I, Pencil50th Anniversary Edition

FOUNDATION FOR ECONOMIC EDUCATION30 South Broadway

Irvington-on-HudsonNew York 10533

1-800-960-4FEE • 914-591-7230www.fee.org

My Family Treeas Told to

Leonard E. Read

“I, Pencil” is a superb case study of freemarkets in action. Half of the world’s eco-nomic problems would vanish if everyonewould read “I, Pencil.”

Burton W. Folsom, Jr.Professor of HistoryHillsdale College

There is no better, more easily under-stood, and more fun explanation of thecomplexity of markets than LeonardRead’s “I, Pencil.” It ought to give consid-erable pause when we listen to the arro-gance of politicians who tell us they canmanage an economy better than millions,perhaps billions, of independent decisionmakers in pursuit of their own personalgoals. Its message to would-be planners isto bug out!

Walter E.WilliamsJohn M. Olin Distinguished Professorof EconomicsGeorge Mason University

The most valuable truths about econom-ics and liberty can be found in a lowlylead pencil. When my children are oldenough, I will read them a classic littleessay by the late philosopher Leonard E.Read that turns a mundane writinginstrument into an elementary lessonabout free-market capitalism.

Michelle MalkinSyndicated columnist

b

b

I, Pencil

Introduction by Lawrence W. Reed

Afterword by Milton Friedman

My Family Tree as Told toLeonard E. Read

This edition of “I, Pencil” is dedicated to our

late esteemed colleague, Beth A. Hoffman,

who worked on its production as her last

project before her untimely passing on

December 1, 2008.

Information concerning the Beth A. Hoffman

Memorial Scholarship Fund may be found

at www.fee.org.

Foundation for Economic Education

Irvington-on-Hudson, New York 10533

b

b

Leonard E. Read (1898–1983) estab-lished the Foundation for Economic Educa-tion in 1946. For the next 37 years he servedas FEE’s president and labored tirelesslyto promote and advance liberty. He was anatural leader who, at a crucial momentin American history, roused the forcesdefending individual freedom and privateproperty.

His life is a testament to the power ofideas. As President Ronald Reagan wrote:“Our nation and her people have beenvastly enriched by his devotion to the causeof freedom, and generations to come willlook to Leonard Read for inspiration.”

Read was the author of 29 books andhundreds of essays. “I, Pencil,” his mostfamous essay, was first published in 1958.Although a few of the manufacturing detailsand place names have changed, theprinciples endure.

This anniversary edition of “I, Pencil”was made possible by the generosity ofRalph Smeed and David H. Keyston.

b

1

IntroductionBY LAWRENCE W. REED

Eloquent. Extraordinary.Timeless. Par-adigm-shifting. Classic.Half a century afterit first appeared, Leonard Read’s “I, Pencil”still evokes such adjectives of praise. Right-fully so, for this little essay opens eyes andminds among people of all ages. Manyfirst-time readers never see the world quitethe same again.

Ideas are most powerful when they’rewrapped in a compelling story. Leonard’smain point—economies can hardly be“planned” when not one soul possesses allthe know-how and skills to produce a simplepencil—unfolds in the enchanting words ofa pencil itself. Leonard could have written“I, Car” or “I, Airplane,” but choosing thosemore complex items would have muted themessage. No one person—repeat, no one, nomatter how smart or how many degreesfollow his name—could create from scratcha small, everyday pencil, let alone a car oran airplane.

This is a message that humbles thehigh and mighty. It pricks the inflated egosof those who think they know how to mindeverybody else’s business. It explains inplain language why central planning is anexercise in arrogance and futility, or whatNobel laureate and Austrian economistF. A. Hayek aptly termed “the pretence ofknowledge.”

Indeed, a major influence on Read’sthinking in this regard was Hayek’s famous1945 article, “The Use of Knowledge inSociety.” In demolishing the spurious claimsof the socialists of the day, Hayek wrote,

b

2

“This is not a dispute about whether plan-ning is to be done or not. It is a dispute as towhether planning is to be done centrally, byone authority for the whole economicsystem, or is to be divided among manyindividuals.”

Maximilien Robespierre is said to haveblessed the horrific French Revolution withthis chilling declaration: “On ne saurait pasfaire une omelette sans casser des oeufs.”Translation: “One can’t expect to make anomelet without breaking eggs.” A consum-mate statist who worked tirelessly to planthe lives of others, he would become thearchitect of the Revolution’s bloodiestphase—the Reign of Terror of 1793–94.Robespierre and his guillotine broke eggs bythe thousands in a vain effort to impose autopian society with government plannersat the top and everybody else at the bottom.

That French experience is but oneexample in a disturbingly familiar pattern.Call them what you will—socialists, inter-ventionists, collectivists, statists—history islittered with their presumptuous plans forrearranging society to fit their vision of thecommon good, plans that always fail as theykill or impoverish other people in theprocess. If socialism ever earns a finalepitaph, it will be this: Here lies acontrivance engineered by know-it-alls whobroke eggs with abandon but never, evercreated an omelet.

None of the Robespierres of the worldknew how to make a pencil, yet they wantedto remake entire societies. How utterlypreposterous, and mournfully tragic!

But we will miss a large implication ofLeonard Read’s message if we assume itaims only at the tyrants whose names we allknow. The lesson of “I, Pencil” is not thaterror begins when the planners plan big. Itbegins the moment one tosses humility

b

3

aside, assumes he knows the unknowable,and employs the force of the State againstpeaceful individuals. That’s not just anational disease. It can be very local indeed.

In our midst are people who think thatif only they had government power on theirside, they could pick tomorrow’s winnersand losers in the marketplace, set prices orrents where they ought to be, decide whichforms of energy should power our homesand cars, and choose which industriesshould survive and which should die. Theyshould stop for a few moments and learna little humility from a lowly writingimplement.

While “I, Pencil” shoots down the base-less expectations for central planning, itprovides a supremely uplifting perspectiveof the individual. Guided by Adam Smith’s“invisible hand” of prices, property, profits,and incentives, free people accomplisheconomic miracles of which socialist theo-reticians can only dream.As the interests ofcountless individuals from around the worldconverge to produce pencils without asingle “master mind,” so do they also cometogether in free markets to feed, clothe,house, educate, and entertain hundreds ofmillions of people at ever higher levels.

With great pride, FEE publishes thisnew edition of “I, Pencil” to mark the essay’s50th anniversary. Someday there will be acentennial edition, maybe even amillennialone. This essay is truly one for the ages.

—Lawrence W. Reed, PresidentFoundation for Economic Education

b

4

I am a lead pencil—the ordinarywooden pencil familiar to all boys and girlsand adults who can read and write.

Writing is both my vocation and myavocation; that’s all I do.

You may wonder why I should write agenealogy. Well, to begin with, my story isinteresting. And, next, I am a mystery—more so than a tree or a sunset or even aflash of lightning. But, sadly, I am taken forgranted by those who use me, as if I were amere incident and without background.This supercilious attitude relegates me tothe level of the commonplace. This is aspecies of the grievous error in whichmankind cannot too long persist withoutperil. For, the wise G. K. Chestertonobserved, “We are perishing for want ofwonder, not for want of wonders.”

I, Pencil, simple though I appear to be,merit your wonder and awe, a claim I shallattempt to prove. In fact, if you can under-stand me—no, that’s too much to ask ofanyone—if you can become aware of themiraculousness which I symbolize, you canhelp save the freedom mankind is sounhappily losing. I have a profound lessonto teach. And I can teach this lesson betterthan can an automobile or an airplane or amechanical dishwasher because—well,because I am seemingly so simple.

Simple? Yet, not a single person on theface of this earth knows how to make me.This sounds fantastic, doesn’t it? Especiallywhen it is realized that there are about one

I, PencilBY LEONARD E. READ

b

5

and one-half billion of my kind produced inthe U.S.A. each year.

Pick me up and look me over. What doyou see? Not much meets the eye—there’ssome wood, lacquer, the printed labeling,graphite lead, a bit of metal, and an eraser.

Innumerable AntecedentsJust as you cannot trace your family

tree back very far, so is it impossible for meto name and explain all my antecedents.But I would like to suggest enough of themto impress upon you the richness andcomplexity of my background.

My family tree begins with what in factis a tree, a cedar of straight grain that growsin Northern California and Oregon. Nowcontemplate all the saws and trucks andrope and the countless other gear used inharvesting and carting the cedar logs to therailroad siding.Think of all the persons andthe numberless skills that went into theirfabrication: the mining of ore, the making ofsteel and its refinement into saws, axes,motors; the growing of hemp and bringingit through all the stages to heavy and strongrope; the logging camps with their beds andmess halls, the cookery and the raising of allthe foods.Why, untold thousands of personshad a hand in every cup of coffee the loggersdrink!

The logs are shipped to a mill in SanLeandro, California. Can you imagine theindividuals who make flat cars and railsand railroad engines and who construct andinstall the communication systems inciden-tal thereto? These legions are among myantecedents.

Consider the millwork in San Leandro.The cedar logs are cut into small, pencil-length slats less than one-fourth of an inchin thickness. These are kiln dried and then

b

6

tinted for the same reason women put rougeon their faces. People prefer that I lookpretty, not a pallid white. The slats arewaxed and kiln dried again. How manyskills went into the making of the tint andthe kilns, into supplying the heat, the lightand power, the belts, motors, and all theother things a mill requires? Sweepers inthe mill among my ancestors? Yes, andincluded are the men who poured theconcrete for the dam of a Pacific Gas &Electric Company hydroplant whichsupplies the mill’s power!

Don’t overlook the ancestors presentand distant who have a hand in transport-ing sixty carloads of slats across the nation.

Once in the pencil factory—$4,000,000 in machinery and building, allcapital accumulated by thrifty and savingparents of mine—each slat is given eightgrooves by a complex machine, after whichanother machine lays leads in every otherslat, applies glue, and places another slatatop—a lead sandwich, so to speak. Sevenbrothers and I are mechanically carvedfrom this “wood-clinched” sandwich.

My “lead” itself—it contains no lead atall—is complex. The graphite is mined inCeylon [Sri Lanka]. Consider these minersand those who make their many tools andthe makers of the paper sacks in which thegraphite is shipped and those who make thestring that ties the sacks and those who putthem aboard ships and those who make theships. Even the lighthouse keepers alongthe way assisted in my birth—and theharbor pilots.

The graphite is mixed with clay fromMississippi in which ammonium hydroxideis used in the refining process.Then wettingagents are added such as sulfonatedtallow—animal fats chemically reactedwith sulfuric acid. After passing through

b

7

numerous machines, the mixture finallyappears as endless extrusions—as from asausage grinder—cut to size, dried, andbaked for several hours at 1,850 degreesFahrenheit. To increase their strength andsmoothness the leads are then treated witha hot mixture which includes candelillawax from Mexico, paraffin wax, andhydrogenated natural fats.

My cedar receives six coats of lacquer.Do you know all the ingredients of lacquer?Who would think that the growers of castorbeans and the refiners of castor oil are apart of it? They are.Why, even the processesby which the lacquer is made a beautifulyellow involve the skills of more personsthan one can enumerate!

Observe the labeling. That’s a filmformed by applying heat to carbon blackmixed with resins. How do you make resinsand what, pray, is carbon black?

My bit of metal—the ferrule—is brass.Think of all the persons who mine zinc andcopper and those who have the skills tomake shiny sheet brass from these productsof nature. Those black rings on my ferruleare black nickel. What is black nickel andhow is it applied? The complete story of whythe center of my ferrule has no black nickelon it would take pages to explain.

Then there’s my crowning glory, inele-gantly referred to in the trade as “the plug,”the part man uses to erase the errors hemakes with me. An ingredient called “fac-tice” is what does the erasing. It is a rubber-like product made by reacting rape-seed oilfrom the Dutch East Indies [Indonesia] withsulfur chloride. Rubber, contrary to the com-mon notion, is only for binding purposes.Then, too, there are numerous vulcanizingand accelerating agents. The pumice comesfrom Italy; and the pigment which gives“the plug” its color is cadmium sulfide.

b

8

No One KnowsDoes anyone wish to challenge my ear-

lier assertion that no single person on theface of this earth knows how to make me?

Actually, millions of human beingshave had a hand in my creation, no one ofwhom even knows more than a very few ofthe others. Now, you may say that I go toofar in relating the picker of a coffee berry infar-off Brazil and food growers elsewhere tomy creation; that this is an extreme posi-tion. I shall stand by my claim.There isn’t asingle person in all these millions, includingthe president of the pencil company, whocontributes more than a tiny, infinitesimalbit of know-how. From the standpoint ofknow-how the only difference between theminer of graphite in Ceylon and the loggerin Oregon is in the type of know-how.Neither the miner nor the logger can be dis-pensed with, any more than can the chemistat the factory or the worker in the oil field—paraffin being a by-product of petroleum.

Here is an astounding fact: Neither theworker in the oil field nor the chemist northe digger of graphite or clay nor any whomans or makes the ships or trains or trucksnor the one who runs the machine that doesthe knurling on my bit of metal nor thepresident of the company performs his sin-gular task because he wants me. Each onewants me less, perhaps, than does a child inthe first grade. Indeed, there are someamong this vast multitude who never saw apencil nor would they know how to use one.Their motivation is other than me. Perhapsit is something like this: Each of thesemillions sees that he can thus exchange histiny know-how for the goods and services heneeds or wants. I may or may not be amongthese items.

b

9

No Master MindThere is a fact still more astounding:

The absence of a master mind, of anyonedictating or forcibly directing these count-less actions which bring me into being. Notrace of such a person can be found. Instead,we find the Invisible Hand at work. This isthe mystery to which I earlier referred.

It has been said that “only God canmake a tree.” Why do we agree with this?Isn’t it because we realize that we ourselvescould not make one? Indeed, can we evendescribe a tree? We cannot, except in super-ficial terms.We can say, for instance, that acertain molecular configuration manifestsitself as a tree. But what mind is thereamong men that could even record, let alonedirect, the constant changes in moleculesthat transpire in the life span of a tree?Such a feat is utterly unthinkable!

I, Pencil, am a complex combination ofmiracles: a tree, zinc, copper, graphite, andso on. But to these miracles which manifestthemselves in Nature an even moreextraordinary miracle has been added: theconfiguration of creative human energies—millions of tiny know-hows configuratingnaturally and spontaneously in response tohuman necessity and desire and in theabsence of any human masterminding!Since only God can make a tree, I insist thatonly God could make me. Man can no moredirect these millions of know-hows to bringme into being than he can put moleculestogether to create a tree.

The above is what I meant when writ-ing, “If you can become aware of the mirac-ulousness which I symbolize, you can helpsave the freedom mankind is so unhappilylosing.” For, if one is aware that theseknow-hows will naturally, yes, automati-cally, arrange themselves into creative andproductive patterns in response to human

b

10

necessity and demand—that is, in the ab-sence of governmental or any other coercivemasterminding—then one will possess anabsolutely essential ingredient for freedom:a faith in free people. Freedom is impossiblewithout this faith.

Once government has had a monopolyof a creative activity such, for instance, asthe delivery of the mails, most individualswill believe that the mails could not be effi-ciently delivered by men acting freely. Andhere is the reason: Each one acknowledgesthat he himself doesn’t know how to do allthe things incident to mail delivery. He alsorecognizes that no other individual could doit. These assumptions are correct. Noindividual possesses enough know-how toperform a nation’s mail delivery any morethan any individual possesses enoughknow-how to make a pencil. Now, in theabsence of faith in free people—in theunawareness that millions of tiny know-hows would naturally and miraculouslyform and cooperate to satisfy this neces-sity—the individual cannot help but reachthe erroneous conclusion that mail canbe delivered only by governmental“masterminding.”

Testimony GaloreIf I, Pencil, were the only item that

could offer testimony on what men andwomen can accomplish when free to try,then those with little faith would have a faircase. However, there is testimony galore; it’sall about us and on every hand. Mail deliv-ery is exceedingly simple when compared,for instance, to the making of anautomobile or a calculating machine or agrain combine or a milling machine or totens of thousands of other things. Delivery?

b

11

Why, in this area where men have been leftfree to try, they deliver the human voicearound the world in less than one second;they deliver an event visually and in motionto any person’s home when it is happening;they deliver 150 passengers from Seattle toBaltimore in less than four hours; theydeliver gas from Texas to one’s range orfurnace in New York at unbelievably lowrates and without subsidy; they deliver eachfour pounds of oil from the Persian Gulf toour Eastern Seaboard—halfway around theworld—for less money than the governmentcharges for delivering a one-ounce letteracross the street!

The lesson I have to teach is this:Leaveall creative energies uninhibited. Merely or-ganize society to act in harmony with thislesson. Let society’s legal apparatus removeall obstacles the best it can. Permit thesecreative know-hows freely to flow. Havefaith that free men and women will respondto the Invisible Hand. This faith will beconfirmed. I, Pencil, seemingly simplethough I am, offer the miracle of mycreation as testimony that this is apractical faith, as practical as the sun, therain, a cedar tree, the good earth.

b

12

Leonard Read’s delightful story,“I, Pencil,” has become a classic, anddeservedly so. I know of no other piece ofliterature that so succinctly, persuasively,and effectively illustrates the meaning ofboth Adam Smith’s invisible hand—thepossibility of cooperation without coercion—and Friedrich Hayek’s emphasis on theimportance of dispersed knowledge and therole of the price system in communicatinginformation that “will make the individualsdo the desirable things without anyonehaving to tell them what to do.”

We used Leonard’s story in our televi-sion show, “Free to Choose,” and in theaccompanying book of the same title toillustrate “the power of the market” (thetitle of both the first segment of the TVshow and of chapter one of the book).We summarized the story and then wenton to say:

“None of the thousands of personsinvolved in producing the pencil performedhis task because he wanted a pencil. Someamong them never saw a pencil and wouldnot know what it is for. Each saw his workas a way to get the goods and services hewanted—goods and services we produced inorder to get the pencil we wanted. Everytime we go to the store and buy a pencil, weare exchanging a little bit of our services forthe infinitesimal amount of services thateach of the thousands contributed towardproducing the pencil.

AfterwordBY MILTON FRIEDMAN

Nobel Laureate, 1976

b

13

“It is even more astounding that thepencil was ever produced. No one sitting ina central office gave orders to these thou-sands of people. No military police enforcedthe orders that were not given. Thesepeople live in many lands, speak differentlanguages, practice different religions, mayeven hate one another—yet none of thesedifferences prevented them from cooperat-ing to produce a pencil. How did it happen?Adam Smith gave us the answer twohundred years ago.”

“I, Pencil” is a typical Leonard Readproduct: imaginative, simple yet subtle,breathing the love of freedom that imbuedeverything Leonard wrote or did. As in therest of his work, he was not trying to tellpeople what to do or how to conductthemselves. He was simply trying toenhance individuals’ understanding of them-selves and of the system they live in.

That was his basic credo and one thathe stuck to consistently during his longperiod of service to the public—not publicservice in the sense of government service.Whatever the pressure, he stuck to his guns,refusing to compromise his principles. Thatwas why he was so effective in keepingalive, in the early days, and then spreadingthe basic idea that human freedom requiredprivate property, free competition, andseverely limited government.

b

Foundation for Economic EducationFreedom’s Home Since 1946

The Foundation for Economic Education(FEE), the oldest free-market organization in theUnited States, was established in 1946 byLeonard E. Read to study and advance thefreedom philosophy. FEE’s mission is to offer themost consistent case for the first principlesof freedom: the sanctity of private property,individual liberty, the rule of law, the freemarket, and the moral superiority of individualchoice and responsibility over coercion.

The Foundation’s flagship magazine, TheFreeman: Ideas on Liberty, presents timelessinsights on the positive case for human liberty toreaders around the world. Throughout the yearFEE’s lecture series, programs, and seminarsbring together thousands of individuals of allages to explore the foundations of free enterpriseand market competition. The Foundation plays amajor role in publishing and promoting numer-ous essential books on the freedom philosophy.

For further information, and to exploreFEE’s online resources, visit www.fee.org.

The Foundation for Economic Education is anon-political, non-profit, tax-exempt educationalfoundation and accepts no taxpayer money. FEEis supported solely by contributions from privateindividuals and foundations.

Published by the Foundation for Economic Education

Designed by Integrated Printing & Graphics

Printed in the United States of America

©2008 Foundation for Economic Education.All rights reserved.

ISBN 1-57246-209-4

Foundation for Economic Education30 S. Broadway, Irvington-on-Hudson, New York 10533(800) 960-4333 www.fee.org