cccd9fdb_brary_of_Economics_and_Liberty__ast_Highlights_HIDE_HIGHLIGHTS
[Time] 0:38
Intro. Knowledge is dispersed, spread out among many people. How can we aggregate that knowledge across people and time? From Infotopia: First, groups might use the statistical average of the independent judgments of their members. Second, groups might attempt to improve on those independent judgments, by using deliberation and asking for the reasoned exchange of facts, ideas, and opinions. Perhaps members will vote anonymously or otherwise after deliberation has occurred. Third, groups might use the price system and develop some kind of market through which group members or those outside of the group buy and sell on the basis of their judgments. Fourth, groups might enlist the Internet to obtain the information and perspectives of anyone who cares to participate. Statistical averages. Surowiecki book, Wisdom of Crowds. Statistical average as if by magic seems to "get it right"--better than experts and also more accurate. Horse racing example. Galton, random fair attendees guess weight of ox. Condorcet jury theorem: Take a group of people each of whom is more likely to get the right answer than the wrong answer. Ask them the question. As size of group expands, likelihood of majority getting it right approaches 100%. Holds for pluralities. This is why surveys tend to do well. But if the group suffers from a systematic bias or are more likely to be wrong than right, then likelihood of group getting it right falls to 0% as size of group expands. Sunstein tried experiment, asking colleagues some questions. Theorem worked for Kentucky Derby, but not for number of times Supreme Court had invalidated State and Federal law. Limitation of crowd wisdom--have to know in advance that group being sampled isn't predisposed to bias toward getting it wrong.
Sunstein on Infotopia, Information and Decision-Making | EconTalk | Library of Economics and Liberty