Guest post by Vedran Vuk from Casey Research.
We've often called Ben Bernanke an idiot, dumb, ignorant, and a whole other variety of adjectives to demean his intelligence and understanding of the economy. Though these words are convenient ways to label a nemesis, they are completely inaccurate.
Ben Bernanke is an extremely intelligent man. Few morons can graduate from the MIT Ph.D. economics program. Perhaps some graduates are dishonest or idiot savants, but in sheer brain power, they are on the far right tail of the IQ distribution.
However, what Bernanke lacks is not intelligence - it is a much more basic human characteristic: humility. The Fed chairman's intelligence has deluded him in to believing the economy can be centrally planned through complex equations and statistics. This isn't his failing alone. Many highly intelligent people, especially in physics, chemistry, and mathematics, lack the same humility when it comes to social issues. Researchers in these fields solve extremely complex systems, and as a result, become deluded in to thinking economic problems can be solved in the same way.
Unfortunately for them, society is vastly more complex than a controlled lab experiment; the economy is pure chaos with millions of forces shaping it.
Scientists and mathematicians often falsely believe the world is just another equation to solve. Usually the smarter the individual, the more they believe in man's capacity to plan and shape the world (even Einstein had communist tendencies). If we get the equation right, we can take the economy to some perfect equilibrium.
Yes, human beings are highly intelligent. We can build skyscrapers, fly planes, cure diseases, and even explore outer space. With these accomplishments achieved, why not centrally plan society through mathematics and the scientific method as well? Unfortunately for us, it just doesn't work that way. The economy is a far too complex system. Several equations cannot capture the simultaneous reactions of six billion people around the world to a million different economic events.
Society doesn't need smarter central planners. We don’t need any at all.