The Wisdom of Crowds: Why the Many Are Smarter Than the Few and How Collective Wisdom Shapes Business, Economies, Societies and Nations

Chapter 7 reprises the topic of traffic explored in Chapter 5 and explores two instances where crowd intelligence has failed to solve similar types of coordination problems. Traffic on the road is fundamentally a problem of coordination where every individual’s actions are affected by what they think others will do. This is why, when they fail to predict other people’s behavior or they perceive others to be freeloading, they react disproportionately to the situation and cause inefficiencies.

For example, major cities like London, New York, and Singapore often deal with traffic congestion due to the sheer volume of cars on the road. This creates a coordination problem where every additional driver over the capacity limit of the road inflicts costs on everyone else but never pays for it. However, implementing tolls on highways to deter people from taking it is not in itself an efficient solution. Most people don’t believe that they have much flexibility in controlling when and where they will be commuting, which is why strong reciprocity dictates that most would rather everyone be stuck in traffic than allow only the financially privileged to buy their way out.

Singapore has implemented a congestion pricing that is successful with curbing this coordination problem.