Some Comments on "Cognitive Democracy"

Cognitive Democracy by Henry Farrell and Cosma Shalizi looks at how three types of social institutions, namely markets, hierarchies, and democracies, solve social problems. The emphasis is on the cognitive aspects of said solutions -- how do the various institutions combine the information they need to create solutions -- and the main arguments are aimed at showing democracies do better and markets and hierarchies do worse than is sometimes supposed.

I was disappointed by this paper, which is to say that I was excited by the premise but felt let down by the execution. Here are some of the places where I think they went wrong:

The biggest single problem with the paper is that it totally deglects the problems of information acquisition within democracies and hierarchies. (It does mention the work of Hayek on others about how markets motivate people to acquire and share information.) In particular, they don't confront the large public choice literature on "rational ignorance" and other topics that suggest democracies do quite poorly on this front.
This is fatal for Farrell and Shalizi's main arguments in favor of democracies because needless to say, it does no good for democracies to excel at combining information that they don't have.
The next biggest problem is the lack of worked examples. The problems the authors have in mind are complex problems, like global warming or financial regulation, but without demonstrations of how (toy models) of democracy, markets, or hierarchies work on toy problems, all of the terms and arguments remain hopelessly vague.
Here's an example of the sort of thing I expected and would have liked. Consider the "who has the button?" problem. In this problem, there are n people. We will call out two of those people as person A and person B: person A has the button, and person B wants it. Only person A knows that A has the button, and the problem is deemed to be solved if person B ends up with the button.
Hierarchy will solve this problem only rarely. If we assume the hierarchy is a tree with d children at every interior node, then person A will on average have approximately log_d n "superiors". The problem gets solved only if person B is one of them, and (log_d n) / n is pretty small for even medium sized n. A more realistic model would also take into account the costs of A searching all of his "inferiors", which would happen on both successes and failures ...
Markets will solve this problem if the value of the button to A is greater than the value of the button to B plus transaction costs. This remains roughly true even in a networked setting without a central auctioneer (Robert Axtell, "The Complexity of Exchange", http://onlinelibrary.wiley.com/doi/10.1111/j.1468-0297.2005.01001.x/abstract;jsessionid=C4944AF2AD52BE909CC4D6F0AD0A8FE5.d03t03 ; I got this reference from one of Cosma's previous posts to Crooked Timber which is why I was expecting "Cognitive Democracy" to be full of this type of juicy result.)
And when will democracy find the button? I don't honestly know. Maybe when person B can convince 1/2 n people to vote to give him enough money or power to obtain the button? The "or" in the previous sentence suggests that there are actually two different solutions, call them democracy+market and democracy+hierarchy, that succeed only when B can solve his voting problem plus when the market or hierarchy component can solve its part. To be fair, the market or hierarchy component can have different parameters than in the above analysis -- in the best case, B can get herself "root" access to the hierarchy or money equal to the social value of B getting the button.
Another reason to look at simple problems is that our intuitions about what is complex is very much shaped by our existing institutions. This leads to a bias towards novel institutions on any problem deemed complex.