Smart People to Blame for Central Planning

From California comes word that the summer program of Singularity University came to an end this week. The idea of SU is simple enough. Put smart people together with the latest technology; let them figure out solutions to the world’s problems.

‘The Singularity’ is an idea from Ray Kurzweil. The gist of it is that computers will soon be smarter than humans; by the middle of this century they’ll be smart enough to figure out how to get smarter and smarter, faster and faster.

No doubt, many of them will go into finance. And no doubt, many will make a fast buck. But will more smartness really make the world a better place? According to the singularists, increased brainpower will be able to solve all sorts of problems – from global climate change to market crises.

But the brain is a big disappointment. No mechanical engineer has ever improved the old-fashioned kiss. Nor has any brain ever straightened out the business cycle. Dumb as a slide rule, the brain does what it is told to do; it doesn’t ask questions. Tell it to build a bridge and it is on the case. Put it to work packaging tranches of toxic assets or selling aluminum siding…it is just as happy with one task as with the next. And the more a man’s brain bends to a challenge, the more it elbows out of the way his finer senses…and the dumber the man becomes. He turns his back on his own intuition as well as the accumulated wisdom from previous bust-ups and bruises. Like a man who has gone crazy, as G.K. Chesterton put it, all he has left is his sense of reason. Then, with nothing more to work with, he comes down on his work like a blacksmith’s hammer on a fine Swiss watch.

During the bubble period, the big banks were the biggest employers of top graduates from the world’s top schools. Oxford, Cambridge, Harvard, Yale…the financial sector drew them in like flies to an open latrine. The financial industry made so much money it had a hard time explaining it. The smart dudes did not toil in the fields, neither did they spin. Then, what did they do? They earned millions, bought BMWs and got dates with actresses. They claimed they were doing a fine job of allocating the world’s wealth and making everyone better off.

But when the bubble blew up, it was apparent that the financial world they created was fragile and perverse. Not a single one of the largest Wall Street banks survived without government handouts. And a news report from this week tells us that Americans were so damaged by the Bubble Epoque that their discretionary spending has now been cut to levels not seen in 50 years. The geniuses wiped out a half-century of economic progress in the richest, most successful economy the world has ever seen.

Smart people were also to blame for the biggest single error of the last century: central planning. The central planners thought they could fix the supposed evils of the natural economy with logic and reason. The idea was so alluring half the world fell for it. If the Nobel Committee had been on the ball they would have given Karl Marx a prize.

If the bug had come from stupid people…smart people might have avoided it. They might have come through the period without permanent scaring. But the wheezy intellectuals behind it were too clever for their own good. They soon infected the top universities…and the government. They convinced almost everyone that central planning was the wave of the future and that anyone who stood against it was a bumpkin, a parasite or a fool. Then, in the name of human progress, they took control in two of the world’s largest countries and turned them into prison camps.

But by the last decades of the 20th century it was obvious even to central planners themselves that it wouldn’t work; in both Russia and China, the planners simply gave up.

Central planning didn’t work because people had plans of their own. They resisted. Then, the planners brought down their hammers. “If you’re going to make an omelet, you have to break some eggs,” said chef Vladimir Lenin. The “Black Book of Communism” puts the death toll as high as 100 million.

Then too, central planning didn’t work for less obvious reasons. Planning requires information. The planners had plenty of it. But private individuals had far more – local, current, more accurate information from first-hand observation and experience. With better information, they could make better plans. Most important, individuals didn’t limit themselves to only the fresh fruit of their rational brains. They put their hearts in it…and drew on instinct and tradition – the distilled spirits of previous generations – giving them a huge advantage over the apparatchiks.

But the brains kept at it. When the forensic experts sifted through the debris from the 2007-2008 financial blow-up they found fingerprints from a whole list of Nobel winners. It was they who had developed the formulae and the theories that deceived investors, and themselves. They believed they could tame risk…by calculation! They figured out the odds and worked out prices – to as many decimals as needed to put investors to sleep. And then along came a risk they had not foreseen – the risk that their own formulae were claptrap and that they were idiots.

Meanwhile, the brains were at work in the public sector too. There, they were still pushing central planning…albeit on a much less ambitious scale than in the last century. In Western countries, government economists fixed lending rates and credit policies in order to encourage over-consumption. In the East, they fixed exchange rates and recycled credit back to their customers in the West in order to encourage over-production. And what ho! Wouldn’t you know it; now the world has too much debt and too much capacity.

And so the brains are back on the job. In China, the government boosts production. In America, the central planners are trying to boost consumption. In short, the fixers are still fixing. And soon, the world will be in an even worse fix than it is now.

Until next time,

Bill Bonner
for Markets and Money

Bill Bonner

Bill Bonner

Best-selling investment author Bill Bonner is the founder and president of Agora Publishing, one of the world's most successful consumer newsletter companies. Owner of both Fleet Street Publications and MoneyWeek magazine in the UK, he is also author of the free daily e-mail Markets and Money.
Bill Bonner

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22 Comments on "Smart People to Blame for Central Planning"

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A Dummy
Is it possible you nitwit, that smart people have also done a lot of good for the world? How about technology? How about advanced medicine? How about the fact that the average life expectancy is increasing every year in countries where science can be applied? Your anti-intellectual bent is disgusting to me. You have the luxury of spewing your vile filth on the internet because of smart people you dumb ass (which should be a compliment according to your POV). Should we just stand aside and let chaos rule our political systems? Are you an anarchist or something? Are smart… Read more »
Julio A. Cartaya
Most of the trouble you describe arise from a fact: ideas do not exist in a vacuum. Yours are examples of ideas taken out of the context in which they were ‘good’, only to find them turn into ‘bad’ ideas or … worse. Like we do for new drugs and medical procedures, new ideas should be subject to controlled testing to prove harmless, then useful, then carefully applied within that context and no more until further consideration. No engineer would ever design stresses that exceed 100 times the known limits of a material, yet that is exactly what economists, politicians… Read more »

Less is more. This is where they fail.

It generally isn’t the ‘big brains’ that fail society, rather the political sociopaths. The most recent financial meltdown has roots in de-regulation and politically motivated economic incentives for consumer spending. The American government living on debt and China providing the cheap cash to ensure their population doesn’t toss the current government. Similarity to 90 & 65 years ago (Russia & China) is that the people in power will do what it takes to keep it. As for the ‘big brains’ in financial organizations, there is a significant difference between a person with a specialized and narrow understanding of advanced math… Read more »
I believe this is a fairly accurate (though depressing) assessment of the state of the world. If smarts are not the way to go, what is? But on another note, all things are a matter of balance. The well meaning big brother that is so prevalent in the big growing governments of the world today are seeming to go in the wrong direction. But as we know the real answer is somewhere in the middle. Somewhere between the ivory tower liberals attitude of “People (other than me) are too dumb and unfortunate to take care of themselves. The government must… Read more »
Howard G Iger

The Economist who denies the timely need for re-balancing of the economy through temporary periods of central planning is an economist who has never read “The Wealth of Nations” or the “The Theory of Moral Sentiments” by Adam Smith

Mohamed Ali

“the fixers are still fixing”….almost sounds like the Joker from the Dark Knight…very similar philosophy on planning too….


So…does the author consider himself to be stupid? Then why should we listen to him? This article doesn’t even seem to have any sort of coherent point at all. ‘Smart people’ aren’t to blame for anything. If smart people fail, then they obviously weren’t smart enough. Enough with the anti-intellectual thing. It’s pretty ‘stupid’ – not to mention mind-numbingly ironic (coming from a ‘professional writer’).

Black And White Markets
Well done! If the planners apply standard/general rules to non-standard situations (i.e., particular/specific my life, your life, my business, your business), they will distort choices destructively. If planners customize the rules for specific situations, they have to take sides and become the tools of lobbyists who compete to get them on their side. The individuals that make up a market can change course in a single decision, allowing them to react to market conditions overnight, with millions of precise, distributed movements according to their specific values. The planners must take weeks, months, and years to make a steering choice, then… Read more »

Government central planning is done by a combo of people who were not smart enough to get a job in the real world and smarter people who seek power. This is a dangerous combination because the power-seekers will always dominate the half-wits while pretending that they are REALLY smart. Result: the half-wits get phony recognition and the power-seekers increase their power. Oh, and the pubic gets screwed while paying the bill.

The only way to mitigate this situation is to reduce the number of things we allow governments to do. There is NO other way.

Yes, exactly so. Its a question of epistemology as pointed out in the Fatal Conceit by Hayek. But as you say, “If there is more money to be made manipulating a system that cannot respond fast enough to stop the manipulation (as is the case with all central planning/regulation bureaucracy), the best and brightest will be hired by the ruthless to exploit it. Further, they will be the ones who understand the game of exploiting the system, and will be able to engineer their own bailouts, all of it at the expense of those who have given the government the… Read more »
I made a comment before reading the comments and now have to make another. Most of the comments are in the nitwit category. The author is not decrying ‘intelligence’ as such but that attitude that raw intellectual power is worth anything out of context. The ‘out of context’ here requires a great deal of hubris and belief in raw intellectual power combined with a certain ‘local’ ignorance. There is a current in our society that worships intelligence. Intelligence is certainly worthwhile but I fear we give too much power to those that can dazzle with their brilliance and that in… Read more »

Good comments Daniel.

I too like Feynman.

I believe the university system must be brought back to serve its core function of providing a general education and that the research and vocational training should sit separately. Too many in universities don’t want to teach, too many university boards are primarily politically and tribally energised. The worst of such boards are those in the US where Wall St and the State Dept/CFR types have firmly got their hooks into all the power faculties. You have exclusive space given to Deans to write narratives and running human rights lawyers in China on undercover budgets and you have creatures like… Read more »
Seems like most psuedo-intellectuals are up in arms; they do deserve to be publicly exposed and shamed. Their college degrees, and their disdain for the real work and for lesser endowed brains have made them lose touch with humanity and with reality. A cultural revolution perhaps is not too far away. Especially, when people start starving due to market failure – about 2014-15? On the other hand, if you read the whole of this article on DR (USA) you might agree that this is one of the best he has written – and he has written a few good ones.… Read more »
My feeling about the ‘smartness’ of the finance industry is that intelligence manifests in different ways. There is the intelligence required to solve real-world problems, where you are up against the laws of physics and your success or failure will be obvious to all. This is real smarts that requires intellectual honesty and will not tolerate hubris. Then there is the sort of dishonest and deceptive smartness so common in the financial industry, where you can appear smart by adopting ever more sophisticated ways of trying to cheat risk. It relies on suspending your critical faculties and believing things when… Read more »
Smart people should read: EXPERTS. See Taleb for the problem with experts… in a nut shell, they have tunnel vision, i.e. they think only in terms of what the know, never in terms of what they might not know (the dreaded Rumsfeldian: UNKNOWN, UNKNOWNS). Most of economics is deeply flawed… the market cycle etc, it’s time all this nonsense was junked along central planning. Markets are not efficient, people are not rational. ‘Private individuals’ are just prone to herd instinct and misinformation as so called genii. The so called business cycle is simply a result of herd behaviour. So called… Read more »

I think Gregory Bateson gets to the nub of the issue in this peice.


It’s not the intelligence factor that is resposnible for the declining results in the economic equation. Like most everything else, negative results are the product of negative ethics and greed factors.


The Austrian economists, (, who predicted the bubble outcomes, still are not being invited to the table at the White House. We will be in for more pain.

Also, watch for books now being written that will describe the depth and breadth of organized crime within our government.

Quite a smart article! The economy structure that engages all material and human resources into all civilization activities, has to be in line with a formulated universally evolutionary pattern. As of now it is not so. Therefore, the perception about human brain and a future AI-dominated surrounding portrayed in the article is much of a restricted prejudiced point of view that emerges out of contemporary sociological issues. The collective intelligence of the planet is working towards forming a collective cybernetic system that’s based on the universal evolutionary formula. Overall this system is a dynamic interactive network with its components again… Read more »
Fabrizio Forlani
The reliance of people on self-organization is in my opinion over estimated. This seems to forget that albeit social animals, human being are driven by fear even more than pleasure. This is what Central Planning is meant to be: to provide safety for the most number of people. This is not what self-organization does. With increasing gains also are increasing risks; you simply can’t splice the two side of the coin. There will always be two. Henceforth, albeit more successful, ‘local’ strategy fail to grant safety and shelter for the majority of people having to cope with classic old feeling… Read more »
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