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Pencils and Cell Phones

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Perhaps you have read the short story “I, Pencil” by economist Leonard Read. He takes you through all the steps necessary to make a pencil and concludes that “nobody knows how to make a pencil.”

To make something as simple as a pencil requires knowledge and technological expertise in fields ranging from forestry to mining to engineering to chemistry. And yet pencils are made day after day, even though no one knows the whole process from start to finish. The worker on the assembly line doesn’t know all the steps. Even the president of the pencil manufacturing company doesn’t really know all of the steps necessary to make a pencil. There is no central authority. All of the necessary steps come together in a free market through what looks like spontaneous order.

Kevin Williamson in a recent column talks about how the market worked to provide us with much more than pencils. When he is speaking to students, he shows them a still from an Oliver Stone movie, Wall Street. The financier Gordon Gekko is talking on a cell phone, a Motorola DynaTac 8000X. The student always—always—laugh. There is good reason. The phone is more than a foot long and weighs a couple of pounds.

But here is the point. In the day in which that movie was shot, you had to be a millionaire to have one. The phone cost the equivalent of $10,000. It also cost about $1,000 a month to operate. You couldn’t put it in your pocket. You couldn’t text on it. You couldn’t get on the Internet with it. You couldn’t play Angry Birds on it.

Most of the students have a smart phone that does all that and much more. Everyday they hold in their hands a technological wonder, especially compared to what only a rich and privileged few could use a few years ago. And while the price of nearly everything is going up, the price of these phones has dropped dramatically. It is also worth mentioning that if “nobody knows how to make a pencil” it is certainly true that “nobody knows how to make a smart phone.” Yet we have it in our hands because of the free market.

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