January 2012

In 1958, Leonard Read published I, Pencil, an essay written in the first person from the point of view of a pencil. In the essay, the pencil explains the unbelievable complexity of creating such a simple product. However, despite its simplicity, Read also argues, “Not a single person on the face of this earth knows how to make one.” In fact, there are no central planners dictating its creation.

Read’s seemingly unbelievable claim is argued to perfection after he cites the numerous raw materials, capital and labor required to produce a pencil, and the millions of people unknowingly cooperating throughout its production. Although the story is educational, the final message that Read attempts to convey is this: Leave all creative energies uninhibited. Society must have faith that free men and women will respond to the Invisible Hand without government coercion.

However, a few weeks ago, John Quiggin, wrote a response to I, Pencil (UPDATED LINK). In Quiggin’s rebuttal, he argues that a pencil is really a product of the mixed economy, not the product of the Invisible Hand. Moreover, Quiggin makes the astounding claim that markets aren’t the best way to organize production. Unfortunately for Quiggin, he fails miserably to argue his case, while ignoring numerous facts that refute his assertions.

Quiggin first argues that the wood used to produce the pencil was probably acquired in a forest managed by the US Forest Service or the Bureau of Land Management, or maybe a similar state agency. He writes the following:

Starting in the late 19th century, the US government (most notably under Theodore Roosevelt) judged that the nation’s forests were not likely to be adequately managed to ensure a supply of timber for, among other things, the production of pencils future generations if they relied on existing private property rights and the workings of the invisible hand. Similar judgements [sic] have been made in Australia and many other countries. That is, the production of pencils in the US in the 1950s depended, to a substantial extent, on conscious planning undertaken 50 years ago.

Quiggin is assuming without evidence that the trees used to produce the pencil in I, Pencil would be absent but for the creation of some government agency. That claim is erroneous.  Nearly 90% of the U.S. timber harvest comes from private lands.

In addtion, the forests of Oregon existed well before the US Forest Service, and a government nationalization of land doesn’t produce the trees already in existence. If Quggin is arguing a government agency was necessary to prevent total deforestation, then the “Tragedy of the Commons” is to blame during westward expansion, not private property rights.

In fact, privately owned tree farms have proved to be very successful at sustaining forests. The American Tree Farm System, a nonprofit organization that has certified millions of private tree farm acres, was created over a decade before I, Pencil was written. Moreover, the Oregon Tree Farm System has successfully achieved Theodore Roosevelt’s goals that Quiggin outlines. Although it appears these nonprofits may accept government money, that would not dispute the effectiveness of private property rights to adequately protect the long-term health of forests.

When individuals profit off trees, there is an enormous incentive for private farms to maintain the forests in the long-term. A sustainable forest creates a sustainable profit with the protection of private property rights that prevent the “Tragedy of the Commons,” the real villain of long-term deforestation.

[click to continue…]