I, Pencil: what does a simple pencil teach us about the free market?

We all know the famed essay by Leonard E. Read entitled “I, Pencil: My Family Tree.”  The Competitive Enterprise Institute is making a series of films which explore the core of Mr. Read’s argument.  (For those of you not familiar with this famous story of economic freedom and the power of free markets, please watch the video by Milton Friedman below as well):

Milton Friedman discusses the “lesson of the pencil” as well, in one of his many illustrative lectures: