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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.

Suggested Citation

  • Maria Demertzis, 2009. "The 'Wisdom of the Crowds' and Public Policy," DNB Working Papers 203, Netherlands Central Bank, Research Department.
  • Handle: RePEc:dnb:dnbwpp:203
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    File URL: https://www.dnb.nl/binaries/Working%20paper%20203_tcm46-212963.pdf
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    References listed on IDEAS

    as
    1. Maria Demertzis & Nicola Viegi, 2008. "Inflation Targets as Focal Points," International Journal of Central Banking, International Journal of Central Banking, vol. 4(1), pages 55-87, March.
    2. Maria Demertzis & Marco Hoeberichts, 2007. "The Costs of Increasing Transparency," Open Economies Review, Springer, vol. 18(3), pages 263-280, July.
    3. Stephen Morris & Hyun Song Shin, 2002. "Social Value of Public Information," American Economic Review, American Economic Association, vol. 92(5), pages 1521-1534, December.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

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

    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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