Monday, July 19, 2004

Markets and Masses

CNN had an interesting article on the relative intelligence of crowds compared to the individuals that are contained within them. Indirectly, this is a powerful argument for capitalism that contrasts with the prevelant "dumb herd" mentality. If this seems interesting to you, also check out Tom Friedman's comments on "The Electronic Herd" in his book The Lexus and the Olive Tree

Also hidden in the article was this gem of a card for those arguing on the impacts of the recent financial scandels.
James Surowiecki, author of "The Wisdom of Crowds" (as quoted by on July 14 2004)
If anything can hurt markets, says Surowiecki, it's lack of trust. Capitalism has succeeded, he says, because people are willing to trust their money with strangers. The misstatements and financial chicanery of the late-'90s bubble have wounded that confidence.

"The challenge for capitalism is that the things that breed trust also breed the environment for fraud," he says. People can make money by working together -- but when the sums of money are as huge as they've been of late, it can be very tempting for people to subvert the system for their own gains.

And yet Surowiecki has hope that trust can be maintained and, indeed, markets can keep improving. Economists and psychologists have found indications that our first impulse -- as people and consumers -- "is to do the socially beneficial thing," he says.

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