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Why Crowd Wisdom is Important May 22, 2007

Posted by Brad in Ideas.

Due to my interest in economics, I often do a lot of thinking about the principles of reflexivity, the efficient markets hypothesis, and market inefficiency in general.  I believe a great deal in the power of the free market and wonder where the line between regulation and freedom should be drawn.

It was interesting, then, on the train today when I overheard a man wondering aloud why a certain stop on the line was necessary.  His reasoning came from a self interested perspective, i.e. he lived near a different stop and in his mind the number of stops contributed to an increase in time in getting to his stop. This self interested actor didn’t realize that he wasn’t the only one who rode the train and who’s money paid for it.

Self-interested actors have a role and would have a greater roll if we lived in a linear and non-hierarchical society. The problem is that we live in a hierarchical society and if the people in charge acted only out of self-interest then we’d have a lot fewer train stops, (metaphor of course) a lot less people served, and an even less efficient system.  The real question is how to decide when the few know what’s best for the many…

Anyway, just doing some thinking out loud.  Anyone have any contradictory opinions?


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