Pricing Progress
And your humble pencil
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Here is a hard truth: no matter how smart or skilled you are, even if you were inclined to fashion one yourself, you couldn’t make a humble pencil. No single individual could, in fact. The modest pencil requires the cooperation of hundreds of thousands of human hands and minds to make a quality and affordable product. These actors coordinate their efforts primarily through a singular mechanism: pricing. Here, we examine how prices and markets work together to expand human capability and how pricing information forms the data inputs that inform progress.
I, Pencil
Decades ago, Leonard E. Read wrote a famous short piece from the perspective of the humble pencil. Though the individual actors have likely changed since then, his essay illustrates the beautiful complexity of an efficient supply chain. He describes how the wood that encases a pencil is sourced from a specific kind of cedar tree grown in America’s Northwest, which is harvested and transported over rail. The logs of wood are then shipped to a…
