I think the example was meant to be hypothetical and a bit absurd so that people can understand the point being made. There are enough real world examples of state intervention for the "common good" gone awry.
These kind of bad mental shortcuts are the result of decades of propagandistic programming, not any kind of reflection of reality.
Besides that, there is the fact that "Authoritarian High Modernism" absolutely existed in the past century and resulted in all sorts of "insane nonsense choices" being made to the great detriment of millions of people.