Baronger's Scribblings

Friday, April 21, 2006

Golden Fridays

I, Pencil, simple though I appear to be, merit your wonder and awe, a claim I shall attempt to prove. In fact, if you can understand me‚—no, that's too much to ask of anyone‚—if you can become aware of the miraculousness which I symbolize, you can help save the freedom mankind is so unhappily losing. I have a profound lesson to teach. And I can teach this lesson better than can an automobile or an airplane or a mechanical dishwasher because‚—well, because I am seemingly so simple.

So begins an essay that economist Leonard E. Read, in 1958. It appears in the EconLibrary. It is a must read, as it is a powerful teaching as well as a thought tool. For that reason I am using it to kick off Golden Fridays. Friday is going to be dedicated to economics in all it's forms. From basic trading, potlatches, comunisim, capitalism and other weird forms in which ideas, material and services acquired, given away or whatever the current definition of economics is.

This essay tells the remarkable story of the humble pencil and how it came to be. It details the many things necessary for its production. Illustrates that without the invisible hand of a free economy, making a pencil would be extremely difficult. It shows why planned economies don't work well. From the rubber to the graphite there are many ingredients which have to acquired, refined and transported.

If it is so difficult and takes so many people to make a pencil, then think how difficult it would be to make a modern car. Think of how many people it would take to make a complete car from scratch. By scratch I mean everything from digging the raw iron ore out of the ground to transporting all the various elements to the final assembly factory. Remember you would need to make as many cars as were demanded by the people. Could the country of Norway make cars from scratch, and if it did would it have any people left over to make anything else that they needed.

What the essay doesn't really go into, but is thought provoking is the role of people as resources. Granted that the woodcutters also supply wood to furniture makers as well as pencil makers. However a piece of wood supplied to one is a piece of wood denied to another. There is only so much wood each individual can cut during a day. So how many wood cutters are needed, the invisible hand determines it. We have seen what happens when the central state tries to circumvent this, in the failure of the Soviet Union.

The greatest advance in Human societies is the innovations in production. There is an old rule of thumb that it takes ten people on the farm to support on person in a city. This rule of thumb is of course obsolete today where only about 10% of the population works in the agriculture industry. The agricultural revolution is the fuel that supplied the concurrent industrial revolution. Without it there wouldn't have been anyone to work in the factories, or else if the state had mandated that they work in the factories, they would have slowly starved. Ponder North Korea, and wonder how this state government allocated the resources of its former farmers and the starvation that has wracked that land.

Think of the early colonies in the Americas. During the early years they were dependent on the Europe for many things that they couldn't produce themselves. Remember they had access to a lot of raw materials. What they lacked was the people, to utilize them all.

McCaffery and Bujold, are both science fiction writers. In both cases they had disasterous planetary colonization events. This theme has also been explored by other authors, but these two have built huge worlds on the theme. The theme of lost technology and regression. Both had small population bases, that did not have the people to maintain their original tech base. Think about it, having all the technological specifications, but not having the actual people to either maintain or build new items.

This is why international trade is very important in todays increasingly complicated technological world. Very few countries have the population base to build everything they need. From raw materials, to the people to process the materials, to people to actually transport and sell the items to everyone who needs them.

Luckily the invisible hand is guiding the modern world. Can you imagine the buerarcacy that would be needed to actually plan all of this out. It would be enormous as they decided exactly how many miners and how many truck drivers were needed. Think about all the people in the government buildings, deciding and planning this minuetia. Now imaging all the real jobs that these people are not doing. Everyone engaged in the planning is not contributing to the bottom line of the economy.

There are three pillars. Always remember that people are a vital part of the system. Resources, people and power are what make an economy run. In capitalisim that power comes in the form of money. But the lubricant that makes it all work well is the freedom, and the invisible hand that this freedom provides.



Post a Comment

<< Home

Weblog Commenting and Trackback by