August 30, 2012


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Paul Ryan’s speech accepting his nomination for the vice presidency of the United States last night has already been widely hailed as a home run national debut by many sources. So it’s no surprise that the Left, which views Ryan’s ideas as the political equivalent of Typhoid Mary, has already pounced on the speech for its alleged inaccuracies, while simultaneously bringing up every conceivable nitpick they can.
Dave Weigel at Slate huffed, “So I was in the cheap seats, not on carpet, when Ryan plowed through one of the more impressive strings of whoppers we’ve seen at this level. Ryan’s been doling out chunks of this speech for weeks, which made the fibs sound even stranger.”
ThinkProgress, meanwhile, attacked the speech practically every minute in their liveblog, seizing on every rhetorical flourish of Ryan’s, no matter how inconsequential, to blast him with some figure or quote that would make him seem to be a hypocrite or a liar. The piece de resistance has to be their final response to Ryan, in which they managed no less than two shots in response to an unfalsifiable bit of feel-good rhetoric:
Ryan reminds the convention of the need to protect the weakest among us. It’s too bad that his budget would drastically cut the programs they rely on. Religious leaders have described Ryan’s budget as a “immoral disaster” that “robs the poor.” At the same time, it gives the rich and corporations $3 trillion in tax breaks.
In short, according to the Left, Ryan’s speech was a fundamentally, inescapably dishonest argument – a “string of whoppers” and disingenuous statements – made in bad faith for the sake of masking his allegedly plutocratic agenda.
But is this rather unflattering assessment accurate, those who are understandably reluctant to take their ideological opponents’ word on anything must be asking. The answer is no – at least, not entirely. Avik Roy at Forbes, as well as Republican consultant Liz Mair, have already exploded some of the attacks on Ryan’s speech, and we will turn to them for help in taking on some of the charges. You can find their full takes here and here.
The ThinkProgress list of charges is probably the most extensive, comprising no less than 12 different charges. Here is our assessment of each:
Charge #1: Ryan voted to add $6.8 trillion to the deficit, which means he’s not a fiscal hawk.
Explanation: In a blog post written by a ThinkProgress intern, Ryan is accused of voting for bills that increase the budget deficit by $6.8 trillion. How do they get this number? By adding up the cumulative cost of all tax cuts that Paul Ryan voted for ($2.5 trillion), as well as “every bill that increased defense spending,” which has supposedly increased the deficit by $1.9 trillion. This only comes to $4.4 trillion, but ThinkProgress explains the rest using this table:
ThinkProgress and Slate Attack Paul Ryans Speech, And We Fact Check The Evidence
So is it true? Barely. Yes, Ryan has voted to spend a lot of money. Outside of Dr. Ron Paul, so has practically every member of Congress. It’s easy to quibble with the numbers here, but we’re going to point out two things instead. Firstly, this chart is of total cost for these bills, not total cost minus revenue. In other words, this isn’t what Ryan voted to add to the deficit. It’s what Ryan voted to spend. So their statement that he added $6.8 trillion to the deficit is flat-out wrong. Secondly, this estimate covers 10 years. Ryan voted to spend $6.8 trillion over ten years. That comes out to roughly $680 billion per year.
Compare this with President Obama’s proposed budget for fiscal year 2013, which would spend $47 trillion over the next ten years, or $4.7 trillion/year, according to Forbes. Ryan’s proposed budget shrinks that number to $40 trillion, or $4 trillion/year. Yes, that’s right, even the supposedly draconian, nasty Ryan budget spends many times more money over ten years than Ryan has personally voted to spend.
So this charge is deceitfully worded and quite arguably irrelevant.
Charge #2: Paul Ryan talked about a General Motors plant that closed in his hometown, blaming President Obama even though that plant closed under Bush.
Explanation: Near the beginning of his speech, Ryan told this story:
A lot of guys I went to high school with worked at that GM plant. Right there at that plant, candidate Obama said: “I believe that if our government is there to support you … this plant will be here for another hundred years.”  That’s what he said in 2008.
Well, as it turned out, that plant didn’t last another year.  It is locked up and empty to this day.  And that’s how it is in so many towns today, where the recovery that was promised is nowhere in sight.
The Left wing of the blogosphere pounced, claiming the plant closed in December of 2008, when Bush was still President, so it‘s not Obama’s fault and Ryan is lying.
So is it true? The Milwaukee-Wisconsin Journal Sentinel describes the plant as having completely shut down in 2009. The decision to close it was made in 2008, but the plant itself didn’t shutter until the next year, by which time the GM bailout had already passed. MRCTV’s Stephen Gutowski pinpoints its moment of failure at April 23, 2009.
National Review’s Henry Payne twists the knife further:
His liberal media allies were quick to pounce on Ryan’s comments. “GM stopped production at its Janesville, Wisconsin production facility in 2008, when George W. Bush was still president,” barked the Daily Kos, filling in Ryan’s obvious blank (true enough, unfriendly-to-Detroit-truck mpg laws are also the legacy of George “We’re Addicted to Oil” Bush).
But the Left misses the point. Under Obamanomics, the government picks winners and losers. Obama promised Janesville would be a winner even as his economic policies guaranteed it would always be a loser. Indeed, Obama’s whole 2008 Janesville speech is a sobering road map for the job-killing policies he has put in place as president.
As a final note – plants have almost certainly closed while President Obama has been in office. Ryan just happened to pick one he had a personal connection to as a symbol. Romney adviser Eric Fernstrohm said precisely this when questioned about the GM Plant issue by John Berman of CNN:
And notice the Ryan said “candidate” Obama. That’s because the president was campaigning in 2008 on saving the plant. He didn’t, and it closed for good in 2009.
Charge #3: Ryan is wrong about the stimulus, which actually “created or saved 3.3 million jobs.”
Explanation: From Ryan’s speech: “What did the taxpayers get out of the Obama stimulus?  More debt.  That money wasn’t just spent and wasted – it was borrowed, spent, and wasted.”
In response, ThinkProgress cites a study by the CBO saying that the stimulus “created or saved” 3.3 million jobs.
So is it true? Not unless you think the highest possible estimate is always the right one. The CBOestimated that the stimulus could have saved up to 3.3 million jobs. In other words, “creating or saving” 3.3 million jobs is the absolute upper limit on what the stimulus could have done. The lowest estimate is 500,000 jobs created or saved. Both numbers are probably inaccurate, but to accept the 3.3 million jobs number requires an extreme degree of optimism.
Charge #4: Paul Ryan supported the stimulus in 2002!
Explanation: ThinkProgress links to a video from the Chris Hayes show showing Paul Ryan speaking on behalf of a 2002 stimulus bill that President Bush signed into law. This is supposed to prove that Ryan is a hypocrite when it comes to stimulus spending.
So is it true? To begin with, it’s irrelevant. Ryan was speaking against the Obama stimulus specifically in his speech. He didn’t rail against the concept of stimulus spending, period. Moreover, there is a lot of daylight between supporting a $42 billion stimulus measure – most of which is in tax relief – and supporting an $831 billion bill that is loaded with giveaways for favored groups/industries. It’s true that Ryan supports the idea of stimulus in principle, but when it comes to stimuli as big as the one Obama wrote? Not a chance.
Charge #5: Ryan’s attacks on Obamacare also hit Romneycare.
Explanation: Ryan said in his speech, “Obamacare comes to more than two thousand pages of rules, mandates, taxes, fees, and fines that have no place in a free country.” ThinkProgress asks, “What about Massachusetts? The two laws are very similar.”
So is it true?  Yes, what about Massachusetts? And more to the point, what about what Ryan actually said? Romneycare isn’t 2,000 pages. It doesn’t include any new taxes. It doesn’t include the infamous Independent Payment Advisory Board (IPAB). Romney vetoed large chunks of regulation that were originally in the bill. Yes, it has a mandate, but that mandate is a lot less expansive. In other words, Romneycare comes to less than two thousand pages, with very few rules, one mandate, no taxes, some fees and some fines. What about Massachusetts? ThinkProgress probably doesn’t want an answer to that question.
Charge #6: Repealing Obamacare would increase the deficit by $109 billion from 2013 to 2022 and take away coverage from more than 30 million Americans.
Explanation: This is a response to Ryan’s promise to repeal Obamacare. Presumably, the idea is to claim that Obamacare is fiscally conservative and Ryan isn’t.
So is it true? The claim that Obamacare will guarantee coverage for “more than 30 million Americans” is nonsense. In fact, the Congressional Budget Office actually says that Obamacare itself will leave 30 million people uninsured. This means that, at most, Obamacare will grant  coverage to 23 million of the more than 50 million people who are presently uninsured, according to the CBO. There’s quite a bit of daylight between that figure and “more than 30 million.” Moreover, these estimates are historically unreliable. The CBO has revised its projects on the fiscal impact of Obamacare multiple times. Not to mention, $109 billion over ten years is a comparatively small number, and should be more than offset by other cuts proposed by Romney and Ryan.
Charge #7: Paul Ryan is a hypocrite on Medicare.
Explanation: This is actually three separate charges in one. ThinkProgress alleges, firstly, that Ryan supported the $716 billion in Medicare cuts that he slams Obama for in the speech; secondly, that Ryan bragged about cutting Medicare spending more than Obama, and thirdly, that under Romney and Ryan, Medicare would actually become insolvent by 2016, instead of 2024, precisely because Romney wouldn’t cut $716 from Medicare.
So is it true? Avik Roy takes apart the “Ryan supported cutting $716 billion from Medicare,” too, talking point this way:
Here are the facts. It’s true that Ryan’s budgets in 2011 and 2012 preserved Obamacare’s cuts to Medicare. However, there is a huge difference between cutting Medicare by $716 billion to fund $1.9 trillion in new health spending, as Obamacare did, and cutting Medicare by $716 billion to shore up the solvency of the Medicare program itself, as the Ryan budget sought to do.
Secondly, the Romney Medicare plan fully repeals Obamacare, including the $716 billion in Medicare cuts.
We will deal with Ryan’s bragging about cutting Medicare spending faster than Obama in a moment. For now, consider the final attack – that Ryan and Romney’s plan will make the program run out of money faster. Why? Well, because they restore the $716 in cuts. Or to be more specific, they would repeal cost-saving provisions in Obamacare that will make the budget of the program shrink naturally. In other words, they implicitly concede that reducing the Medicare budget by eliminating inefficiency is a good thing.
And that is precisely what Ryan was trying to do with the Path to Prosperity. As established above, Ryan’s original budget cut $716 billion now in order to shore up Medicare for the future. According to his own budget, the other cuts would have also been directed toward establishing Medicare’s long term solvency. ThinkProgress is free to dispute whether his method would work, but if you follow the internal logic of these charges, they end up attacking Romney for being too friendly to Medicare, relative to Obama and Ryan. That’s a talking point the Romney campaign would probably love, with some adjustments.
Charge #8: Ryan’s Medicare plan only cuts Medicare spending because it makes seniors pay more.
Explanation: ThinkProgress links to one of their own studies showing that the Romney-Ryan plan on Medicare would force seniors to pay more out of pocket, making up for the savings to the government.
But is it true? The ThinkProgress study isn’t talking about current seniors, but about people who will be seniors in 2023. Which is strange, because they also think Medicare will end in 2016 under Romney-Ryan. So which is it? Will the Romney-Ryan plan end Medicare in four years, or will it keep it solvent while making people who are currently under 55 pay more down the line? Moreover, the actual study relies entirely on estimates of what would happen after Romney and Ryan repeal Obamacare to make its case that seniors would be hurt, suggesting that when Romney and Ryan replace Obamacare, they could easily put in other cost control mechanisms that keep their promise true. In fact, even the left-leaning Politifact agrees this is a possibility.
Charge #9: The credit downgrade is Republicans’ fault.
Explanation: ThinkProgress says this: “Ryan just brought up a ‘downgraded America.’ It was his party that held the debt ceiling hostage, causing America’s creditors to lose faith and downgrade the country. In fact, the ratings agency repeatedly blamed Republicans for refusing to raise taxes.”
But is it true? From Liz Mair (Warning! Language):
If we go back to S&P’s original statement explaining its decision to downgrade, we see that it says this:
We lowered our long-term rating on the U.S. because we believe that the prolonged controversy over raising the statutory debt ceiling and the related fiscal policy debate indicate that further near-term progress containing the  growth in public spending, especially on entitlements, or on reaching an agreement on raising revenues is less likely than we previously assumed and will remain a contentious and fitful process. We also believe that the fiscal consolidation plan that Congress and the Administration agreed to this week falls short of the amount that we believe is necessary to stabilize the general government debt burden by the middle of the decade. 
Our lowering of the rating was prompted by our view on the rising public debt burden and our perception of greater policymaking uncertainty, consistent with our criteria…
This is S&P essentially saying the downgrade occurred because of four things:
1) It wasn’t clear until the last possible minute that the debt ceiling would definitely be raised (OK, blame the Tea Party on this one, though I’d also note Obama voted against raising the debt ceiling as a senator and if we give him a pass on that, he ONLY gets a pass because his position was so minority then as to not matter– so he was fringe AND irrelevant);
2) Washington– constituted by two relatively intransigent political parties– can‘t and won’t get its s**t together to a) cut spending– and especially entitlements and/or b) raise revenue at an adequate level for S&P’s tastes (Democrats and Republicans get equal blame here, as Democrats won’t accept significant cuts to entitlement spending, which S&P calls out by name, and many Republicans won’t accept any tax increases);
3) The deal cut in order to allow the debt ceiling to be raised sucked and didn’t do enough (again, both parties get blame here); and
4) Our debt burden is getting too big and setting aside that Democrats and Republicans in Washington haven’t been able to get their shit together to deal with it, S&P thinks they won’t, in the near future, get their s**t together, either (again, both parties get blame here).
In short, no, this isn‘t all the Republicans’ fault.
Claim #10: Ryan is wrong that Obama has racked up more debt than all previous presidents combined.
Explanation: Ryan claimed, “President Obama has added more debt than any other president before him, and more than all the troubled governments of Europe combined.  One president, one term, $5 trillion in new debt.” ThinkProgress responds, “Obama hasn’t amassed more debt than all past presidents combined, as Ryan claimed. The New York Times beaks down the math: ‘The national debt stood at $10.626 trillion on the day that President Obama took office. It now stands slightly above $15 trillion.’”
But is it true? Only if you assume Ryan said something he didn’t say. Ryan‘s numbers match up with ThinkProgress’ numbers. He simply said that President Obama has added more debt than any other single president before him – not the more expansive line that President Obama added more than all of them combined, which they are correct to call deceitful. However, President Obama did add more debt than every President from Washington up until Reagan combined, according to CNSNews.
Claim #11: Paul Ryan supports austerity, which has pushed European countries into second recessions.
Explanation: Unlike the United States, which has spent a large amount of money to try and offset the recession, European countries have embraced a more fiscally conservative route by trying to get their budgets to balance. This approach hasn’t gone well in some countries. Ryan is a fiscal conservative, therefore ThinkProgress concludes that he supports the same approach.
But is it true? Not remotely. To begin with, the word “austerity” appears nowhere in Ryan’s speech. Secondly, European austerity is loathed among American conservative economic thinkers for a very simple reason – it doesn’t actually cut spending. It just raises taxes:
In France, for example, the so-called austerity largely consisted of raising taxes. There was a 3 percent surtax on incomes above €500,000, an increase of one percentage point in the top marginal tax rate (from 40 to 41 percent), and an end to the automatic indexation of tax brackets for inheritance, wealth, and income taxes. There was also a 5 percent hike in the corporate income tax on businesses with revenue of more than €250 million, as well as a hike in the capital-gains tax, and closure of several corporate tax breaks. And even though most of these tax hikes were aimed at the wealthy, the middle class did not get off free. There was an increase in the Value Added Tax (VAT) and the excise taxes on tobacco and alcohol.
That’s an agenda that should gladden the heart of any tax-increase zealot — or even Paul Krugman.
There is a candidate in this election with that agenda, and it’s not Paul Ryan.
Claim #12: Paul Ryan claims to support protecting the weak, but his budget attacks them.
Explanation: Ryan said, “And the greatest of all responsibilities, is that of the strong to protect the weak.  The truest measure of any society is how it treats those who cannot defend or care for themselves.”
ThinkProgress responds to this by citing “religious leaders” who called Ryan’s budget an “immoral disaster” and claiming he wants to cut the government benefits that help the weak.
But is it true? ThinkProgress’ idea of quoting religious leaders is quoting a group that includes Jim Wallis – in other words, the religious Left doesn‘t like Ryan’s budget. They also quote one priest who‘s a constituent of Ryan’s (hardly a religious leader), and one single Catholic bishop. This is a far cry from the entire Vatican rising up in arms against Ryan’s budget plan. However, the idea that Ryan’s budget ideas rob the poor is unfalsifiable, since it doesn’t attack specific policies. Another ThinkProgress post (mercifully shorter) references Ryan‘s support for tax cuts as evidence that he doesn’t care about the weak. It’s probably news to John F. Kennedy that Catholics can’t support tax cuts in good conscience. Isn’t there a Deadly Sin like this someplace…?
Bonus: Even Fox News is attacking Ryan’s speech?
Explanation: Fox News published an article today describing Ryan’s speech as “deceitful.” The Left has jumped on it as evidence that Ryan’s gone too far even for the supposedly right-leaning Fox.
But is it true? Not at all. The author of the article is one of Fox News’ token liberal contributors. And it gets things wrong. It regurgitates three of the arguments covered here, as well as a thoroughly unfalsifiable semantic claim about President Obama’s “You Didn’t Build That” gaffe. Not to mention, every article published by a Fox News contributor does not represent the entire voice of the company.

August 24, 2012

The one and only.
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Gawker has an interesting headline up: “Inside Mitt Romney’s Tax-Dodging Cayman Schemes.” The gossip site also has released some 950 pages of material related to Mitt Romney’s investments, mostly having to do with Bain Capital. In Gawker’s own words: “Together, they reveal the mind-numbing, maze-like, and deeply opaque complexity with which Romney has handled his $250 million fortune.”
Most respectable publications maintain a fairly strict church/state division between the editorial side and the business side, and Gawker, a not very respectable publication, seems to do the same. Apparently, nobody thought to tell the boys on the Romney beat that Gawker Media is part of a shell company incorporated in the Cayman Islands. Gawker’s money lives in the same neighborhood as Romney’s money. Call it bipartisanship.
As John Cassidy relates in The New Yorker, Gawker’s finances are “organized like an international money-laundering operation.” For example:
Much of its international revenues are directed through Hungary, where [bossman Nick] Denton’s mother hails from, and where some of the firm’s techies are located. But that is only part of it. Recently, [Felix] Salmon reports, the various Gawker operations—Gawker Media LLC, Gawker Entertainment LLC, Gawker Technology LLC, Gawker Sales LLC—have been restructured to bring them under control of a shell company based in the Cayman Islands, Gawker Media Group Inc.
Why would a relatively small media outfit based in Soho choose to incorporate itself in a Caribbean locale long favored by insider dealers, drug cartels, hedge funds, and other entities with lots of cash they don’t want to advertise? The question virtually answers itself, but for those unversed in the intricacies of international tax avoidance Salmon spells it out: “The result is a company where 130 U.S. employees eat up the lion’s share of the the U.S. revenues, resulting in little if any taxable income, while the international income, the franchise value of the brands, and the value of the technology all stays permanently overseas, untouched by the I.R.S.”
So we have evil offshoring — exploiting those poor marginalized Hungarian nerds — baroque tax-minimizing schemes, assets that will not be repatriated because of U.S. taxes, and that favorite sin of the Left: hypocrisy. In my mind, hypocrisy is a lesser sin than stupidity, and it is sort of stupid to write up a breathless account about Romney’s doing the precise same thing your company does. Incidentally, there is nothing in the Gawker report or the accompanying documents suggesting that Romney or Bain did anything improper. And neither did Gawker, for that matter: U.S. tax practices create very powerful incentives to pursue avoidance strategies. Gawker’s owners apparently know that, even if its writers lack the guts or the intellectual capability to acknowledge as much.
We eagerly await the next Gawker editorial on the need for corporate-tax reform.

August 19, 2012

About the Authors

Leonard Read (1898–1983) was the founder and first president of FEE. ... See All Posts by This Author
Leonard E. Read

I, Pencil

A Simple Instrument Teaches a Profound Lesson

Leonard E. Read (1898-1983) founded FEE in 1946 and served as its president until his death. “I, Pencil,” his most famous essay, was first published in the December 1958 issue of The Freeman.
I am a lead pencil—the ordinary wooden pencil familiar to all boys and girls and adults who can read and write.*

*       My official name is “Mongol 482.” My many ingredients are assembled, fabricated, and finished by Eberhard Faber Pencil Company.

Writing is both my vocation and my avocation; that’s all I do.
You may wonder why I should write a genealogy. Well, to begin with, my story is interesting. And, next, I am a mystery— more so than a tree or a sunset or even a flash of lightning. But, sadly, I am taken for granted by those who use me, as if I were a mere incident and without background. This supercilious attitude relegates me to the level of the commonplace. This is a species of the grievous error in which mankind cannot too long persist without peril. For, the wise G. K. Chesterton observed, “We are perishing for want of wonder, not for want of wonders.”
I, Pencil, simple though I appear to be, merit your wonder and awe, a claim I shall attempt to prove. In fact, if you can understand me—no, that’s too much to ask of anyone—if you can become aware of the miraculousness which I symbolize, you can help save the freedom mankind is so unhappily losing. I have a profound lesson to teach. And I can teach this lesson better than can an automobile or an airplane or a mechanical dishwasher because—well, because I am seemingly so simple.
Simple? Yet, not a single person on the face of this earth knows how to make me. This sounds fantastic, doesn’t it? Especially when it is realized that there are about one and one-half billion of my kind produced in the U.S.A. each year.
Pick me up and look me over. What do you see? Not much meets the eye—there’s some wood, lacquer, the printed labeling, graphite lead, a bit of metal, and an eraser.
Innumerable Antecedents
Just as you cannot trace your family tree back very far, so is it impossible for me to name and explain all my antecedents. But I would like to suggest enough of them to impress upon you the richness and complexity of my background.
My family tree begins with what in fact is a tree, a cedar of straight grain that grows in Northern California and Oregon. Now contemplate all the saws and trucks and rope and the countless other gear used in harvesting and carting the cedar logs to the railroad siding. Think of all the persons and the numberless skills that went into their fabrication: the mining of ore, the making of steel and its refinement into saws, axes, motors; the growing of hemp and bringing it through all the stages to heavy and strong rope; the logging camps with their beds and mess halls, the cookery and the raising of all the foods. Why, untold thousands of persons had a hand in every cup of coffee the loggers drink!
The logs are shipped to a mill in San Leandro, California. Can you imagine the individuals who make flat cars and rails and railroad engines and who construct and install the communication systems incidental thereto? These legions are among my antecedents.
Consider the millwork in San Leandro. The cedar logs are cut into small, pencil-length slats less than one-fourth of an inch in thickness. These are kiln dried and then tinted for the same reason women put rouge on their faces. People prefer that I look pretty, not a pallid white. The slats are waxed and kiln dried again. How many skills went into the making of the tint and the kilns, into supplying the heat, the light and power, the belts, motors, and all the other things a mill requires? Sweepers in the mill among my ancestors? Yes, and included are the men who poured the concrete for the dam of a Pacific Gas & Electric Company hydroplant which supplies the mill’s power!
Don’t overlook the ancestors present and distant who have a hand in transporting sixty carloads of slats across the nation.
Once in the pencil factory—$4,000,000 in machinery and building, all capital accumulated by thrifty and saving parents of mine—each slat is given eight grooves by a complex machine, after which another machine lays leads in every other slat, applies glue, and places another slat atop—a lead sandwich, so to speak. Seven brothers and I are mechanically carved from this “wood-clinched” sandwich.
My “lead” itself—it contains no lead at all—is complex. The graphite is mined in Ceylon. Consider these miners and those who make their many tools and the makers of the paper sacks in which the graphite is shipped and those who make the string that ties the sacks and those who put them aboard ships and those who make the ships. Even the lighthouse keepers along the way assisted in my birth—and the harbor pilots.
The graphite is mixed with clay from Mississippi in which ammonium hydroxide is used in the refining process. Then wetting agents are added such as sulfonated tallow—animal fats chemically reacted with sulfuric acid. After passing through numerous machines, the mixture finally appears as endless extrusions—as from a sausage grinder—cut to size, dried, and baked for several hours at 1,850 degrees Fahrenheit. 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.
My cedar receives six coats of lacquer. Do you know all the ingredients of lacquer? Who would think that the growers of castor beans and the refiners of castor oil are a part of it? They are. Why, even the processes by which the lacquer is made a beautiful yellow involves the skills of more persons than one can enumerate!
Observe the labeling. That’s a film formed by applying heat to carbon black mixed with resins. How do you make resins and what, pray, is carbon black?
My bit of metal—the ferrule—is brass. Think of all the persons who mine zinc and copper and those who have the skills to make shiny sheet brass from these products of nature. Those black rings on my ferrule are black nickel. What is black nickel and how is it applied? The complete story of why the center of my ferrule has no black nickel on it would take pages to explain.
Then there’s my crowning glory, inelegantly referred to in the trade as “the plug,” the part man uses to erase the errors he makes with me. An ingredient called “factice” is what does the erasing. It is a rubber-like product made by reacting rape- seed oil from the Dutch East Indies with sulfur chloride. Rubber, contrary to the common notion, is only for binding purposes. Then, too, there are numerous vulcanizing and accelerating agents. The pumice comes from Italy; and the pigment which gives “the plug” its color is cadmium sulfide.
No One Knows
Does anyone wish to challenge my earlier assertion that no single person on the face of this earth knows how to make me?
Actually, millions of human beings have had a hand in my creation, no one of whom even knows more than a very few of the others. Now, you may say that I go too far in relating the picker of a coffee berry in far off Brazil and food growers elsewhere to my creation; that this is an extreme position. I shall stand by my claim. There isn’t a single person in all these millions, including the president of the pencil company, who contributes more than a tiny, infinitesimal bit of know-how. From the standpoint of know-how the only difference between the miner of graphite in Ceylon and the logger in Oregon is in the type of know-how. Neither the miner nor the logger can be dispensed with, any more than can the chemist at the factory or the worker in the oil field—paraffin being a by-product of petroleum.
Here is an astounding fact: Neither the worker in the oil field nor the chemist nor the digger of graphite or clay nor any who mans or makes the ships or trains or trucks nor the one who runs the machine that does the knurling on my bit of metal nor the president of the company performs his singular task because he wants me. Each one wants me less, perhaps, than does a child in the first grade. Indeed, there are some among this vast multitude who never saw a pencil nor would they know how to use one. Their motivation is other than me. Perhaps it is something like this: Each of these millions sees that he can thus exchange his tiny know-how for the goods and services he needs or wants. I may or may not be among these items.
No Master Mind
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! Since only God can make a tree, I insist that only God could make me. Man can no more direct these millions of know-hows to bring me into being than he can put molecules together to create a tree.
The above is what I meant when writing, “If you can become aware of the miraculousness which I symbolize, you can help save the freedom mankind is so unhappily losing.” For, if one is aware that these know-hows will naturally, yes, automatically, arrange themselves into creative and productive patterns in response to human necessity and demand—that is, in the absence of governmental or any other coercive master-minding—then one will possess an absolutely essential ingredient for freedom: a faith in free people. Freedom is impossible without this faith.
Once government has had a monopoly of a creative activity such, for instance, as the delivery of the mails, most individuals will believe that the mails could not be efficiently delivered by men acting freely. And here is the reason: Each one acknowledges that he himself doesn’t know how to do all the things incident to mail delivery. He also recognizes that no other individual could do it. These assumptions are correct. No individual possesses enough know-how to perform a nation’s mail delivery any more than any individual possesses enough know-how to make a pencil. Now, in the absence of faith in free people—in the unawareness that millions of tiny know-hows would naturally and miraculously form and cooperate to satisfy this necessity—the individual cannot help but reach the erroneous conclusion that mail can be delivered only by governmental “master-minding.”
Testimony Galore
If I, Pencil, were the only item that could offer testimony on what men and women can accomplish when free to try, then those with little faith would have a fair case. However, there is testimony galore; it’s all about us and on every hand. Mail delivery is exceedingly simple when compared, for instance, to the making of an automobile or a calculating machine or a grain combine or a milling machine or to tens of thousands of other things. Delivery? Why, in this area where men have been left free to try, they deliver the human voice around the world in less than one second; they deliver an event visually and in motion to any person’s home when it is happening; they deliver 150 passengers from Seattle to Baltimore in less than four hours; they deliver gas from Texas to one’s range or furnace in New York at unbelievably low rates and without subsidy; they deliver each four pounds of oil from the Persian Gulf to our Eastern Seaboard—halfway around the world—for less money than the government charges for delivering a one-ounce letter across the street!
The lesson I have to teach is this: Leave all creative energies uninhibited. Merely organize society to act in harmony with this lesson. Let society’s legal apparatus remove all obstacles the best it can. Permit these creative know-hows freely to flow. Have faith that free men and women will respond to the Invisible Hand. This faith will be confirmed. I, Pencil, seemingly simple though I am, offer the miracle of my creation as testimony that this is a practical faith, as practical as the sun, the rain, a cedar tree, the good earth.

Leonard Read’s delightful story, “I, Pencil,” has become a classic, and deservedly so. I know of no other piece of literature that so succinctly, persuasively, and effectively illustrates the meaning of both Adam Smith’s invisible hand—the possibility of cooperation without coercion—and Friedrich Hayek’s emphasis on the importance of dispersed knowledge and the role of the price system in communicating information that “will make the individuals do the desirable things without anyone having to tell them what to do.”
We used Leonard’s story in our television show, “Free to Choose,” and in the accompanying book of the same title to illustrate “the power of the market” (the title of both the first segment of the TV show and of chapter one of the book). We summarized the story and then went on to say:
“None of the thousands of persons involved in producing the pencil performed his task because he wanted a pencil. Some among them never saw a pencil and would not know what it is for. Each saw his work as a way to get the goods and services he wanted—goods and services we produced in order to get the pencil we wanted. Every time we go to the store and buy a pencil, we are exchanging a little bit of our services for the infinitesimal amount of services that each of the thousands contributed toward producing the pencil.
“It is even more astounding that the pencil was ever produced. No one sitting in a central office gave orders to these thousands of people. No military police enforced the orders that were not given. These people live in many lands, speak different languages, practice different religions, may even hate one another—yet none of these differences prevented them from cooperating to produce a pencil. How did it happen? Adam Smith gave us the answer two hundred years ago.”
“I, Pencil” is a typical Leonard Read product: imaginative, simple yet subtle, breathing the love of freedom that imbued everything Leonard wrote or did. As in the rest of his work, he was not trying to tell people what to do or how to conduct themselves. He was simply trying to enhance individuals’ understanding of themselves and of the system they live in.
That was his basic credo and one that he stuck to consistently during his long period of service to the public—not public service in the sense of government service. Whatever the pressure, he stuck to his guns, refusing to compromise his principles. That was why he was so effective in keeping alive, in the early days, and then spreading the basic idea that human freedom required private property, free competition, and severely limited government.
It is a tribute to his foresight, persistence, and sound understanding of the basis for a free society, that FEE, the institution he established and on which he lavished such loving care, is able to celebrate its fiftieth anniversary.
Milton Friedman

August 13, 2012


We are Catholics from diverse backgrounds and experiences committed to the re-election of President Obama.
  • Baca

    Polly Baca

  • Bagley

    The Hon. Elizabeth Frawley Bagley

  • Becerra

    Representative Xavier Becerra

  • Cafardi

    Nicholas Cafardi

  • Dahlkemper

    Kathy Dahlkemper

  • DeLauro

    Representative Rosa DeLauro

  • Durbin

    Senator Dick Durbin

  • Foster

    Miguel Foster

  • Groome

    Thomas Groome

  • Kaptur

    Representative Marcy Kaptur

  • Kennedy

    Victoria Reggie Kennedy

  • Kovari

    Victoria Kovari

  • O’Malley

    Governor Martin O’Malley

  • Oberstar

    Jim Oberstar

  • Parks

    Lawrence Parks

  • Phelps

    Sister Jamie T. Phelps

  • Rotondaro

    Fred Rotondaro

  • Ryan

    Representative Tim Ryan

  • Schneck

    Stephen Schneck

  • Sweeney

    John Sweeney

  • Tuohey III

    Mark Tuohey III