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The 'Wisdom of the Crowds' and Public Policy

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  • Maria Demertzis

Abstract

Surowiecki (2004) argues that collective predictions are better than individual predictions and calls that the Wisdom of the Crowds. We use an analytical information model to demonstrate and explain this. Then we see how these two predictions are affected by better public information and show that while individual predictions always improve, collective ones do not. A social planner that relies on collective predictions to form policy may erroneously refrain from providing better information. We use two examples to show where this might be applicable.

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File URL: http://www.dnb.nl/binaries/Working%20paper%20203_tcm46-212963.pdf
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Bibliographic Info

Paper provided by Netherlands Central Bank, Research Department in its series DNB Working Papers with number 203.

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Date of creation: Feb 2009
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Handle: RePEc:dnb:dnbwpp:203

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Related research

Keywords: Public information; social planner; 'expert' vs 'lay' crowds.;

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  1. Maria Demertzis & Marco Hoeberichts, 2007. "The Costs of Increasing Transparency," Open Economies Review, Springer, vol. 18(3), pages 263-280, July.
  2. Maria Demertzis & Nicola Viegi, 2005. "Inflation Targets as Focal Points," Money Macro and Finance (MMF) Research Group Conference 2005 52, Money Macro and Finance Research Group.
  3. Maria Demertzis & Marco Hoeberichts, 2006. "The Costs of Increasing Transparency," DNB Working Papers 080, Netherlands Central Bank, Research Department.
  4. Stephen Morris & Hyun Song Shin, 2002. "Social Value of Public Information," American Economic Review, American Economic Association, vol. 92(5), pages 1521-1534, December.
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