This month marks the 50th anniversary of one of the most famous and influential essays in economics, I, Pencil, written by Leonard Read.
This is the best non-theoretical introduction to the power of free-markets, that elaborately and persuasively explains Adam Smith’s invisible hand, the importance of dispersed knowledge, and the role of price system in communicating information. (The last one is also explained very well in another book that I finished reading last month: The Price of Everything by Russell Roberts. This book is a distinctive attempt to teach basic economics through fiction. )
I came across this essay just few years ago – first while watching (on the web) the PBS series Free To Choose by Milton Friedman and then while reading the book by the same name. This essay (I, Pencil), Free To Choose (both the series and the book) and other works of Milton Friedman had profound impacts on my understanding, limited as it is, of capitalism and free markets.
Here’s a web-link to the essay. You can also read and download the essay in pdf format here. If you don’t want to read the full essay, watch a short video (below) by Milton Friedman that succinctly captures the essence of the essay.
Reading this essay also reminds me of a related, quite fascinating, excerpt from Ants At Work written by Deborah Gordon:
The basic mystery about ant colonies is that there’s no management. A functioning organization with no one in charge is so unlike the way humans operate as to be virtually inconceivable. There is no central control. No insect issues commands to another or instructs it to do things in a certain way. No individual is aware of what must be done to complete any colony task. Each ant scratches and prods its way through the tiny world of its immediate surroundings. Ants meet each other, separate, go about their businesses. Somehow these small events create a pattern that drives the coordinated behavior of colonies.
PS. In case you’re wondering, the queen, despite the namesake, doesn’t have any authority or control over the colony. Her sole function is to reproduce.
Here’s an earlier, related post: The Myth of Rational Voter.