Information cascade and decision making structure

by noni mausa

Lifted from comments at Economist’s View on a post about information cascades (following the crowd…when does the crowd start?):

I participated in a classroom project modeling the allocation of funds to community projects by a “city council” of students. There were five or six groups of us, and at the end of the allocation process we all presented our results.

In most groups, the members discussed how the money should be allocated among several choices — senior community support, teen job training, a battered women’s shelter, a swimming pool, a school breakfast program, cleanup of a local lake, that sort of stuff. In these groups, the final allocation of the money was very consistent from group to group.

I suggested a different approach in our group, similar to a silent auction. Each “councilor” was given control over a percentage of the available funds, and decided how much of his or her money should go to which project. Then we pooled our results to reach a final result that was radically different from the other groups’ decisions.

A third approach I had considered (but our group agreed would take too long) was to view the projects not as competing, but as potentially a cascade where injection of funds at one point (perhaps teen jobs) could cascade down into the others (senior home support, lake cleanup, school lunch preparation) thus getting several uses out of each dollar.

My point? To a large extent the process used for deciding something determines what decisions can be made. Different process — different decisions. Not an earthshaking concept, but it keeps being forgotten.