“Of Pencils and Learjets” or “Why Liberals Don’t Understand Basic Economics”

“Literally thousands of people cooperated to make this pencil. People who don’t speak the same language; who practice different religions; who might hate one another if they ever met. When you go down to the store and buy this pencil, you are, in effect, trading a few minutes of your time for a few seconds of the time of all of those thousands of people. What brought them together and induced them to cooperate to make this pencil? There was no Commissar sending out orders from some central office. It was the magic of the price system – the impersonal operation of prices that brought them together and got them to cooperate to make this pencil so that you could have it for a trifling sum.”

Milton Friedman on the complex and not readily appearent beauty of the capitalist system. Most of us have probably heard this before especially if you’re an armchair economist like me :)

A friend passed this along yesterday via Facebook. Enter the Competitve Enterprise Institute‘s short movie “I, Pencil:”

Yes, the beautiful, complex yet mundane pencil is a good example on why the market works. Every time. No Government bureaucrat put these people together to make this pencil.

“Ok, ok I blog about aviation so let’s get to it will you?” you say. Last I watched an episode of National Geographic’s Megfactories. I saw the episode on the Learjet factory in Wichita (that’s Wah-chee-ta in aviation parlance…lol):

The connections between the pencil and the Learjet are readily apparent to me. Yes, the airplane clearly more complex than the pencil but the same free market economic prinicples apply here. The raw materials were acquired and processed to become parts of the latest incarnation of Bill Lear’s dream, the Learjet 60XR. Again, no Government bureaucrats involved to say build that airplane. People thousands of miles apart, having never met working towards a common goal “guided” by Adam Smith’s “invisible  hand.”

Yes, it’s physical beauty is appearent but the beautiful complexity that place to bring things we normally take for granted is less so and takes time to think about.

Another point to be made is, could you imagine the complex decisions that would need to be made for central planners undertake production of pencils…nevermind something more complex like aircraft. History is littered with failure of centrally planned economics.

A “happy medium” you say? Government is force. How do you compete in the marketplace with what your told is a competitor AND is acting as the referee? (*Obamacare mandated state exchanges*).

 

In everything from pencils to Learjets, there’s beauty in what was thought to be mundane because of the free-market system.

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10 Comments

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10 responses to ““Of Pencils and Learjets” or “Why Liberals Don’t Understand Basic Economics”

  1. cg23sailor

    Playing Devil’s Advocate here but that is precisely what the liberals claim Obama was talking about with his “You didn’t build that” speech.

  2. It’s my opinion only, granted, but I thought that Obama was claiming that OWNERS of businesses “didn’t built that,” but rather benefitted from the public roads, etc., provided by the common efforts of others (without acknowledging that all taxpayers at all levels at various times PAID for such common benefits.) Or alternatively, was perhaps saying that every business running today was built on the shoulders of centuries of businesses that have gone before. Or something like that. I think that no one would dispute that the history of commerce is a continuum of progress.
    However, in the example of “I, Pencil,” each OWNER of the timber company, the timberland, the trucking company, the lumber mill, the [pencil] manufacturing company, the mine, the mining company, etc., etc., built or acquired his business by his OWN efforts.
    That concept is what offended the business community.

  3. Bill Brandt

    A lot of conservatives don’t even understand economics. I have been reading a book about the Great Depression of the 1930s, The Forgotten man , and in the beginning one of the author’s premises is that both Herbert Hoover and Franklin Roosevelt actually exacerbated the conditions through their governmental actions. While other countries qwere coming out the US was still deeply mired – and getting worse.

    (talk about history repeating itself!)

    Hoover was thought of as an engineering whiz kid – and he had the credentials. Besides making a fortune in mining – he had made a mine in Russia very productive until the communists took over – he had helped tremendously in giving aid during a big flood in the South – so much so that mothers named their babies “Hoover”.

    But when the stock market crash came – the person who would have handled it best is a President largely forgotten – Calvin Coolidge. When it came to economics he believed in letting the market sort things out.

    As to the premise here – one need look no further than my once proud state of California. Governmental interference with the market is on a grand scale here and companies are fleeing the state.

  4. Bill, as you go through The Forgotten Man you’ll see parallels with the current administration that will curl your toes: history repeating itself in one generation (almost.)
    Shlaes has a new book on Coolidge coming out in Feb ’13. I have pre-ordered: http://amzn.com/0061967556

    • Bill Brandt

      It’s an excellent book colocomment – she really gives you a feeling for the times – and the misery. The 13 year old boy in NYC who hung himself over despair – family couldn’t afford the heating – or 3 meals – stands out with me.

  5. Pingback: “I, Pencil,” updated and animated — and not so offensive as I expected « Millard Fillmore's Bathtub

  6. Pingback: Basic economics for Black Friday 2012: “I, Pencil,” in animation « Mr. Darrell's Wayback Machine

  7. Pingback: Black Friday economics | Mr. Darrell's Pin Factory

  8. Anybody else use a Fisher pen? Fisher pens have a gas bladder in them that puts pressure on the ink to flow. You can write upside-down with a Fisher pen.

    It’s a product of the U.S. drive to get into space. In the relative zero-gravity of orbit, ink doesn’t flow down, or at all. So NASA sponsored a competition to see who could invent a pen that solved the problem of writing in outer space. Fisher eventually won, with that gas-pressurized bladder that pushes the ink out at any angle, with no gravity assist.

    You can buy a Fisher today for about $10, but most of them run $20 or so. NASA probably spent much for for the first thousand.

    After the fall of the Soviet Union, the U.S. and Russia went into cooperation mode in space exploration. In an early joint flight, it is reputed, a NASA employee asked a Russian employee for his pen. “I don’t have a pen,” he said. “They don’t work in space.”

    “But, we developed the Fisher pen, and it works,” the NASA guy said.

    “We use pencils,” the Russian said.

    Competition doesn’t win at everything, all the time. Leonard Read’s essay smartly and memorably presents some of the key points of free market economics. But there are other issues he doesn’t deal with, and the film misses them, too.

    For today’s teenagers, someone should do a couple of updates. “I, SmartPhone” and “I, Tablet Computer” could include lessons in government regulation of radio spectrum and how such regulation allows public safety functions and air traffic control to exist alongside great profit-seeking groups, and how such developments would be impossible without government regulation. There would also be a section on the mining and milling of rare Earths, of ores like Coltan, which would introduce the concept of blood or conflict diamonds and ores, the collapse of order in unregulated areas like Congo and Somalia, slave labor as in Pakistan and China. “I, Fast Food Breakfast” could include side lessons in importing of orange juice from Brazil and other nations, artificially-flavored syrups from China and the threat from climate change to U.S. maple tree farmers, and meat from Australia and Argentina, along with the ideas of food safety regulation on eggs and egg products by USDA and FDA. “I, Burrito” could include lessons in cultural diffusion and migrant farm workers who pick the tomatoes . . .

    By the way, the fact that pencil leads are graphite (and clay), and not lead, should not be taken to mean that pencil manufacturers came up with a kid-safe product on their own; lead in the paint on pencils was enough to worry the health officials, until regulation got different paints used.

    We need a classroom guide on Read’s piece and this new movie that seriously discusses the need for regulation in pencil manufacture, from the safety of the saws used to cut the trees, and in the mills, to the anti-child labor provisions of the graphite and rubber import agreements, to the forest regulation and research necessary to keep the incense cedar wood in production, through the anti-deforestation requirements on rubber plantations and the regulation of lead in the paint. The movie is good, much less right-wing than those groups who fawn over it, but still in need of some real-world economic reality.

    (Links to sources at the site cited above.)

  9. Pingback: “I, Pencil,” updated and animated — and not so offensive as I expected (even if free market nuts think it is) | Millard Fillmore's Bathtub

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