The 'Wisdom of the Crowds' and Public Policy
AbstractSurowiecki (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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Bibliographic InfoPaper provided by Netherlands Central Bank, Research Department in its series DNB Working Papers with number 203.
Date of creation: Feb 2009
Date of revision:
Public information; social planner; 'expert' vs 'lay' crowds.;
Find related papers by JEL classification:
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
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- Maria Demertzis & Marco Hoeberichts, 2007. "The Costs of Increasing Transparency," Open Economies Review, Springer, vol. 18(3), pages 263-280, July.
- 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.
- Maria Demertzis & Marco Hoeberichts, 2006. "The Costs of Increasing Transparency," DNB Working Papers 080, Netherlands Central Bank, Research Department.
- 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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