American Compass recently attacked economists again. Writing on the conservative think tank’s Substack, Chris Griswold attempted to debunk Leonard Read’s pro-global-division-of-labor essay “I, Pencil” with a post entitled “I, Sharpie.”
Read’s essay was written to inspire awe over the unplanned, spontaneous order of the market. In it, a pencil explains the complex process involved in making such a seemingly simple thing. A pencil is made from wood, glue, graphite, clay, castor oil, brass, rubber, and more--materials that come from all corners of the earth to be assembled in a single factory.
The pencil narrator draws attention to all the things involved in getting those inputs to the factory: the tools used by the various workers, the coffee they drink, the ships that transport the goods, the lighthouses that guide the ships, and the hydroelectric dam that powers the factory. The reader gets a good lesson in how the market’s price system coordinates the concatenation of countless efforts underlying the assembly of a mere pencil.
The point of Read’s essay is not that human skill, knowledge, ingenuity, or entrepreneurship do not matter. It also does not argue that government policy does not or cannot shape incentives to change human action. Yet these are somehow the takeaways that Griswold attacked. The Sharpie narrating Griswold’s essay praises the judgment of the Newell Brands CEO for moving production to America. It criticizes the pencil’s awe at the “millions of tiny know-hows configurating naturally and spontaneously in response to human necessity and desire and in the absence of any human masterminding” by pointing out that pencils are made offshore.
The Sharpie further praises the knowledge and skill of the people who made him and says that it had not “seen any invisible hands fix a single machine.” It claims that its story reveals an astounding fact: “business leaders decide where things are made, and policy can push them toward one decision or another. There is no mystery here, just political economy.”
If the Sharpie thought that would astound economists, it was wrong. Every economist knows that policies shape decision-making, and most economic research attempts to estimate the effects of policy on economic outcomes. Economists like Joseph Schumpeter, Ronald Coase, and Israel Kirzner pioneered the study of entrepreneurship and the theory of the firm; thus, business leaders’ entrepreneurial decisions about how to run their firms fit well within the scope of economic research.
That pencils and Sharpies are made by skilled workers in factories does not conflict with the notion of the invisible hand. No economist claims that an invisible hand will fix a machine on a factory floor. Rather, the metaphor communicates the order that emerges unplanned in markets.
Markets comprise billions of people with an incredible variety of plans. Prices guide those people as they attempt to coordinate their plans with others. The pencil’s praise of trade is a critique of autarky, or self-sufficiency; trading in the market frees people from the horrors of autarky.
Finally, the Sharpie praises policymakers who shape incentives to bring manufacturing to America. The Sharpie could use some economics education on this point especially. The problem most economists are concerned about with government intervention is the second-order effects, not the immediate effect. For example, when the Trump administration raised tariffs on steel in 2018, it created about 1,000 jobs in the steel industry, but it destroyed approximately 75,000 jobs in manufacturing industries that use steel as an input. Economists are trained to look for those second-order effects that the Sharpie failed to notice.
The Sharpie could learn from Read’s pencil or Adam Smith’s woolen coat: markets and prices help people coordinate to accomplish things beyond the wildest dreams of someone working in isolation. Interfering with those interactions can cause undesirable effects. Anyone, even a Sharpie, who advocates government industrial policy, which interferes with free trade, needs to account for the full scope of its economic consequences.
