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Is there actually any wisdom displayed by the crowd? Or is it just the latest pet term to describe quantifiable results from chaos? .

Wisdom of the Crowd? Is the crowd capable of showing wisdom in literal terms or is the end result a chaotic decision that superficially resembles wisdom.


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    Jun 19 2012: I think the right answer might be 'it depends'.

    For instance some say that 'the market knows' when it comes to economic/political matters. But the market is often just an example of group-think rather than the wisdom of crowds.
    • Jun 20 2012: The market is not in any way a form of groupthink, it is an automated process driven by speculation on supply and demand.
      While groupthink definitely is a problem with the wisdom of the crowds; it relies on the level of cohesiveness of the group (do the members have a natural or personal tendency to agree in the first place, before arguments are made?), the structure (is there a strong leader-figure who carries a power position over the other members?),the situational context (is there little time to make the decision, "code red"?), and transparency of the group (do experts have access to the discussion? Or are people aware of the decisions that are taken).

      Groupthink is a political process that has been the driving force in western democracies since the Cold War, but it has nothing to do with market equilibrium.
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        Jun 20 2012: I disagree.

        The market, and the speculators that make it/drive it, is guided by economic theories. The forming of these (academic) economic theories are not immune from the pressures that are typical of group-think. In fact, they seem particularly susceptible to these pressures.

        For instance, the current neo-liberal approach to economics routinely fails to look sufficiently at alternatives, displays massive data bias, is overly optimistic in terms of risk-taking, etc.

        The deregulation of financial markets by politicians (at the bidding of economists and the markets)that gathered ever-increasing pace since somewhere in the seventies saw politicians join in this group-think.

        The global economic collapse that emerged fully in 2008 is a result of listening to the markets. Group-think quietened the voices and thinking that could have prevented it happening. Market-led group-think is currently paralysing the European Union and plunging countries such as Greece into despair.

        The market is often portrayed (basically by itself) as an efficient process driven by supply and demand, an 'invisible hand' (as Adam Smith put it) that self-regulates. If it ever was, it certainly isn't now. The 'purity' of supply and demand has been distorted by things such as derivatives, and other dubious financial gambits. The market is not an automated process as it is not rational - chaos is always present.

        Economics (and hence the market) is a social science that is very much prone to group-think - do economists, financial journalists etc have a tendency to (in a broad sense) agree? Absolutely - especially if they want a successful career.
        • Jun 20 2012: Almost all of what you say is true, and i agree 100% that the economic market is rigid, not transparent enough and chaotic. It is just not susceptible to groupthink, while it is very similar. In political and social science, groupthink happens in close knit groups of *decisionmaking*, not in something as abstract and large as *the market* or in an *economic theory*.

          Also since the late 1930's interference in the world market by governments has decreased significantly, this is obscured by the fact that by then many international monetary banks were set up, and international cash flows increased due to international trade booming, and the exchange rates that had a large impact on many national economies (according to the Keynesian model). However, this was natural economic behavior, following from the introduction of floating exchange rates. This has very little to do with groupthink. Overall, governments started interfering *less* in the economy, especially after what happened after the first global monetary crisis (fall of the gold standard), not a single government has since dared to take sever economic measures that interfere in the market.

          I do agree with you that the economic bias that is holding the EU captive right now in dealing with the euro-crisis may seem strongly related to a groupthink incident, were it not for the fact that the huge discussion, slow descisionmaking and switching of positions makes it entirely the opposite of what constitutes the concept of groupthink (which is spelled without an hyphen)

          The economic market suffers from *structural institutional flaws*. Groupthink is a *spontaneous occurrence* that is created by the "wrong" composition of a small group of people that have to make a quick decision.

          If you wanna read about groupthink, this is probably the best contemporary work: http://www.worldcat.org/title/groupthink-versus-high-quality-decision-making-in-international-relations/oclc/699670351&referer=brief_results

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