Caleb Dowdy

Macroeconomics
10-6-2010

"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." Here the Pencil talking

about the vast and complex process of how he came to be. As we can see there is a distinct

division of labor with each contributor specializing in his/her respective trade (ie. The logger,

the miner, the farmers, and so on…). "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." We can see again division of labor and specialization of a

sort in these machines in the factory, each machine having one specific task and a specialized

set of skills to accomplish these tasks.

"Each of these millions sees that he can thus exchange his tiny know-how for the goods

and services he needs or wants." The preceding passage is a positive economic statement

made by the author. Here we see the Author stating that in exchange for a good or service a

consumer will exchange his goods or services. By running their decision through a cost-benefit

analysis and if the costs of this exchange are less than the benefits a deal is in the making

(assuming the other party has reached a similar verdict). "Since only God can make a tree, I

insist that only God could make me." So in reading the preceding excerpt we can come to a

conclusion that this is a normative economic statement, and we find a similar statement in the

following statement, “If you can become aware of the miraculousness which I symbolize, you

can help save the freedom mankind is so unhappily losing." Value is subjective so to say that

mankind is losing is to invest an emotional-based thought, making the statement normative.

 Caleb Dowdy
Macroeconomics
10-6-2010
"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." When we compare the excerpt above to Adam Smith's "invisible hand

principle", "Self-interested individuals, wholly unaware of the effects of their actions, act as if

driven by an "invisible hand" to produce the greatest social good." We notice a striking

resemblance between the two excerpts. This is where we can Adam Smith's invisible hand

interweaved into the story.

Leonard goes on to write, "millions of tiny know-hows configurating naturally and

spontaneously in response to human necessity and desire and in the absence of any human

masterminding!" In this passage we can make a direct connection between this statement and

Hayek's term "catallaxy" or a self-organizing system of voluntary cooperation.

One large issue in government planning agency is that some will argue that government

intrusion is actually the source of monopoly. With the producer trying to monopolize the pencil

industry by eliminating the competition, they are now free to set their own higher prices. What

really baffles me about the market system of coordination is how the value of technology can

just drop so rapidly after updates or upgrades are made. Same with the value of a car originally

priced at 10k when it was first released and years later the same car can be purchased at 1k

from a used car lot.