From “I, Pencil” to “I, Smartphone”: The Moral Limits of the Market

From “I, Pencil” to “I, Smartphone”: The Moral Limits of the Market September 17, 2014

I’m pleased to feature a guest post by my friend and colleague Kevin Brown, an assistant professor of business and economics at Asbury University. This column is based in part on an article, “Capitalism and the Common Good,” that appears in the September 2014 issue of Christianity Today.


i-pencilIn the late 1950s, the economist Leonard Read wrote an essay that continues to demand attention over half a century later. The subject? A pencil. Seeking to convey the multitude of economic forces, resources, and human industriousness pooled together in the production process, “I, Pencil” creatively illustrates Adam Smith’s “invisible hand” at work by demonstrating the complexity of making the simple yet ubiquitous pencil. Indeed, the activity and coordination required to create such a simple instrument is so multifaceted that Read described the process as “miraculous.”

We now live in a digital age, and the pencil has been taken over by other devices. But the miracle of the market has not, according to “I, Smartphone,” a short video created recently by the Institute for Faith, Work, and Economics (IFWE). Similar to “I, Pencil,” “I Smartphone” highlights the resources, ingenuity, and productive labor across the world coming together to create a smartphone device. Moreover, IFWE offers a spiritual dimension. Christians, they suggest, should care about production in a free market system “because God has given us the market process as the most powerful tool we have in a fallen world to serve each other by using our gifts. … We see Jesus in that.”

In many ways, paralleling Read’s example of a pencil to a modern-day smartphone is appropriate. Both products require resources, ingenuity, and productive forces from around the world in order to arrive upon the finished good. Further, the companies that produce these products must think carefully about a host of marketplace factors (price, differentiation, marketing, etc.) in order to attract and appease potential consumers. Finally, if these forces work correctly, a mutually beneficial exchange occurs within the marketplace benefiting both consumer and producer alike. Perhaps Read had it right: it all seems “miraculous.”

What historical lesson are we to learn from this process? The conclusion to a 2008 version of “I, Pencil” offers some direction:

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.

In the case of the pencil, “creative energies” may rightly be applauded. Can we say the same for the more contemporary example of a smartphone? In Read’s original version, the resources mobilized to create a pencil include cedar, wax, graphite, labeling material, brass, zinc, copper, lacquer, black nickel, and factice (not to mention the thousands of resources that went into creating the machinery used to process and produce the pencil). Similar to the pencil, the smartphone contains an array of resources from across the globe.

One particular mineral that nearly all smartphones contain is columbite-tantalite, or what is commonly referred to as coltan. Coltan mining occurs all over the world. However, a large majority of it takes place in the Democratic Republic of Congo. The UN, as well as other advocacy groups, has documented the illegal smuggling of coltan from the Congo, which often involves violence, fighting, rape, and murder. In essence, violent militia groups help to facilitate the smuggling of imported minerals, all contributing to what has been described as the “Congolese War.” Like “blood diamonds,” the unethical mining of coltan has fueled violence, rape, and murder in a place that, as Enough Project founder John Prendergast writes, “most of us will never go, affecting people most of us will never meet.”

This is not to dismiss the creative energies sparked by the free market. But the story of coltan and smartphones shows how the market is apt to facilitate vice as well as virtue. This is different from the belief that markets consistently churn the input of vice into a virtuous output.

In the late 18th century, this seemingly counter-intuitive idea is evident in Adam Smith’s own “Wealth of Nations” where self-regarding market agents would, in satiating their own interests, somehow produce the greatest common good. There is an important distinction, however, to be made here. While many may charge Smith with promoting the “market alchemy” of vice to virtue in his famous treatise, Stanford Philosopher Debra Satz has emphasized that Smith—and other classical economists—was clear that markets work best when they are rooted in a framework of laws, regulations, and social standards of morality. In other words, markets do not necessarily produce these outcomes; they require them.

In “I, Pencil,” Read provided a noteworthy example of the market’s capacity to mobilize productive forces across the globe. However, the violence so closely correlated with the production of smartphones provide a sobering reminder that the invisible hand has the capacity to reflect the best, and worst, of our own hands.

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  • stefanstackhouse

    Yes, the free market is an elegant solution to the problem of allocating scarce private goods in a manner that optimizes their marginal utility – IF all externalities and other market distortions are regulated out of existence. That is a very, very big IF, and many of the shortcomings of capitalist economies are attributable in large part to the failure of governments – thanks mainly to their becoming beholden to and being manipulated by rich and powerful rent-seekers – to actually do this.

    The other big problem here is that not all goods are private goods. There are also public goods, and because of the “free rider” problem these simply cannot be provided efficiently and optimally by a free market, no matter how much doctrinaire libertarians might dream otherwise (or no matter how much crony capitalists and their agents might spew propaganda claiming otherwise). There are also toll goods and common-pool goods, each of which have their own unique characteristics and issues. Socialists think that governments can own these and operate them efficiently, but they never do. Capitalists think that corporations can own these and operate them in a way that serves the public well, but they never do. The only solution that actually works is for the people who actually benefit from these toll or common-pool goods to directly own and operate them for their own benefit through some sort of cooperative enterprise or public trust with a directly-elected board of trustees. This is the only approach that combines the feedback system of supply and demand with the feedback system of the ballot box, both of which are required to assure both economic efficiency and responsive public service.

    This is the truth, even though most of you have never been told this.

  • Benjamin Martin

    Markets are a “side effect” of preparing for war. Don’t let libertarian fairy tales fool ya.

    “…money and markets do not emerge spontaneously…one simply hands out coins to the soldiers and then demands that every family in the kingdom was obliged to pay one of those coins back to you, one would, in one blow, turn one’s entire national economy into a vast machine for the provisioning of soldiers, since now every family, in order to get their hands on the coins, must find some way to contribute to the general effort to provide soldiers with things they want. Markets are brought into existence as a side effect.”

    David Graeber (2011) Debt: The First 5,000 Years

  • trytoseeitmyway

    Your comment is one of the silliest I have read in a long time, and that’s really saying something. For one thing, it looks like something has been left out of the quotation that would be needed for the quotation to form, you know, a sentence. For another, some author’s goofy counterfactual hypothetical about debt (the subject of the book, as summarized by the cited Wikipedia article) doesn’t tell anyone anything about the formation of markets, which is a topic a bit more complex than, on the available evidence, you have the intelligence to grasp. There really is no substitute for markets in the efficient allocation of scarce resources; if there was ever a doubt, the Soviets proved it conclusively, albeit to their chagrin.

  • Hillary Spragg