Public policy and the wisdom of crowds

Collective intelligence, or the wisdom of crowds, refers to a phenomenon by which, under the right conditions, groups of individuals can render highly accurate judgments. This phenomenon has long played an important role in economics, where understanding the behavior of groups is often essential to explaining economic outcomes. More recently, political scientists have shown that trends in public opinion show evidence of collective intelligence. This article further explores how the wisdom of crowds affects politics. I look at two types of decision-making processes, those governed by group dynamics versus those rendered by organizations. Distributional analysis of financial markets and foreign exchange rates shows that when policies are determined by groups they are less prone to instabilities, evidence that in certain issue areas decision-making by groups is more readily adaptive to shifting environmental cues than decisions made through organizational deliberation. 2017 Elsevier B.V. All rights reserved.