29.6.04

WHY I'M NO FAN OF CONSENSUS.

Cass Sunstein:
Return here to NASA, whose failures have been partly a product of a culture that disfavors dissent. In fact, group polarization is a pervasive problem in government circles, where like-minded officials often end up holding a more extreme version of the view with which they began. Surowiecki offers the example of the Bay of Pigs disaster, in which President Kennedy's advisers squelched their private doubts and developed unjustified enthusiasm for a ludicrous invasion plan predicated on the absurd thought that twelve hundred people could unseat Castro and take over Cuba. Is it too speculative to suggest that the current problems in Iraq are partly a product of group polarization within the executive branch--and that those problems could have been anticipated if the White House had had a better process for aggregating privately held information?
That's part of a much longer -- and worth reading in its entirety -- essay (hat tip: Milt Rosenberg, who has more time to do online research with the Choke-cago Cubs blowing leads on Extension 720's time) on circumstances under which the wisdom of crowds beats the wisdom of experts.

Professor Sunstein spends a lot of time on markets, which ought not come as a surprise. Markets exist to resolve disagreements. We have markets for goods such as desktop computers, where sellers can disagree on their vision of what a desktop computer ought to do, buyers can disagree over the use to which the computer ought to be put, and the price is a sufficient statistic that rations the right to sell to those who are willing to accept that price -- or less, and rations the right to buy to those who are willing to pay that price -- or more. Where there is less room for disagreement on the end use, as might be the case with some sub-assemblies of the disk drive and is certainly the case with a pin-length piece of brass wire, the market will not be as effective at resolving disagreements.

Fads -- which in econ-speak go by the less normative sounding name of "information cascades," are one possible consequence of decision making with too much deference to experts. Back to Professor Sunstein:
The problem with information cascades is that group members are likely to do far worse than they would if everyone disclosed his or her private information. By pointing to the dangers of bad cascades, Surowiecki signals the importance of starting with a "wide array of options and information" and of having at least a few people who are willing "to put their own judgment ahead of the group's, even when it's not sensible to do so." Much of the time, Surowiecki writes, groups do best if their members pay little "attention to what everyone else is saying."
Gee, there's an idea ... the Therapeutic University as information cascade. Well, I'm on sabbatical, and that might be more sexy than the basic oxygen furnace as an information cascade. Developing ...

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