I, Pencil: My Family Tree as Told to Leonard E. Read

“I, Pencil” was most directly influenced by Austrian-British economist Friedrich Hayek’s famous article “The Use of Knowledge in Society.” The scholarly article was first published in the September 1945 issue of The American Economic Review. Hayek argues against the then-widespread notion that markets function efficiently only when market actors have complete knowledge of all relevant facts and issues—or, as Leonard Read puts it, when there is a central “mastermind” to assemble this knowledge. Hayek maintains that “perfect” knowledge is not only unattainable but unnecessary because in free markets, prices communicate enough information to induce actors to make rational decisions. This is also the core of Read’s argument in “I, Pencil.”

The economics term “dispersed knowledge” predicates that each individual participant in a market possesses unique “knowledge of the particular circumstances of time and place” in which he operates, and it is impossible for any one individual or organization to acquire all of these “dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess” (Hayek, Friedrich. “The Use of Knowledge in Society.” Foundation for Economic Education, 1 May 1996). Hayek asserts that this dispersed contextual knowledge is essential for adapting swiftly to changes in the marketplace.