In a desperate attempt to save his theory of the “wisdom of crowds” – the bedrock of the prediction markets, Surowiecki does the previously unthinkable and refers to “the folly of crowds.” (a phrase I myself have used in the past in response to Surowiecki’s arguments).

Concluding his article, Surowiecki has what we may term an “economist” moment, in that he engages in less than convincing psychobabble, that some may see as lending little support to his previously grand and unchallenged theory of the “wisdom of crowds”;

“But the answer may not be necessarily to use markets less, but rather to do a better job of ensuring that they are working the way they should: that there are many players in them rather than few, that diverse opinions can be easily registered, and that incentives and goals are well aligned. The collective intelligence of markets can be a startling and useful thing. It’s just too bad that it’s been years since we have seen much of it.”

What Surowiecki cannot bring himself to say is that the real outcome of recent events is that market fundamentalism has proven to be wrong. The crowd is not wise; as in the case of Nazi Germany, it has been led lemming like to its own funeral.

http://www.guardian.co.uk/commentisfree/2009/mar/31/james-surowiecki-comment-global-economy