The Wise Many

Dave Mulcahey

Connoisseurs of the Strangelovian may recall last summer’s dustup over a plan hatched by Iran-Contra felon John Poindexter and the Defense Advanced Research Projects Agency to create a peculiar futures 

market for political events. The Policy Analysis Market would function as an exchange in which the public could place bets on any number of possible political events in volatile parts of the world, such as whether King Hussein would be overthrown in Jordan or whether terrorists would unleash biological weapons on Israel. 

News of the scheme sent congressional Democrats and liberal scribblers around the bend. Great rhetorical hay was made, and the terrorism lottery” was taken out and shot.

But, argues James Surowiecki in his useful new book, The Wisdom of Crowds, the tizzy was perhaps unjustified. As Surowiecki points out, such opinion markets have proved wonderfully accurate at predicting elections and a host of other significant events. These markets work their magic, he argues, by aggregating a great deal of information from as many sources as possible. It matters not whether particular players bet irrationally or based on partial information. It all comes out in the wash, and the sum of all bets tends to reveal something approximating reality.

So to give Poindexter and Co. the benefit of the doubt, their scheme may be interpreted as an admission that our intelligence establishment needs to right itself. Maybe decision markets could help. 

By now, conceding difficult social and political decisions to market mechanisms is a cliché. Or, rather, avowing the free market’s inerrancy and puissance in these matters is the cliché. It has been the drumbeat of the Republican backlash for a quarter-century, a bludgeon the party has used to enact a long docket of regressive social policies. Members of the loyal opposition may therefore be forgiven for approaching Surowiecki’s book with trepidation. 

But we should all be reading it. The book’s insights are pragmatic and forthrightly progressive. The question at the heart of The Wisdom of Crowds is: How can we best make the decisions that order our collective efforts? 

Surowiecki argues that, under the right conditions, large groups of people exercise exceptionally good judgment. Even accounting for individual limitations and natural tendencies toward prejudice and irrationality, collective decisions usually will outperform expert opinion, particularly when the group does not defer to those opinions. What those right conditions” are is the good part. Wise crowds, the author says, must be decentralized, independent and diverse, and their individual opinions must be aggregated with transparency. Diversity and independence are important because the best collective decisions are the product of disagreement and contest, not consensus or compromise,” Surowiecki writes. Paradoxically, the best way for a group to be smart is often for everyone in it to think and act as independently as possible.”

In other words, liberal values are key to good judgment. Ignore the need for diversity of opinion and your enterprise may go the way of Long Term Capital Management, the high-flying hedge fund that went down the crapper, despite its star-studded roster of whiz kids and Nobel laureates. Ignore independent judgments and you get stock market bubbles and space shuttle disasters. Embrace these values and you can work wonders like Linux. Surowiecki also takes a sensible view of what markets can and can’t do: They can foster economically optimal outcomes. They do not necessarily make good social policy.

Of course, to summarize The Wisdom of Crowds in this way may make it sound like just another management-lit title. It’s not. The book is superbly written, subtle and, even, a useful meditation on democracy. One cannot read the book, in fact, without wanting to whale on the Bush administration with the yardstick of judgment Surowiecki so ably describes.

Interestingly but not necessarily surprisingly, The Wisdom of Crowds is a little thin when dealing with politics. Politics, after all, is where passion and irrationality too often rule, and most political systems are designed to one extent or another to take decisions out of the hands of the many. In our own case, sometimes it’s hard to say which is more appalling: the nonwisdom of the crowd or the methods we’ve chosen to aggregate it. But we would do well to heed Surowiecki on this point: We’re better off casting our lot with the people, however flawed, than with a bunch of Platonic guardians who claim to know best.

Dave Mulcahey, a former managing editor of The Baffler, wrote In These Times’ monthly Appallo-o-meter” feature for nearly 10 years, until the fall of 2009.
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