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This is one of the great texts on economics. Together with "Economics in One Lesson" by Hazlit, should be required high school reading all over the planet. These texts immunise the mind against logical fallacies about material progress. They will make mankind come together without politicians or enemies.

"There is a fact still more astounding: the absence of a master mind, of anyone dictating or forcibly directing these countless actions which bring me into being. No trace of such a person can be found." This is one of the beautiful miracles of our kind, a fact that remains unknown to most of us. Including many who figure themselves at the commanding heights.

Every attempt to make this fictional mastermind more powerful makes our fate worse.

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Sorry, I think it's very interesting and makes some nice points with beautiful language, but I don't follow the conclusion. It oversteps in arguing without proof that all forms of enterprise must function just like pencils, soluble by the natural dynamics of a free market. But not all forms of enterprise have the same properties as pencil production.

You could imagine an antithetical essay "I, police" involving a lawless village in which each person trains extensively in martial arts and marksmanship in order to protect themselves. Then each realizes it is more efficient to focus on their own vocation and hire a private security guard. Then a few neighbors realize it is more efficient to pool their money and hire just enough security to protect their block, and finally the whole village realizes it is most efficient to pool their money into just enough security, at which point they realize they have formed a government with taxes and police force. The story could end with "It is a fact most astounding that the forces of an unencumbered free market lead directly to an inevitable centralization into a collective governing whole."

Of course this story does not prove that all affairs should be handled by the government; but the pencil doesn't prove the opposite either.

While "I, Pencil" is definitely a story from the free-market tribe, and the concluding paragraph pays due homage, the point of the article is not that "all enterprise [are]soluble by the natural dynamics of a free market".

The point is that the simple things in our society are the product of very complicated networks of activity that nobody understands. And this is pretty universal, whether you are talking about pencils or police.

Of course this complexity is not the only consideration that determines how things should be done. But it is a consideration that is usually ignored when people seek to regulate an industry.

One difference is that the pencil story actually happened. It describes real practical life.

Your village police story OTOH is made up.

Pretty sure there are police forces.

Yes, but none of them were formed in a village where people were first martial arts experts, then tried hiring private security guards, and finally realized the wisdom of creating a state with taxation rights to finance a police force.

I usually hear about villages forming militias rather than hiring professional security. It would be interesting to read examples of primitive governments formed like that.

If you count in "hiring" security from within the community, then this would probably describe most governments.

But non of them is financed voluntary and non of them was created in voluntary association.

I think any recently formed countries, created by pionners (Israel come to my mind, and kurdistan may be the next) would contradict your claim.

Most Palestinians and anti-government Jews in Israel wouldn't agree. Maybe Kurdistan will be the first country in which political elites (backed by populist voting majority) treat all their citizens as subjects and not as objects to achieve their own objectives. I hope so, I don't know much about Kurdistan.

It's the sort of thing that happened in history as best as we can tell. If you want cases where we've observed the whole process, the development of alliances in EVE online from groups of friends to large quasi-governmental organisations complete with legalistic codes has been fascinating to watch.

The pencil story is entirely a made-up parable as well. The author is simply imagining how the pencil industry operates -- he didn't literally trace the steps in the process himself and was a grocery wholesaler in real life, not a pencil manufacturer. If you agree with his political assumptions that the free market is ideal it all sounds very convincing, but that's the problem with any political diatribe.

Now you made me find an article about how Leonard Read researched pencil manufacturing for the essay: https://fee.org/articles/leonard-read-the-spiritual-economis...

If such a high profile and somewhat controversial essay was wrong on the details, I think we'd have heard about those errors.

I agree with the criticism that you're making, but I think your police force comparison contains fallacies. Human institutions cannot be told from the assumption that we all began as isolated individuals and arrived at the solution of centralised control as the outcome of a set of rational collective choices.

I'm sure there are many 'origins of the police' narratives, but one I know is the Metropolitan Police of London were developed explicitly to curtail the dock workers from exercising their customary right to take small amounts of the goods they were unloading home with them. To generalize from this (a dangerous game, I know, but this seems to be the flavor of the thread), institutions are constructed to protect the interests of one class from another

The point of the article is to express how something so trivial as a pencil is created by countless intelligent actors, working in kind of dynamic unison, without any controlling agent.

The article makes the point very well - and it's something that definitely should be taught more in school.

I think it's very easy for kids to grasp 'top down' control in government, teams or organizations - it's something so intuitive it does not need explanation.

The concept of 'free markets' and their ability to facilitate amazing things is in some ways counterintuitive, and needs to be learned.

So I think the point is fair.

I don't think anyone is implying that all systems must operate in this manner.

Thie is a charming free-market story, but the problem comes when people construe it as "unplanned, unregulated and competitive is always better". The idea that things can "work themselves out" to a better result than if supervised is highly exciting, to the point that some cannot resist it and just fall in love with it. This leads to the classic "Man-with-a-hammer", as C.Munger calls it: this is so good, let's hammer/free-market all the things!

Games are full of Man-with-a-hammer examples, like "bluff all the things" (eg. poker), "sacrifice all the things" (chess) or "never run to win the race" (backgammon). This inevitably leads to failure, but economy being what it is, the failure is too vague, too diffuse and too erratic to acknowledge them in the case of "free market all the things".

The problem comes in when people imagine that what's going on is "unplanned." As the economist George Reisman has pointed out, decentralized activity by actors who have a financial stake in the game and who are thus guided by profit and loss is exactly what economic planning is. Centralized "planning," as the economist Ludwig von Mises pointed out, is planned chaos.

"Economics in One Lesson" has been touted as a perfect introduction to Economics, yet I was pretty underwhelmed after I read it.

It just assumes that trickle down economics works, and repeats this "lesson" ad nauseam chapter after chapter.

However, it is very clear historically that trickle down economics does not work, and that completely unregulated markets lead to human rights abuse.

Picketty is much more enlightening.

Piketty's book contains a correlation-implies-causation statistics-driven narrative to pitch yet another tax increase.

Economics In One Lesson is an exercise in logic, showing that many popular economic policies are flawed or will necessarily have non-obvious side effects.

EIOL is also deliberately written to be an easy read.

It's hard to compare the two.

(In the unlikely case anyone cares, my personal take on Piketty: wealth inequality doesn't matter unless you think jealousy is a matter of public policy. Wealth inequality is an inevitable consequence of progress. What matters is whether the wealthy can loose their wealth due to their own mistakes, and whether wealth inequality implies legal inequality. Private profits and public risks, bailouts, legislation a la tete du client, bribes, lobbying, monopolies, special tax agreements, propping up markets, complicated laws, ... that's how the 99% get screwed. Taxes allow the government to function. They cannot "counterbalance" the legal privileges of the 1%.)

I think wealth inequality matters, but not only from a moral standpoint:

From wikipedia on Trickle-down economics:

> A 2015 report by the International Monetary Fund argues that there is no trickle-down effect as the rich get richer:

>> [I]f the income share of the top 20 percent (the rich) increases, then GDP growth actually declines over the medium term, suggesting that the benefits do not trickle down. In contrast, an increase in the income share of the bottom 20 percent (the poor) is associated with higher GDP growth.[19]

The other way of looking at it is that Piketty is a popularisation of serious piece academic research, however flawed some of its data processing and conclusions may be, whereas Economics in One Lesson is a pamphlet beating straw men to death with "analysis" that's beneath simplistic in many parts and flatly wrong in some of the others (e.g "for every public job created...a private job has been destroyed somewhere else")

The one thing they have in common is both being pretty polemical in tone.

"What is seen and what is not seen”; tracing the consequences of a policy to all groups affected. These are basic economic truths and skills that are extremely important to impart on kids and young adults. Skills that many adults miss.

Just like “I Pencil” delivers the crucial, uplifting insight that complex economic cooperation spontaneously emerges everywhere. This order will exist prior to and regardless of any political system.

Keeping these broad insights front and center at all times, does not imply that you have to reject every proposed intervention a priori. But if you know that every intervention will have side effects and can backfire because of the sheer complexity of the order, even when meaning well, you will naturally be much more careful and skeptical.

Which in my opinion is really a very, very, very good thing. Especially in this day and age, where the spontaneous order is more complex than ever and where government is once again very big, technocratic and e.g. willing to "clamp" macro economic variables.

I also quite simply disagree that EIOL is “beneath simplistic”. If the kids are interested in economics, they should obviously read much more than just these texts.

It is a bit weak on some of the more complex of economic issues, such as the role of contract law in the emergence and functioning of industrial societies.

Judges are definitely not masterminds.

Lawmakers are sort of masterminds, especially when defining the founding principles of the law. They don't have pencil production, and usually any particular production, in mind.

The beauty is that a general principle allows almost any business to flourish; the lawmakers need not know what specific business it might be. This makes such laws reasonably future-proof.

Well, the text makes visible an invisible machine, built by all but planned by none.

I don’t think the author wanted to write a reference work on all aspects of its subject :-)

Here’s what I personally get out of its perspective: contentment and inspiration. It provides glory to the seemingly mundane tasks of everyday economic life. Comparing prices, finding customers and suppliers, solving small problems, settling disputes. This is what the invisible machine is composed of.

It also shields my mind, like a lode star that guides me away from many popular beliefs about what “needs to be done to boost GDP”.

Well, You did call it one of the great economics texts... I agree that the topic is an important one (I have told a similar story about nuts and bolts), but its presentation here ends up in simplistic dogma that ignores several realities of industrial economies.

I am not sure that a mind shield is a good thing.

Yes, in the context of getting high school kids acquainted with the emergent nature of economic order.

The shield/lode star thing: let's not go full politics. I'm not narrow minded... Let's just leave it at that :-)

We can agree to disagree :-) In a libertarian utopia, no-one should be required to read anything.

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