I Pencil

Imagine you are holding an ordinary pencil. How many people do you think helped make it, from obtaining raw materials to delivering it to a store?

A simple pencil connects thousands of people, natural resources, specialized jobs, and businesses. Nobody needs to control the entire process for all those people to contribute to making the finished product. This helps illustrate the economic idea known as the invisible hand, associated with Enlightenment thinker Adam Smith.

How can people working in their own self-interest cooperate to produce something that none of them could make alone?

The invisible hand is a metaphor for how people pursuing their own interests in a market can sometimes produce benefits for others, even when helping society was not their primary goal.

For example, a pencil manufacturer wants to earn a profit. To do so, the company must attract customers by offering a pencil people are willing to buy. The manufacturer consequently helps supply a product that other people want.

Smith did not claim that self-interest always produces good results. Markets can also produce unfair outcomes, pollution, exploitation, and other problems. His idea gives us a way to investigate how markets work—not a guarantee that they always work well.

1. In your own words, define Adam Smith's invisible hand.
2. Explain how I, Pencil demonstrates specialization and cooperation.
3. Give one example of how a person's pursuit of self-interest can benefit other people.
4. Explain one reason markets might fail to produce a good outcome for everyone.
5. Final challenge: If you had to explain the invisible hand to a sixth grader using an example other than a pencil, what example would you choose and why? (a smartphone, a pair of sneakers, a slice of pizza, or a school backpack) Identify at least five different people, jobs, or industries involved in producing and delivering it, explain what motivates two of those participants, and describe how the participants depend on one another.