The following post by Executive Board member David Deerson was originally published at OpenMarket.org, the official blog of the Competitive Enterprise Institute.
“If you wish to make an apple pie from scratch, you must first create the universe.” – Carl Sagan.
By now, you’ve probably heard of the latest controversy surrounding the President. It revolves around comments he made in Roanoke, Virginia, last Friday to a crowd of supporters. “If you’ve got a business,” the president said, “you didn’t build that. Somebody else made that happen.” The business community, conservatives, and libertarians are all outraged at the comments, which have been airing almost non-stop in the mainstream media and the blogosphere (including us here at OpenMarket.org). The comments have also spawned a series of Internet memes, some of which are pretty funny.
But one meme in particular got me thinking. It consists of a photo of Steve Jobs with an early model of a Macintosh computer. The text reads, “Nice computer, you didn’t build that.” Well, the simple truth is that he didn’t. No one possibly could have. No one in the world knows how to build a computer, and even if they did, they couldn’t possibly do it in the short course of a lifetime.
Those familiar with free-market economics probably know where I’m headed by now. Students of capitalism know that no man knows how to build a pencil, let alone a computer. The lesson was taught most memorably by Leonard E. Read, founder of the Foundation for Economic Education. In his brilliant and hugely influential essay, “I, Pencil,” Read points out that no single person can create a pencil. No one has the knowledge, the time, nor the ability. If you haven’t read it, I strongly encourage you to do so. It’s not long. I’ll summarize, but it’s no substitute for Read’s brilliance.
To make a pencil, you must first chop down a tree. That will require a saw, and some rope. Ore must be mined, converted into steel, and fashioned into a saw. The rope requires the cultivation of hemp, linen, or some other fiber, and must go through a complicated binding and strengthening process. The logs, once cut, are shipped by train. To make a pencil, you’ve got to build a train. We’ve barely even started our pencil-making thought-experiment, and it is already abundantly clear that no single person can accomplish all of work it will take, nor does any single person have the knowledge that would require.
And yet, there are pencils. Astoundingly, no single person directed their creation. The miners who harvested the ore to make the axe to chop down the tree had no idea that their labor was going towards the production of a pencil. And they didn’t care. They knew simply that they had the ability to put a pick-axe to a rock wall, and that someone was willing to pay them for it. The scientists who developed the rubber for the truck tires did not have pencils in mind.
This is the miracle of the market. Millions of people, each with their own specialty, acting for their own independent reasons, come together to create something without even knowing it. The creation of a pencil, or a Macintosh computer, could not possibly happen any other way.
Now, just because no one can build a pencil on his own, it doesn’t follow that the government has a right to tax the pencil manufacturer’s earnings and redistribute it. That was Obama’s implication, and I disagree with it completely. But there is an important lesson to be taken from Obama’s words, one that is nearly the opposite of what he intended by them. Read puts the moral of his story very simply: “Leave all creative energies uninhibited. Have faith that free men and women will respond to the Invisible Hand. This faith will be confirmed.”