Pencils And Politics

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?" Ruth responds: Who commands the millions of people involved in making a pencil? Who is in charge? Where is the pencil czar?

Her point is that markets allow order to emerge without anyone imposing it. The "poetry of the possible" is that things are organized without an organizer. "The graphite miner in Sri Lanka doesn't realize he's cooperating with the cedar farmer in California to serve the pencil customer in Maine." 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.

Goods and services, like languages, result from innumerable human actions—but not from any human design. "We," says Ruth, "create them with our actions, but not intentionally. They are tapestries we weave unknowingly." They are "emergent phenomena," the results of human action but not of human design.