Are pencils sexy? Or is the title of this post a blatant attempt to exploit sex to get readers?
Well actually, I think that pencils are just a teensy bit sexy because (a) they are without doubt phallic, to a Freudian, and (b) they can tell us a great deal about why free markets work - no, don't go away, this is much more interesting than sex.
OK, so here's a simple question. When did you last have difficulty buying a pencil? You can't remember, can you? What's more, you almost certainly were able to buy the the style, colour and hardness that you wanted. And at a price that didn't make your eyes water.
The pencil example was used during a course I took in economics, before I decided on psychology (and you thought I was making that phallic bit up, shame on you). The example was to illustrate the power of free markets in providing the things that we want at a price we can afford.
Consider. The pencil consists of wood, paint, a ferrule (that's the metal bit), an eraser (not a rubber which, I understand, means something quite different in the States) and the core which is a mixture of graphite and clay. A pencil manufacturer needs to be able to bring together those resources.
But there is an almost infinite chain of knock-on effects. The wood comes from trees which need to be planted. At maturity they need to be felled. To do that you need axes or more likely chain-saws. So there is a pull-through to metal smelters and engineering works to provide those things. But ore needed to be mined first, and machine tools designed and built. Ore bodies need to be prospected and then developed. And in each of these industries we need the right number of people with the right kinds of skills.
I could make exactly the same point about the paint that covers the pencil, or the ferrule, or the eraser, or the graphite core, the system of distribution and so on.
How on earth do all these things come together, in the right quantities, to allow the right number of pencils to be made? You may well ask. In fact I hope you did. As I trailed earlier, it's down to free markets and the pricing mechanism. Every time one of the elements gets out of kilter the price mechanism will correct it. Too much wood? Price goes down because the pencil makers don't need it. Resources move out of wood into something else. Can't get the metal to make ferrules for love or money? Well I don't know if love will talk, but money will. When entrepreneurs see the price of metal being bid up, and supernormal profits being made, they will get into metal, the supply will increase, and the price will move back into the normal range.
Blahdy blahdy blah. What stops this being dull? I'll tell you, using two real examples.
Number one. I used to be an academic at University College London. We had a Russian visit our department. This was in the pre-Glasnost era, late 70s. I was showing him around and he wanted my contact details. He took out his wallet and withdrew from it a carefully folded piece of paper. It already had stuff written on it, right to the edges. He found a blank space, the size of a postage stamp, and wrote my details there. Paper, it turned out, was something he did not have a lot of. Well it was either going to be that, or a glut, spin a coin. At that time the Soviets used to plan, five years at a time, what they would need. Paper would be part of that plan, but from the above you know that means factories, wood, plantations, felling facilities, distribution etc etc ALL of which have to be planned correctly - and since prices would all be fixed, no price mechanism to tell you when you got it wrong. Which means you would get it wrong.
Number two. I had a rant about why Britain's National Health Service, far from being a jewel in its crown, was in fact an expensive mistake. If you followed the above you will understand why something as simple as a lead pencil can't be delivered by a central committee. In the UK they are smart enough to know that. They let pencils arrive courtesy of the free market. But what they do try and deliver by a central committee is a £100 billion health system. Hmmmm.
This is not good news, because we live in an age where governments everywhere are getting very fond of doing everything. Dear oh dear.
Postscript
Adam Smith explained all this much better than I can, and he did it over 200 years ago. He really was a genius, but denigrated by the modern left. His present-day supporters are often branded as neo-conservative loonies. Ah well, pass the Valium.
Well actually, I think that pencils are just a teensy bit sexy because (a) they are without doubt phallic, to a Freudian, and (b) they can tell us a great deal about why free markets work - no, don't go away, this is much more interesting than sex.
OK, so here's a simple question. When did you last have difficulty buying a pencil? You can't remember, can you? What's more, you almost certainly were able to buy the the style, colour and hardness that you wanted. And at a price that didn't make your eyes water.
The pencil example was used during a course I took in economics, before I decided on psychology (and you thought I was making that phallic bit up, shame on you). The example was to illustrate the power of free markets in providing the things that we want at a price we can afford.
Consider. The pencil consists of wood, paint, a ferrule (that's the metal bit), an eraser (not a rubber which, I understand, means something quite different in the States) and the core which is a mixture of graphite and clay. A pencil manufacturer needs to be able to bring together those resources.
But there is an almost infinite chain of knock-on effects. The wood comes from trees which need to be planted. At maturity they need to be felled. To do that you need axes or more likely chain-saws. So there is a pull-through to metal smelters and engineering works to provide those things. But ore needed to be mined first, and machine tools designed and built. Ore bodies need to be prospected and then developed. And in each of these industries we need the right number of people with the right kinds of skills.
I could make exactly the same point about the paint that covers the pencil, or the ferrule, or the eraser, or the graphite core, the system of distribution and so on.
How on earth do all these things come together, in the right quantities, to allow the right number of pencils to be made? You may well ask. In fact I hope you did. As I trailed earlier, it's down to free markets and the pricing mechanism. Every time one of the elements gets out of kilter the price mechanism will correct it. Too much wood? Price goes down because the pencil makers don't need it. Resources move out of wood into something else. Can't get the metal to make ferrules for love or money? Well I don't know if love will talk, but money will. When entrepreneurs see the price of metal being bid up, and supernormal profits being made, they will get into metal, the supply will increase, and the price will move back into the normal range.
Blahdy blahdy blah. What stops this being dull? I'll tell you, using two real examples.
Number one. I used to be an academic at University College London. We had a Russian visit our department. This was in the pre-Glasnost era, late 70s. I was showing him around and he wanted my contact details. He took out his wallet and withdrew from it a carefully folded piece of paper. It already had stuff written on it, right to the edges. He found a blank space, the size of a postage stamp, and wrote my details there. Paper, it turned out, was something he did not have a lot of. Well it was either going to be that, or a glut, spin a coin. At that time the Soviets used to plan, five years at a time, what they would need. Paper would be part of that plan, but from the above you know that means factories, wood, plantations, felling facilities, distribution etc etc ALL of which have to be planned correctly - and since prices would all be fixed, no price mechanism to tell you when you got it wrong. Which means you would get it wrong.
Number two. I had a rant about why Britain's National Health Service, far from being a jewel in its crown, was in fact an expensive mistake. If you followed the above you will understand why something as simple as a lead pencil can't be delivered by a central committee. In the UK they are smart enough to know that. They let pencils arrive courtesy of the free market. But what they do try and deliver by a central committee is a £100 billion health system. Hmmmm.
This is not good news, because we live in an age where governments everywhere are getting very fond of doing everything. Dear oh dear.
Postscript
Adam Smith explained all this much better than I can, and he did it over 200 years ago. He really was a genius, but denigrated by the modern left. His present-day supporters are often branded as neo-conservative loonies. Ah well, pass the Valium.
9 comments:
very interesting. Wasn't it the Americans who spent millions trying to develop a pen that would write in space - the Russians brought along a pencil to the same party. (Have commented on the spider one, too, don't know if you'd be obsessive enough to cast your eye down and check.)
Obsessive? Only to excess. Haven't seen your comment, but will rush off to look.
I haven't come across the Russian pencil story. Very good! It's crazy to be sophisticated when simple will do.
Thanks for dropping in.
Personally I find a goose quill dipped in fresh human blood does the job very effectively and at minimum cost .....
bob (aka Count Dracula)
Dear Count D,
Minimum cost; precisely so. Delivered to you courtesy of the free market.
good.......I am a pen manufacturer supplier and looking for partners globally. If any one interest please contact me through this website.
Dear Alan Roberta,
Yessss. A wee bit tenuous, but definitely marks for trying.
Dis donc! - I shall never see a pencil in the same light again..!
Ps, I'm intrigued by your pen manufacturer supplier's goods - is he a purveyor of stationary stationery? This is a novel concept...
At the risk of sounding pedantic, I do feel a supplier should actually be able to spell the product he is selling...!
Hi Her,
Ah! Missed the stationary blooper, though I did have a look at roberta's web site. I'll bet everyone does; a kind of horrid fascination!
Thanks for dropping by. I hope the pencil thing made sense. It was quite formative for me, though it was many years ago!!
Post a Comment