The quality of decisions in democracies depends on how large groups of people form their opinions. In this respect there are two opposing ideas, the wisdom of crowds and mass delusions. The wisdom of crowds was first discovered in 1906 by Francis Galton. He was visiting a livestock fair where an ox was on display. Villagers were invited to guess the animal’s weight. Nearly 800 people participated in the contest. No-one guessed the weight of 1,198 pounds exactly, but the average guess of 1,197 pounds was almost perfectly right.
At least in specific cases groups of individuals can on aggregate assess a situation quite good and better than nearly every individual on his or her own. The average guess included the extremes on both sides. Galton was impressed. He came to believe that this was an argument in favour of democracy. It suggests that if all views are reflected in parliament, it can result in good decisions.
The wisdom of crowds depends on individuals having different backgrounds and making their assessments independently so that they look at the issue in different ways. The more people are alike or the more they influence each other, the more they can become prone to group think so that the wisdom of the crowd disappears.1 In extreme cases this can lead to mass delusions like stock market bubbles.2
Diversity of opinions is a reasons why decision-making in democracies can be better than other forms of decision-making. Mass delusions are a reason why this is not always the case. The greatest mass delusion humanity is suffering from currently is not dealing adequately with the limits of our planet. Our planet cannot support our life styles for much longer. At least in democracies the information about this issue is freely available to everyone. So why don’t people in democracies act?
Perhaps that is because the measures that need to be taken affect us all directly and significantly as they would require considerable sacrifice, while we won’t feel the consequences of our inaction right now. Most people have a short term bias and they value the present more than the future, most notably a distant and uncertain future. And no country can take action alone as it wouldn’t make a difference.
At least in democracies it may be possible to make the wealthiest finance the efforts to deal with the challenges. These efforts require massive amounts of capital. The wealthy own most capital but only have a small portion of the votes. Low interest rates indicate an excess of capital and a lack of investment opportunities so that it may be possible to direct more capital towards meeting these challenges.
1. The Wisdom of Crowds. James Surowiecki (2004). Doubleday, Anchor.
2. Extraordinary Popular Delusions and the Madness of Crowds. Charles Mackay (1841). Richard Bentley, London.