Noise: A Flaw in Human Judgment—A Review

Rob Henderson in Quillette:

Are crowds smart or dumb? You may have heard the terms “wisdom of the crowds” and the “madness of crowds.” The former idea is that the collective opinion of a group of people is often more accurate than any individual person, and that gathering input from many individuals averages out the errors of each person and produces a more accurate answer. In contrast, the “madness of crowds” captures the idea that, relative to a single individual, large numbers of people are more likely to indulge their passions and get carried away by impulsive or destructive behaviors. So, which concept more accurately reflects reality?

Noise: A Flaw in Human Judgement by Daniel Kahneman, Olivier Sibony, and Cass R. Sunstein provides the answer. The authors share research indicating that “independence is a prerequisite for the wisdom of crowds.” That is, if you want to use crowdsourcing to produce accurate information, you have to ensure that people make their judgments in private. If people provide their answers in a public setting where they can see everyone else’s answers, then the crowd can transform wisdom into madness.

More here.