Bryan Caplan spoke at SxSW and questioned the popular wisdom of crowds theory propagated by James Surowiecki. Notes from his talk:
The idea that voting works is based on the so-called “Miracle of aggregation”, which Caplan likens to a form of alchemy. You take some uninformed opinions, mesh them together, and shake it all up and voila, it’s informed.” While Surowiecki’s book cited a number of examples of crowd wisdom (groups of people collaboratively guessing the number of jellybeans in a jar or guessing the weight of a cow), Caplan criticized what he saw was a “(weak) hunt for counter-examples.” His one-off counter-example: In polls asking voters what percentage of the budget is spent on foreign aid, averages come around 10-20 percent, when in fact it’s actually just 1.2 percent. Ultimately, in Caplan’s view: “The miracle of aggregation fails and it fails very directly.” As that relates to democracy: “What’s interesting about this miracle of aggregations is it gives people a way to believe democracy works despite the public’s deficiencies.”
Caplan is one of the most interesting thinkers I’ve come across. He blogs at EconLog.
I don’t think Bryan Caplan’s foreign aide example correctly compares with James Surowiecki’s jelly beans and pigs examples. He may still be right in his distrust of the “miracle of aggregation,” but I think he’s comparing apples to oranges in this sense. All the information necessary to correctly guess the number of jelly beans in a jar is directly in front of the guesser, the whole problem is in plain view, as is the pig’s weight, there is no problem of asymmetric information at the time the guess was placed.
The problem of the foreign aide example is that the concept is a bit more abstract, only the people who are familiar with federal budgets would even get close. Given a sense of how large the budget is or how much is spent on aide would have surely gotten the group closer without giving them the answer to the question. Your average person knows very little about foreign aide budgets.