The dramatic fluctuation in the trading price of Bitcoins over the past month is an example of decentralized economic coordination. Bitcoins had increased in price over 400 percent since March and now have seen about half of those gains be washed away. The price may fall further still.
When naive or ill-informed participants begin to make decisions in a decentralized process, which is what appears to have taken place in the Bitcoin market recently, the effect of their bad choices is easier to expose and safeguard against. It allows for millions of experiments in trial and error. If a central bank were to step in to “stabilize” the price of Bitcoins, all those bad investment decisions would be locked in place.
If the majority of voters (or politicians) make ill-informed decisions, they make bad decisions for everyone. It’s a one-size-fits-all approach, even for those who knew better. Intuitively, it might makes sense to entrust economic planning to benevolent experts. But even if those experts are more knowledgeable than the average person, the cumulative knowledge of those experts doing the planning would pale in comparison to the cumulative knowledge of those who would be planned.