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Wisdom of Crowds?

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Eric080 Posted: Mon, Nov 1 2010 11:12 AM

I was interested in hearing a libertarian response to this:

 

http://en.wikipedia.org/wiki/Wisdom_of_crowds

 

I haven't read the book and I don't know if you have, but I'v always been under the assumption that majorities are mediocre and that specialization would lead to better results.  How do you think this theory relates to democracy in general?

"And it may be said with strict accuracy, that the taste a man may show for absolute government bears an exact ratio to the contempt he may profess for his countrymen." - de Tocqueville
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Eric080 replied on Mon, Nov 1 2010 12:25 PM

Bump

 

Come on, I thought this thread would be sure to attract some democracy-downers wink

"And it may be said with strict accuracy, that the taste a man may show for absolute government bears an exact ratio to the contempt he may profess for his countrymen." - de Tocqueville
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I think the concept is misleading, because it all depends how the 'crowd' is organized, and how the wisdom is promoted.

Is he talking about the voluntary collaboration of the market, or the democratic rituals of elections, or bureaucratic and governmental organizations?  From what I can see, he seems to be confusing all of them into one category.

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I think the concept is misleading, because it all depends how the 'crowd' is organized, and how the wisdom is promoted.

Human intelligence relies on brain cells, which on their own are quite dumb and useless. Thought is the transmission of light signals between cells, forming a pattern that can be described as intelligent. When someone dies, the cells remain, only the light has stopped.

Is it the cells, then, that contain the wisdom, or the light that is wise?

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I know Caplan in The Myth of The Rational Voter heavily criticizes the wisdom of crowds theory (he calls it the "Miracle of Aggregation") as it relates to democracy, and specifically economics.

His main evidence is emprical, where he shows that the less-educated voting majority systematically favors economically counterproductive arguments.  Specifically (off the top of my head), they suffer from anti-foreign bias, anti-immigrant bias, anti-capitalistic bias, make-work bias, anti-technology bias and probably a few I'm forgetting.  Politicians, as a result, tend to cater to these biases which produces suboptimal policies relative to the policies that only educated voters or economists would choose.

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Student replied on Tue, Nov 2 2010 8:50 AM

it has been a while since i read the book, but as i think of it there are probably fewer favorable implications for democracy than it might first seem. here is kind of how i think of it (though this isn't a fully cooked idea so feel note errors):

early in the book suroweicki gives the example of how at a county fair, people were asked to give their best estimates on the weight of a particular ox (i think there was a prize for the person that got the closest). however, when it came to analyzing the results, they found that mean guess was better than any individual guess. if i remember correctly, it was believed that this was the case because if we assumed that the errors (guesses too high and too low) were randomly distributed, they would essentially cancel each other when you take the average. 

at first blush that might seem like good news for democracy, right? if we imagine that the quality of a politician or a particular policy is like the weight of a cow, then we should leave the decision of which politician is best to the "crowd". i am not so sure. 

the problem is that "mean vote" isn't what matters in elections like those held in the us--it is the *median* vote.
http://en.wikipedia.org/wiki/Median_voter_theorem
 

as such we shouldn't expect random errors to be "averaged" out as in the case of guessing an oxes weight. 

to sum up: "in a democracy, it isn't the wisdom of crowds making the decisions--it is the wisdom of the median voter. and you should be very concerned by that". 

Ambition is a dream with a V8 engine - Elvis Presley

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Eric080 replied on Tue, Nov 2 2010 12:22 PM

That's a great point, Student.  With the ox weight, you have a quantified value that cancels out less informed guesses with better informed guesses.  But it seems to me that with the median vote, the answer is binary and there is no way to quantify how "good" a vote is compared to another vote.

 

The point I think Caplan was making is that with a few choices, uniformed people will cancel themselves out while the more intelligent people will gravitate towards the correct answer.  That's probably why I think in Who Wants to be a Millionaire, you'd be better off asking the audience with 4 options versus 2 options.  But in Caplan's book, he was making the case that the public suffers from systematic biases that skew the "wisdom of crowds."

"And it may be said with strict accuracy, that the taste a man may show for absolute government bears an exact ratio to the contempt he may profess for his countrymen." - de Tocqueville
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