Sunday, August 01, 2004

How to apply the Wisdom of Crowds

I've been listening to the audiobook version of a good book, The Wisdom of Crowds. The author's thesis is that groups can arrive at the correct answer to a question more reliably than single individuals, even if the individual is an expert and the group members are not. Larger groups are better decisionmakers than smaller ones. The reason for this is that each individual knows some small amount of useful information along with random biases. In the collective decisionmaking, the random biases cancel each other out and the correct answer emerges, under the proper circumstances. The author then goes on to discuss ways that the process goes wrong.

So here's an idea on voter participation that I had independently of the book's thesis: allow voters to allocate a portion of the budget for a state or local governmental entity. On the ballot, the voter gets to take a nominal or substantial amount of money from a specifically-created reserve fund owned by the governmental entity, and direct it to the governmental department favored by the voter. This would start to bring free-market concepts into governmental budgeting, and make governmental departments more directly responsible to the voters. And if you accept The Wisdom of Crowds thesis, the voters' decison on budgets could often improve on the decisionmaking by governmental experts.

Update 8.4.04: Some other blogs are talking about this book too. Daniel Drezner's has a good post and some interesting comments.

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