Verse 3: Sagely management

不尚賢， 使民不爭。
By not rewarding the deserving, the people do not fight.
不貴難得之貨，使民不為盜。
By not valuing rare goods as precious, the people do not become thieves.
不見可欲，使民心不亂。
By not seeing objects of desire, the people's hearts do not become confused.
是以聖人之治，
Hence, the sage governs by:
虛其心，實其腹，
Emptying the heart, filling the abdomen;
弱其志，強其骨；
Weakening the will, strengthening the bone;
常使民無知、無欲，
Constantly causes the people to be without knowledge, without desire,
使夫智者不敢為也。
Making the smart afraid to act.
為無為，則無不治。
Taking the action of non-action, everything is governed.

Comments
The first three lines are interpreted as observations, not prescriptions. The key here is to use the mind of the child. "The sage governs by..." becomes the prescription, a pragmatic approach that eschews the higher values of heart and will. Note how the text does not tell you how to achieve this, but tells you the outcome, where the people have no desire (which is always in the mind) and no knowledge (only wisdom). That leaves the reader a lot of space to find the appropriate method. The smart become afraid to act, because their plans easily backfire. In this case, governing without governing (i.e. not spewing out all the propaganda about heart and will) actually achieves everything.