Pick up a pencil. It costs almost nothing. Now try to find one person on earth who knows how to make it.
The wood comes from a particular tree, cut with a saw made of steel, which came from iron ore mined somewhere else and smelted with coal. The graphite is mixed with clay from a different country and baked. The yellow paint involves pigments, the glue involves chemistry, the metal band around the eraser is brass, and brass is copper and zinc from two more mines. The eraser itself is a rubber compound.
Nobody holds all of this knowledge. The person who fells the tree cannot make the saw. The chemist who formulates the paint has never seen the mine. Each one knows a small part extremely well and nothing about the rest, and yet the pencil appears on a shelf for a few thousand dong.
An economist called Leonard Read wrote this argument in 1958 and it has not aged. His point was that enormously complicated things can be produced without anyone being in charge of the whole, provided that prices carry information between the parts. A rise in the price of copper tells the brass maker to use less, without anyone explaining why, and without the brass maker needing to know that a mine has flooded on another continent.
It is worth remembering when something simple is surprisingly cheap. Behind it is usually not one clever factory but thousands of people who have never met.
Vocabulary in this text
- iron /ˈaɪɚn/ — to make clothes smooth with a hot tool
- compound /ˈkɑmpaʊnd/ — a substance made of two or more elements
- knowledge /ˈnɑlədʒ/ — information and understanding you have
- formulate /ˈfɔɹmjəˌleɪt/ — to express an idea or plan carefully
- appear /əˈpɪɹ/ — to become possible to see, or to seem
- shelf /ˈʃɛlf/ — a flat board for putting things on
- whole /ˈhoʊl/ — complete, all of something
- provide /pɹəˈvaɪd/ — to give something that is needed
- explain /ɪkˈspleɪn/ — to make something clear to someone
- flood /ˈflʌd/ — a large amount of water covering land