Pencils and Politics

Newsweak ^ | 14 Sep 2008 | George Will

[oblomov]

Improbable as it might seem, perhaps the most important fact for a voter or politician to know is: No one can make a pencil. That truth is the essence of a novella that is, remarkably, both didactic and romantic. Even more remarkable, its author is an economist. If you read Russell Roberts's "The Price of Everything: A Parable of Possibility and Prosperity" you will see the world afresh—unless you already understand Friedrich Hayek's idea of spontaneous order.

Roberts, an economist at George Mason University and Stanford's Hoover Institution, sets his story in the Bay Area, where some Stanford students are indignant because a Big Box store doubled its prices after an earthquake. A student leader plans to protest Stanford's acceptance of a large gift from Big Box. The student's economics professor, Ruth, rather than attempting to dissuade him, begins leading him and his classmates to an understanding of prices, markets and the marvel of social cooperation. Holding up a Dixon Ticonderoga No. 2, she says: "No one can make a pencil."

Nonsense, her students think—someone made that one. Not really, says Ruth. Loggers felled the cedar trees, truckers hauled them, manufacturers built the machines that cut the wood into five-sided portions to hold graphite mined in Sri Lanka, Mexico, China and Brazil. Miners and smelters produced the aluminum that holds the rubber eraser, produced far away, as were the machines that stamp TICONDEROGA in green paint, made somewhere else, on the finished pencil.

Producing this simple, mundane device is, Ruth says, "an achievement on the order of a jazz quartet improvising a tune when the band members are in separate cities." An unimpressed student says, "So a lot of people work on a pencil. What's the big deal?"

[oblomov]

Perhaps Will forgot the famous part of Milton Friedman's "Free to Choose":

http://www.youtube.com/watch?v=d6vjrzUplWU

[Psycho_Bunny]

"an achievement on the order of a jazz quartet improvising a tune when the band members are in separate cities."

lol...wrong.

Only someone who knows nothing about what they're talking about would say something like that.

[gusopol3]

thanks for the link, it’s just 2 mins long

[Daffynition]

I'm confident that Friedman is talking about a *quality* yet inexpensive pencil.

The garbage that comes out of China makes me c-r-a-z-y!

[conservatism_IS_compassion]

The boss of the pencil factory does not boss very much: He does not decide the prices of the elements of his product—or of his product. No one decides. Everyone buying and selling things does so as prices steer resources hither and yon, harmonizing supplies and demands.

That is an unsatisfactory description. In reality, some people bid money for a particular good, and others offer that good for money. The price is the result of negotiation between each buyer and each seller. And the terms to which the buyer and seller agree are affected by the potential not only for each buyer to deal with all other sellers and each seller to deal with all other buyers, but by the potential of the buyer to buy a substitute for the good in question (and the potential for the seller to make a different product).