In 1964, Leonard Read wrote a genealogy from the perspective of a pencil, demonstrating the vast, complicated web of the structure of production that is handled by the division of labor on free markets. The pencil explained that no one knows how to make a pencil because of the myriad production processes involved:
My family tree begins with what in fact is a tree, a cedar of straight grain that grows in Northern California and Oregon. Now contemplate all the saws and trucks and rope and the countless other gear used in harvesting and carting the cedar logs to the railroad siding. 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. Why, untold thousands of persons had a hand in every cup of coffee the loggers drink!
The pencil then detailed the remaining work required for pencil production, which included making flat cars, rails, and railroad engines; shipping the logs; developing communication systems; supplying heat, light, and power; building a factory; forging mining tools; mining graphite; and shipping the materials to one place. Continuing, it described the supplies needed to paint the pencils and the process of painting, labeling, and adding brass tips; mining zinc and copper to make the brass; and fabricating the eraser.
While the division of labor required to fabricate a pencil is impressive, consider how many more steps are required to manufacture complicated things such as smartphones or computers. Yet each step requires one particular resource—energy.
When people discuss fossil fuels, they typically weigh the pros and cons of the electricity in their houses and the fuel in their cars. They usually do not consider what was required to build those houses and cars—much less the pencils they use to write. Fossil fuel advocate Alex Epstein writes in his book Fossil Future: Why Global Human Flourishing Requires More Oil, Coal, and Natural Gas—Not Less about the machines needed to build houses:
Today’s unprecedented shelters are possible only because today’s shelter-building industry, like the food industry, employs a massive staff of fossil-fueled machine laborers that cost-effectively do incredible amounts of work for us.
These machine laborers include:
- excavation machines that enable one human to dig up and move massive amounts of earth to make room for the foundations of sturdy buildings;
- grading machines that enable one human being to easily flatten uneven, bumpy patches of land to make them suitable for large, level structures;
- lifting machines, such as cranes, that can lift enormous amounts of weight that, if they could ever be lifted before, took years of slave labor;
- the machines we call power tools, which enable human beings to combine their dexterity with large amounts of power for precision tasks such as hammering, fastening, and sawing;
- compacting machines that make the ground under buildings solid;
- cutting machines that clear trees to make way for human habitation;
- paving machines that build the amazing roads that interconnect our shelters;
- mining machines that extract all the raw materials involved in our amazing buildings, from iron and coal for steel, to aluminum, to copper, to sand; and
- high-heat machines used to transform mined materials into vital usable materials such as cement, steel, and plastics.
Without these completely unappreciated fossil-fueled machine laborers radically increasing humans’ productivity ability, high-quality shelter would be out of reach for the vast majority of people in what is today’s empowered world.
And that’s just the building of shelter.
A discussion of fossil fuels’ unique cost-effective benefits as they relate to house construction could easily stop there; however, if we also apply Read’s genealogy, it becomes clear that each one of the listed machines also relies on complex systems of machines and processes that require energy. In Read’s pencil analogy, he lists the hydroelectric power that runs the mill he discusses, but without the unique cost-effective energy source of fossil fuels, one could never reliably power every step of the process. This also applies to more complicated goods such as phones or computers. And as Epstein explained, the process of building the high-quality shelters that we take for granted today would be impossible without fossil fuels.
Speaking about the Austrian school of economics, Robert Murphy stated that “their capital theory and business-cycle theory are the best I have found.” The Austrian school’s capital theory is vital. While others ignore what is required for the structure of production, the Austrian school does not. Fossil fuels should be a priority in the world today—not because they are the most efficient at the level of the consumer good but because without fossil fuels the entire structure of production of the modern economy falls apart.
