The Use of Knowledge in Society (FA Hayek, 1945, AER). As Milton Friedman notes above, Hayek’s essential argument was that the sort of knowledge that would be required for a central figure/institution to plan effectively is simply too dispersed to be complete and accessible to any authority:

What is the problem we wish to solve when we try to construct a rational economic order? On certain familiar assumptions the answer is simple enough.
If we possess all the relevant information,
if we can start out from a given system of preferences, and
if we command complete knowledge of available means, the problem which remains is purely one of logic.
That is, the answer to the question of what is the best use of the available means is implicit in our assumptions. The conditions which the solution of this optimum problem must satisfy have been fully worked out and can be stated best in mathematical form: put at their briefest, they are that the marginal rates of substitution between any two commodities or factors must be the same in all their different uses.

This, however, is emphatically not the economic problem which society faces. And the economic calculus which we have developed to solve this logical problem, though an important step toward the solution of the economic problem of society, does not yet provide an answer to it. The reason for this is that the “data” from which the economic calculus starts are never for the whole society “given” to a single mind which could work out the implications and can never be so given.

The peculiar character of the problem of a rational economic order is determined precisely by the fact that the knowledge of the circumstances of which we must make use never exists in concentrated or integrated form but solely as the dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess. The economic problem of society is thus not merely a problem of how to allocate “given” resources—if “given” is taken to mean given to a single mind which deliberately solves the problem set by these “data.” It is rather a problem of how to secure the best use of resources known to any of the members of society, for ends whose relative importance only these individuals know. Or, to put it briefly, it is a problem of the utilization of knowledge which is not given to anyone in its totality.

Leonard Read had for some time been a leading figure in the Chamber of Commerce and a co-founder in 1946–along with Henry Hazlitt and others–of the Foundation for Economic Education, which published various pamphlets and texts defending the idea of a free economy. He also acquired what remained of Albert Jay Nock’s The Freeman. It was there , in the December 1958 issue, that he published his own classic essay, I, Pencil. In a uniquely personable address, he used the life story of how the seemingly simple writing utensil is made to illustrate Hayek’s thesis: 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 master-minding! 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.[...] 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 master-minding—then one will possess an absolutely essential ingredient for freedom: a faith in free men. Freedom is impossible without this faith. [...] The lesson I have to teach is this: Leave all creative energies uninhibited. Merely organize society to act in harmony with this lesson. Let society’s legal apparatus remove all obstacles the best it can. Permit these creative know-hows freely to flow. Have faith that free men will respond to the Invisible Hand. This faith will be confirmed. I, Pencil, seemingly simple though I am, offer the miracle of my creation as testimony that this is a practical faith, as practical as the sun, the rain, a cedar tree, the good earth. Perhaps no other piece of writing has more profoundly influenced people to embrace market economics and it lives on today even in an enchanting film version. In the age of MAGA and other Nationalist groups we can’t really say that its message has become a truism, but even they have to pretend that the centralized regimes they dream of are actually promissors of freedom.

Meanwhile, if this essay gets you in the mood for a longer more sophisticated version of these ideas, in one of my favorite examples of the contrast of markets with planning, Francis Spufford’s novel Red Plenty depicts the USSR’s disastrous experiment with cybernetics

In the twentieth century, Russians stopped telling skazki. And at the same time, they were told that the skazki were coming true. The stories’ name for a magic carpet, samolet, ‘self-flyer’, had already become the ordinary Russian word for an aeroplane. Now voices from the radio and the movies screen and television began to promise that the magic tablecloth amobranka, ‘self-victualler’, would soon follow after. ‘In our day,’ Nikita Krushchev told a crowd in the Lenin Stadium of Moscow on 29 September 1959, ‘the dreams mankind cherished for ages, dreams expressed in fairytales which seemed sheer fantasy, are being translated into reality by man’s own hands.’ He meant, above all, the skazki’s dreams of abundance. Humanity’s ancient condition of scarcity was going to end, imminently. Everyone was going to climb the cabbage stalk, scramble through the hole in the sky, and arrive in the land where millstones revolved all by themselves. “Whenever they gave a turn, a cake and a slice of bread with butter and sour cream appeared, and on the top of them, a pot of gruel.’ Now, instead of being imagined compensation for an empty belly, the sour cream and the butter were truly going to flow.

And of course, Krushchev was right. This is exactly what did happened in thhe twentieth century, for hundreds of millions of people. There is indeed more food, and more kinds of food, in one ordinary supermarket of the present day, than in any of the old hungry dreams, dreamed in Russia or elsewhere. But Krushchev believed that the plenty of the stories was coming in Soviet Russia, and coming because of something that the Soviet Union possessed and the hungry lands of capitalism lacked: the planned economy. Because the whole system of production and distribution in the USSR was owned by the state, because all Russia was (in Lenin’s words) ‘one office, one factory’, it could be directed, as capitalism could not, to the fastest, the most lavish fulfillment of human needs. Therefore it would easily out-produce the wasteful chaos of the marketplace. Planning would be the USSR’s own self-turning millstone, its own self-victualling tablecloth.

This Russian fairytale began to be told in the decade of the famine before the Second World War, and it lasted officially until Communism fell. Hardly anyone believed it, by the end. In practice, from the late 1960s on all that the Soviet regime aspired to do was to provide a pacifying minimum of consumer goods to the inhabitants of the vast shoddy apartment buildings ringing every Soviet City. But once upon a time the story of red plenty had been serious: an attempt to beat capitalism on its own terms, and to make Soviet citizens the richest people in the world. For a short time, it even looked – and not just to Nikita Krushchev- as if the story might be coming true, Intelligence was invested in it, as well as foolishness: a generation’s hopes, and a generation’s intellectual gifts, and a tyranny’s guilty wish for a happy ending.

When we speak of the End of History, it is this that we mean. It is not that people will not try to come up with alternatives to capitalism–for instance, Donald’s proposed tariffs, expulsions of immigrants, retaliation against disfavored businesses, etc.--it is that we are arrived at the recognition that none of them are viable. I, Pencil teaches the lesson simply and well.

(Reviewed:15-Oct-24)

Grade: (A) Orrin C. Judd

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Leonard Read Links:

    -WIKIPEDIA: Leonard Read
    -WIKIPEDIA: I, Pencil
    -FILMOGRAPHY: Leonard Read (IMDB)
    -Foundation for Economic freedom
    -ENTRY: Read, Leonard E. (1898-1983) (Donald J. Boudreaux, Aug 15th, 2008, Encyclopedia of Libertarianism)
    -TRIBUTE SITE: LeonardRead.org
    -INDEX: Leonard E. Read (The Online Books Page)
    -INDEX: Leonard E Read (Internet Archive)
    -INDEX: Leonard E. Read (Mises institute)
    -INDEX: Leonard E. Read 1898 – 1983 (Online Library of Liberty)
    -OBIT: Leonard E. Read Dies; Free-Market Advocate (NY Times, May 16, 1983)
    -ESSAY: I, Pencil (Leonard E. Read, December 1958, Foundation for Economic Freedom: The Freeman)
    -ETEXT: I, Pencil with Intro by Milton Friedman and Afterword by Donald J. Boudreaux (OLL)
    -VIDEO: I, Pencil - Leonard E. Read | Animated version of great essay (EconClips)
    -FILM: I, Pencil: The Movie
    -ETEXT: The Essential Leonard Read (FEE)
    -ETEXT: How To Advance Liberty (Leonard E. Read)
    -ETEXT: Then Truth Will Out ( Leonard E. Read, The Freeman)
    -VIDEO: MILTON FRIEDMAN & LEONARD READ "I, PENCIL" Full Audiobook (Free to Choose Network)
    -INTERVIEW: A Rare and Insightful Interview with Leonard Read (Tibor R. Machan, April 1975, Reason)
    -STUDY GUIDE: I, Pencil (FEE)
    -STUDY GUIDE: I, Pencil (Genius.com)
    -STUDY GUIDE: I, Pencil (SuperSummary)
    -STUDY GUIDE: I, Pencil (IvyPandsa)
    -STUDY GUIDE: I, Pencil (Course Sidekick)
    -STUDY GUIDE: I, Pencil (LitBug)
    -STUDY GUIDE: I, Pencil (Edusson)
    -STUDY GUIDE: I, Pencil (Study.com)
    -STUDY GUIDE: I, Pencil (Competitive Enterprise Institute)
    -STUDY GUIDE: I, Pencil (Fast Track Teaching)
    -STUDY GUIDE: I, Pencil (BooKey)
    -STUDY GUIDE: I, Pencil (SuperSummary)
    -PODCAST: How Can This Possibly Be True?: A famous economics essay features a pencil (yes, a pencil) arguing that “not a single person on the face of this earth knows how to make me.” Is the pencil just bragging? In any case, what can the pencil teach us about our global interdependence — and the proper role of government in the economy? (Stephen J. Dubner, 2/18/16, Freakonomics Radio)
    -PODCAST: Pencil: Is the pencil underrated? Tim Harford examines the role pencils have played in developing our world, and finds out why some writers have called them a "miracle of the free market". Do they have a point? (BBC: 50 Things That Made the Modern Economy, 6/23/19)
    -VIDEO: Masterminds and Society | Leonard E Read: I, Pencil (PhilosophyToons)
    -VIDEO BOOK CLUB: Leonard E. Read - I, Pencil | Live Reading with Text (Book Club)
    -ESSAY: Leonard E. Read's Small Tent Strategy (Gary North, Mises.org)
    -ESSAY: Leonard E. Read, Crusader (Bettina Bien Greaves, Liberty Haven)
    -ESSAY: Leonard E. Read: A Portrait: The Advancement of Human Liberty Is a Learning Process (EDMUND OPITZ, 9/01/1998, FEE: The Freeman)
    -ESSAY: The Legacy of Leonard E. Read (Jacob G. Hornberger, September 1991, future of Freedom Foundation)
    -ESSAY: Leonard Read, the Founder and BuilderThe story of Leonard Read. One of the most notable social philosophers of our time. (Mary Sennholz, 5/01/96, FEE)
    -ESSAY: “I, Pencil”: Diving Into Leonard E. Read’s Stunning Masterpiece (Ariana Goforth, March 15, 2023, Stone Soup)
    -ESSAY: Leonard E. Read on Why Means Matter More Than Ends (Gary M. Galles, FEE)
    -LETTER: To Leonard Read [Letter 250] (Ayn Rand, August 29, 1946)
    -ESSAY: Leonard Read, Modern Libertarian Founding Father, Gets His Books Fully Digitized (Brian Doherty, 3.2.2015, reason)
    -ESSAY: What Leonard Read Learned from Mises and Nock about Changing the World: The power of ideas and of the Remnant (Dan Sanchez, FEE)
    -ESSAY: Nock and Leonard Read on “One Improved Unit” and the Power of Attraction (Stephan Kinsella, January 8, 2011, The Libertarian Standard)
    -ESSAY: FDR Spied on Leonard Read (Jacob G. Hornberger, April 16, 2015, FEE)
    -ESSAY: Time to Revisit the Classic 1958 Essay ‘I, Pencil’ by Leonard Read and the 2012 Movie Version (Mark J. Perry, June 08, 2016, AEIdeas)
    -ESSAY: I, Pencil Revisited (Kevin Carson, July 11th, 2023, Center for a Stateledss Society)
    -ESSAY: I, Pencil: A Brilliant Vintage Allegory of How Everything Is Connected (Maria Popova, The Marginalian)
    -ESSAY: You, Pencil (AntiCap)
    -VIDEO LECTURE: Milton Friedman - Lesson of the Pencil
    -ESSAY: Adam Smith Vs. Leonard E. Read (Bronwyn Cordiak, 12/07/15, Bear Market)
    -ESSAY: We Pencils (Medianism, 6/01/17)
    -ESSAY: When You Buy Your Coffee, Remember “I, Pencil” (Corianna Baier, Jul 23, 2019, Show Me Institute)
    -ESSAY: The Absence of A Master Mind (Paco Jariego, October 19, 2014, mind the Post)
    -ESSAY: Lesson of making a pencil applies to economic woes (Phyllis Hunsinger, November 11, 2020, The Business Times)
    -ESSAY: Humans: Why They Triumphed: How did one ape 45,000 years ago happen to turn into a planet dominator? The answer lies in an epochal collision of creativity. (Matt Ridley, May 22, 2010, Wall Street Journal)
    -ESSAY: Collective intelligence on the edge (Matt Ridley, January 16, 2011)
    -ESSAY: The BBC’s critique of ‘I, Pencil’ misses the point (Rev. Ben Johnson, Nov. 15th, 2024, Acton Transatlantic Blog)
    -ESSAY: Some criticisms of "I, Pencil" (Terence Eden)
    -ESSAY: “I, Pencil”: A Lesson in Liberty (Brody Reifenberg, Sep 24, 2017, Liberation Day)
    -ESSAY: We Are Not Pencils: We are witnessing firsthand the dangers of absolute reliance on complex, uncontrolled, globalized supply chains. (Declan Leary, Oct 20, 2021, American Conservative)
    -ESSAY: In Defense of ‘I, Pencil’ (Dominic Pino, October 20, 2021, National Review)
    -ESSAY: “I, Pencil” and the Vital Message of “I Don’t Know”: The innumerable market miracles all around us provide us with overwhelming proof of the power of liberty. (Gary M. Galles, December 20, 2018, FEE)
    -ESSAY: More on Leonard Read’s “I, Pencil” (Don Boudreaux, January 15, 2023, Cafe Hayek)
    -ESSAY: Leonard Read on Violence, Liberty, and Love (Gary Galles, 02/03/2020, Mises Institute)
    -ESSAY: The Biggest Lesson of “I, Pencil”: "Freedom taps this richest of all the world’s resources." (Gary M. Galles, December 29, 2018, FEE)
    -PODCAST: Who Was Leonard Read? (The Tuttle Twins, The Way the World Works)
    -PODCAST: The Legacy of Leonard E. Read: What impact did Leonard Read, the founder of the Foundation for Economic Education, have on the libertarian movement? Join FFF president Jacob G. Hornberger and Citadel professor Richard M. Ebeling as they examine the life of this libertarian luminary. ( Future of Freedom Foundation June 23, 2022)
    -PODCAST: Memorable Mentors: Leonard Read (Ron Baker and Ed Kless, Soul of Enterprise)
    -VIDEO: I, Rose (Marginal Revolution University)
    -ESSAY: The Use of Knowledge in Society (FA Hayek, 1945, AER)

What is the problem we wish to solve when we try to construct a rational economic order? On certain familiar assumptions the answer is simple enough.
If we possess all the relevant information,
if we can start out from a given system of preferences, and
if we command complete knowledge of available means, the problem which remains is purely one of logic.
That is, the answer to the question of what is the best use of the available means is implicit in our assumptions. The conditions which the solution of this optimum problem must satisfy have been fully worked out and can be stated best in mathematical form: put at their briefest, they are that the marginal rates of substitution between any two commodities or factors must be the same in all their different uses.

This, however, is emphatically not the economic problem which society faces. And the economic calculus which we have developed to solve this logical problem, though an important step toward the solution of the economic problem of society, does not yet provide an answer to it. The reason for this is that the “data” from which the economic calculus starts are never for the whole society “given” to a single mind which could work out the implications and can never be so given.

The peculiar character of the problem of a rational economic order is determined precisely by the fact that the knowledge of the circumstances of which we must make use never exists in concentrated or integrated form but solely as the dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess. The economic problem of society is thus not merely a problem of how to allocate “given” resources—if “given” is taken to mean given to a single mind which deliberately solves the problem set by these “data.” It is rather a problem of how to secure the best use of resources known to any of the members of society, for ends whose relative importance only these individuals know. Or, to put it briefly, it is a problem of the utilization of knowledge which is not given to anyone in its totality.

    -ETEXT: Economics in One Lesson by Henry Hazlitt
    -ETEXT: An Inquiry into the Nature and Causes of the Wealth of Nations by Adam Smith (Onl;ine Library of Liberty)
    -ETEXT: Red Plenty by Francis Spufford
    -WIKIPEDIA: The Fable of the Bees
    -ETEXT: The Fable of the Bees; Or, Private Vices, Public Benefits by Bernard Mandeville (Project Gutenberg)
    -REVIEW: of I, Pencil by Leonard E. Read (thomas Freese, Tom Woods’s Liberty Classroom)
    -REVIEW: of I, Pencil (Lewis Foster, The Great Recovery)
    -REVIEW: of I, Pencil (Sandaru R., Casual Eyes)
    -REVIEW: of I, Pencil: The Movie (Carl P. Close, The Beacon)
    -REVIEW: of On Thinking for Self – Leonard E. Reed (Kevin Holtsberry, Collected Miscellany)

Book-related and General Links:

    -
    -ESSAY: I, Pencil with Tariff Rates Added (David Henderson,4/05/25, EconLog)
    -ESSAY: Benjamin M. Anderson: Hayek’s Precursor on the Knowledge Problem (James A. Dorn, 11/18/24, Cato)
    -ESSAY: Capitalism versus socialism in the light of the present world economic and financial situation (Benjamin M. Anderson, June 1922, Chase Economic Bulletin )
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