In 1958, Leonard Read, in an attempt to write a version of Hayek’s “The Use of Knowledge in Society” for a wider audience, wrote “I, Pencil.” (It doesn’t cover all of Hayek’s points but it’s pretty good given its short length.)
Many economists use Read’s short article in their classes to great effect. It became much wider known when Milton Friedman used it in his PBS TV series, “Free to Choose.”
One interesting thing I just thought of is that in laying out the various elements of a pencil that come from other countries, Read does not talk about tariff rates. It wasn’t because there was free trade. In fact, tariff rates around the world were pretty high when Read wrote. Indeed, as I wrote 2 months ago, Trump is single-handedly undoing much of the progress that the world has made on trade since the 1940s. So tariff rates were quite high when Leonard Read was writing.
Still, I think it’s interesting to take the 4 countries from which some of the inputs come and note the tariff rates that will now be assigned under Trump’s new high (though not reciprocal) tariff regime.
So here are the 4 passages, with the tariff rate after each. Remember that the ✏️ is talking. Hokey? Sure, but it works. A lot of my 30-something military officer students loved it.
“My ‘lead’ itself—it contains no lead at all—is complex. The graphite is mined in Ceylon [Sri Lanka].” Tariff rate: 44%.
“To increase their strength and smoothness the leads are then treated with a hot mixture which includes candelilla wax from Mexico, paraffin wax, and hydrogenated natural fats.” Tariff rate: 25%.
“An ingredient called ‘factice’ is what does the erasing. It is a rubber-like product made by reacting rapeseed oil from the Dutch East Indies [Indonesia] with sulfur chloride.” Tariff rate: 32%.
“The pumice comes from Italy; and the pigment which gives “the plug” its color is cadmium sulfide.” Tariff rate: 20%. Italy is part of the EU and therefore gets the EU tariff rate.
Postscript:
Thanks to commenter Andrew_FL for pointing out the tariff rate for Italy.
[Image via Wikipedia: Pbroks13, CC BY-SA 4.0 <https://creativecommons.org/licenses/by-sa/4.0>, via Wikimedia Commons.]
READER COMMENTS
Andrew_FL
Apr 5 2025 at 9:47pm
I believe that there’s is one rate for all of the EU, not rates on specific countries. It should be 20%
David Henderson
Apr 6 2025 at 12:17am
Thanks, Andrew. I made the change.
Daniel Shapiro
Apr 5 2025 at 11:41pm
This is great! Thanks for posting this!
David Henderson
Apr 6 2025 at 12:14am
Thanks, Danny.
Pete Smoot
Apr 6 2025 at 10:39am
I, Pencil ought to be required reading for high school graduation. Forget Huckleberry Finn or Catcher in the Rye, spend a day on this.
You could spend a week exploring all the various trade barriers and market manipulations the narrator encounters, e.g. “the ferrule is manufactured in <fill in the blank> rather than <fill in other blank> because labor unions make machine operators expensive there.”
David Seltzer
Apr 6 2025 at 1:24pm
David: There are some interesting economic concepts in your post. The tariffs on the parts necessary to make I, Pencil are complementary. The tariffs on the parts will raise the price of the pencil and quantity demanded for pencils will decline. Negative cross-elasticity. Assume unit elasticity for pencils. A 25% increase in price results in a 25% decline in quantity demanded for Pencils. First and second order effects: Higher priced parts, higher priced pencils, fewer pencils demanded, increase in unemployed pencil workers. Substitution effect: If the price of pencils increase enough, people can “write” text with pens or cell phones or computers as substitutes. Positive cross-elasticity. Of course, I could be wrong.
David Seltzer
Apr 6 2025 at 4:27pm
Correction: Should have read, parts necessary to make I, Pencil are complementary. Not, tariffs on the parts necessary to make I, Pencil are complementary.
Mike Burnson
Apr 7 2025 at 9:12pm
Despite reading myriad links and playing with the wording of searches, I cannot find a simple, organized list of what tariffs are being charged on American products. My strong sense of skepticism tells me that there is a reason these data are difficult to find: special interests don’t want these data readily available to the American public. There are examples of similar “disappearance” of data: average age of Covid deaths disappeared after 2020 and actual human contribution to “greenhouse gas” emissions (human is 0.3%, nature is 99.7%) are two examples.
I do find that the EU is magically “open” to 0% tariffs, announced a few hours before I write. I also read about other means of restricting imports from the US, such as absurd allegations of “unsafe” foodstuffs: beef raised with bovine growth hormone and banning GMO crops. These are purely protectionist measures that limit trade more severely than tariffs. I also find the USTR calculations for “trade reciprocity” using terms and expression that I do not understand, but they do not seem straightforward.
Bottom line: there are lots of “unknowns” affecting trade and both sides play their games.
Mike T
Apr 10 2025 at 12:07pm
Well done 👏👏👏👏👏👏
Harry Jaeger
Apr 11 2025 at 9:15pm
Count me among the “30-something military officer students” who loved it. Professor Henderson’s class was exceptional.
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