The Fatal Conceit

Matthew Light

Active Member
Dec 25, 2015
F.A. Hayek wrote a book called The Fatal Conceit: the errors of socialism. It explains why socialism does not work, and why the outcome of distributed decisions from thousands or millions of market participants leads to human welfare while micromanagement by technocrats fails. Basically, it is known as the calculation problem, and it boils down to the fact that individual market participants necessarily know much more about local conditions and their own needs than central planners ever can.

The Soviet Union created a committee called GOSPLAN as a replacement for market decisions. GOSPLAN would make decisions about how many tons of iron ore to manufacture, how many tall boots to send to Vladivostok,

In the United States where I live, we have an economic system that is a very complex mixture of central planning and market-based production and distribution. Areas of the economy that are primarily based in markets tend to function much better than those dominated by government intervention - for an example, compare the technology sector to K-12 education.

The most socialist, regulated and centrally-planned sector of the American economy (and indeed most countries) is our money and financial system. The Federal Reserve, led by a group of technocrats, decides what base interest rate is appropriate for the economy. In recent years they have also decided to create billions of new currency units to purchase. Indeed, their actions and the crises they created are in large part responsible for Satoshi Nakamoto launching the Bitcoin project.

How ironic it is now that another group of unelected technocrats have decided that central planning by experts, in this case members of the Bitcoin Core team, is preferable to allowing market processes to decide the correct maximum transaction processing speed on the Bitcoin network. This group of central planners claims to be acting in the name of freedom and decentralization, but they do not actually trust non-coercive and open marketplaces of software implementations or even of ideas. Instead we see them practicing censorship, cyber-warfare, and economic attacks against those who offer alternative visions of the bitcoin agora.

Central planning of an economic system is always a mistake, whether by GOSPLAN, the Federal Reserve Board, the European Central Bank, or the Bitcoin Core team. The evolution of Bitcoin over the past half-decade has demonstrated that. It is time for Bitcoin to liberate itself from the failed software project of Core and to embrace alternatives that offer a larger blocksize.
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New Member
Dec 20, 2015
South Florida, USA
I recently started reading Stephen Wolfram's A New Kind of Science and just came across this passage:

[N]ormally we start from whatever behavior we want to get, and then try to design a system that will produce it... But unlike engineering, nature operates under no such constraint... [T]he only situations in which we are routinely aware both of underlying rules and overall behavior are ones in which we are building things or doing engineering. (p.40)​

Likewise, markets operate under no such constraint, unless it is imposed. This gets us back to the thread that @Peter R started about Empiricism vs Rationalism. The engineering mindset necessarily prioritizes ends over means, otherwise it is just tinkering. However, free markets prioritize means over ends, generally operating according to a small number of intuitive rules and letting the Invisible Hand sweat the details.

Until hodlers, miners, and anyone else with actual skin in the game step up, Bitcoin is subject to being hijacked by benevolent dictators. Once they do, things could get dicey, but in some unpredicatable way.
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Reactions: Peter R


Active Member
Sep 10, 2015
It's my prefered book from him.

He understood the limits of reason and the superiority of an emerging evolutionary process over it. Nobody want to create civilization, yet its exist.

Nobody understand what Bitcoin will become, it's only the market which will discover all its potentialities. The future will surpise us.
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