As Jared Wilson remarks, this verse (in the wording of the Authorised Version) is widely misunderstood and misapplied in the evangelical world.  With it we baptise and bless our dreams, our plans, our ‘visions’.

Consider this:

‘In companies without a vision people come to work, they do stuff all day, they meet, they go home. In sports teams without a vision, people come to training, they train, the go home. In life, people without a vision, do stuff, go home and drift aimlessly in the winds of life through to death.

‘…A clear vision brings focus and direction. It binds those involved in any process together, like the band would bind the hair in the wind. A clear vision.

If people are not focussed on the common goal and are all doing their own thing because of a lack of clarity of vision, you have a tough time getting to the “promised land”.’

‘My imagination influences by aspiration.  In other words, your dreams determine your destiny. To accomplish anything you must first have a mission, a goal, a hope, a vision. “Without a vision the people perish.” Proverbs 29:18.’
(Rick Warren).

‘Every family in America deserves a decent home, whether a farmhouse or a city apartment, rented or owned, modest or splendid. What matters is that the home be a place for a family to live in health and grow in dignity. I have been criticized for such statements by people who think I raised hopes that can never be fulfilled, but I believe in the wisdom of the Bible—“Where there is no vision, the people perish.” (Pr. 29:18)’ (Lyndon B. Johnson)

A glance at a range of modern translations suggests that the true meaning of this verse is rather different:

NIV – Where there is no revelation, the people cast off restraint
NLT – When people do not accept divine guidance, they run wild
CEV – Without guidance from God law and order disappear
NKJV – Where there is no revelation, the people cast off restraint
HCSB – Without revelation people run wild
ESV – Where there is no prophetic vision the people cast off restraint
AMP – Where there is no vision [no redemptive revelation of God], the people perish

Quoting the entire verse in the ESV helps us to see the true meaning and intent of this proverb:

‘Where there is no prophetic vision the people cast off restraint, but blessed is he who keeps the law.’

I’m not convinced by the argument that the word ‘vision’ has fundamentally changed since the days of the AV translation (as words such as ‘conversation’ certainly have).  It seems more probable to me that the translators presupposed the idea of ‘prophetic vision’, precisely as found in the ESV.  On the other hand, they certainly would not have understood the word in terms of the modern meaning of ‘an ability to think about or plan the future with imagination or wisdom.’

Put simply, ‘a nation’s well-being depends on obedience to divine revelation.’ (EBC)

Garrett (NAC) notes that this verse places God’s revelation through the prophetic vision and through the Mosaic law side by side:

‘Social harmony and restraint cannot be achieved without the exhortations of the prophets and the teaching of the law.’

According to Hard Sayings of the Bible:

‘For many years this proverb has been misinterpreted, probably because the KJV translates it “Where there is no vision, the people perish.” One can infer from that translation that wise groups must have a five-, ten- or twenty-year plan for the future if they do not wish to become defunct as an organization. And many have taken just that meaning from this text.

‘However, the word vision does not refer to one’s ability to formulate future goals and plans. Instead, it is a synonym for the prophetic word itself. It is what a prophet does. It refers to the prophetic vision, revelation which comes as the word of God.’

Cf. 1 Sam 3:1, which speaks of the ‘rarity’ of the Lord’s word in those days.

As pointed out in HSB, the word translated ‘perish’ in the AV has also led to misunderstanding:

‘This does not refer to the perishing of churches with inactive planning committees (a fact which may be true on grounds other than those presented here in this text). Nor does it mean the perishing of the unevangelized heathen who will die in their sin if someone does not reach them quickly (a fact which is also true on other grounds).

‘…It means “to cast off all restraint.” It clearly warns that where the word of God is silenced so that it no longer comments on the local situation, the results are terrifying. The populace becomes ungovernable as they cast aside all that is decent and civil for whatever their own baser appetites wish to indulge in.’

Such casting off of restraint is illustrated in Ex 32:25 –

‘While Moses was absent for a mere forty days on Mount Sinai receiving the law of God, the people began to fear that he would never return. Without the input of the prophetic word, the people began to get out of control. They cast off all restraint and began to dance about a newly made golden calf. They ate and drank and indulged in open immorality, apparently recalling what they had seen in Egypt.’

See also Eric Bargerhuff: The Most Misunderstood Verses in the Bible, chapter 17.