Read, Leonard, I, Pencil.

Charming illustration of the workings of the invisible hand to guide the market and coordinate the division of labor in producing even the simplest of objects—a pencil. As told by the pencil itself.

AdamSmithWorks Comics: The Invisible Hand, at the Speaking of Smith blog, May 2, 2023.

Have you ever wondered what an invisible hand looks like???





















From An Inquiry into the Nature and Causes of the Wealth of Nations, Book IV, Chap. 2 by Adam Smith. London: Methuen and Co., Ltd., 1904. Edwin Cannan, ed. First published 1776.

But the annual revenue of every society is always precisely equal to the exchangeable value of the whole annual produce of its industry, or rather is precisely the same thing with that exchangeable value. As every individual, therefore, endeavours as much as he can both to employ his capital in the support of domestic industry, and so to direct that industry that its produce may be of the greatest value; every individual necessarily labours to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good. It is an affectation, indeed, not very common among merchants, and very few words need be employed in dissuading them from it. [Par. IV.2.9]

From The Theory of Moral Sentiments by Adam Smith. London: A. Millar, 1790. First published 1759.

The produce of the soil maintains at all times nearly that number of inhabitants which it is capable of maintaining. The rich only select from the heap what is most precious and agreeable. They consume little more than the poor, and in spite of their natural selfishness and rapacity, though they mean only their own conveniency, though the sole end which they propose from the labours of all the thousands whom they employ, be the gratification of their own vain and insatiable desires, they divide with the poor the produce of all their improvements. They are led by an invisible hand to make nearly the same distribution of the necessaries of life, which would have been made, had the earth been divided into equal portions among all its inhabitants, and thus without intending it, without knowing it, advance the interest of the society, and afford means to the multiplication of the species. [Par. IV.I.10]

From “I, Pencil,” by Leonard Read. Irvington-on-Hudson, NY: Foundation for Economic Education, Inc., 1999. First published 1958.

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. Instead, we find the Invisible Hand at work. This is the mystery to which I earlier referred.

It has been said that “only God can make a tree.” Why do we agree with this? Isn’t it because we realize that we ourselves could not make one? Indeed, can we even describe a tree? We cannot, except in superficial terms. We can say, for instance, that a certain molecular configuration manifests itself as a tree. But what mind is there among men that could even record, let alone direct, the constant changes in molecules that transpire in the life span of a tree? Such a feat is utterly unthinkable!

I, Pencil, am a complex combination of miracles: a tree, zinc, copper, graphite, and so on. But to these miracles which manifest themselves in Nature an even more extraordinary miracle has been added: the configuration of creative human energies?millions of tiny know-hows configurating naturally and spontaneously in response to human necessity and desire and in the absence of any human master-minding!… [Pars. RP.22-24]


Additional Readings and Resources

Hayek, Friedrich A., “The Use of Knowledge in Society,” American Economic Review, 1945

In F. A. Hayek’s seminal article, he illuminates the real role of markets?the coordination of knowledge and information without anyone being in charge. Hayek argued that markets process more information than could possibly be mastered by a mastermind or even a mastermind working with a computer. It’s one of the most eloquent expositions of how decentralized, unorganized individuals individual decision-making can outperform a central planner.

Hayek’s insights formed the basis of Leonard Read’s whimsical look at uncontrolled order and the role of markets in coordinating knowledge, “I, Pencil.” Reading both side by side is a fascinating look at economic rhetoric.


An Animal That Trades, Part 1: The Invisible Hand

This video series, produced by AdamSmithWorks, can be watch as a full 38-minute feature, or in five thematic, classroom-friendly chunks.

Don Boudreaux, Michael Munger, and Russ Roberts on Emergent Order, an EconTalk podcast. June 12, 2017.

Why is it that people in large cities like Paris or New York City people sleep peacefully, unworried about whether there will be enough bread or other necessities available for purchase the next morning? No one is in charge–no bread czar. No flour czar. And yet it seems to work remarkably well. Don Boudreaux of George Mason University and Michael Munger of Duke University join EconTalk host Russ Roberts to discuss emergent order and markets. The conversation includes a reading of Roberts’s poem, “It’s a Wonderful Loaf.”

Don Coursey, Vernon Smith, Economic Experiments, and the Visible Hand, at Econlib. October 28, 2022.

Don Coursey reflects on the origins of experimental economics and the work of its founding father, Nobel laureate Vernon Smith, who made “the mechanics of the invisible hand visible for the first time!”

Related Topics

Biography of Adam Smith in the Concise Encyclopedia of Economics

Invisible Hand Explanations of Society at the Online Library of Liberty

Michael Munger, Division of Labor, in the Concise Encyclopedia of Economics

Elaine Sternberg, The Power and Pervasiveness of Spontaneous Order, at Econlib. June 5, 2021.

Spontaneous Order Collection at the Online Library of Liberty

Peter Foster, Adam Smith’s Invisible Hand, at AdamSmithWorks

Dan Klein, The Regularity of Irregularity: Adam Smith’s Three Invisible Hands, at AdamSmithWorks, July 8, 2020.

Steven Horwitz, Seeing the Invisible Bridge in Adam Smith, at AdamSmithWorks, February 19, 2020.