One of the features of relying upon wisdom of the crowds is that you don’t ask the same questions that the members of the ‘crowd’ are. So it’s not really ‘the blind leading the blind’.
For example, (an oversimplified econ 101 sort of example) if you don’t care what kind of wood your pencils are made out of, you can just buy the cheapest wood. The price of the wood is based on the supply of different kinds of wood, what other people are making out of wood, and demand in the marketplace for different kinds of manufactured wood products (amongst other things). If you were making pencils out of cedar, and then everyone decides they want bookcases made of cedar, then the price of cedar will rise and you can start making it out of some other wood. The result is that you end up using wood in the most efficient fashion, taking into consideration the desires of people buying all sorts of things and the need for wood in different areas of society. But this is all accomplished without anyone being concerned about using wood most efficiently; the pencil-maker just wants to make pencils as cheaply as possible, the people buying pencils encourage him to do so by buying the cheapest pencils that meet their needs, and the other industries have no need to concern themselves over pencils at all.
The pencils made out of more expensive wood will sell better if that’s what people want; otherwise, they’ll buy the ones made out of cheaper wood because they’re cheaper.
If you try to sell the cheaper pencils at the more expensive pencils’ price, you lose the information about what people want and meanwhile someone undercuts you and eats your lunch.
One of the features of relying upon wisdom of the crowds is that you don’t ask the same questions that the members of the ‘crowd’ are. So it’s not really ‘the blind leading the blind’.
For example, (an oversimplified econ 101 sort of example) if you don’t care what kind of wood your pencils are made out of, you can just buy the cheapest wood. The price of the wood is based on the supply of different kinds of wood, what other people are making out of wood, and demand in the marketplace for different kinds of manufactured wood products (amongst other things). If you were making pencils out of cedar, and then everyone decides they want bookcases made of cedar, then the price of cedar will rise and you can start making it out of some other wood. The result is that you end up using wood in the most efficient fashion, taking into consideration the desires of people buying all sorts of things and the need for wood in different areas of society. But this is all accomplished without anyone being concerned about using wood most efficiently; the pencil-maker just wants to make pencils as cheaply as possible, the people buying pencils encourage him to do so by buying the cheapest pencils that meet their needs, and the other industries have no need to concern themselves over pencils at all.
Wish I had more time to make this clearer.
How do you decide whether you should care about what kind of wood is used?
Markets!
The pencils made out of more expensive wood will sell better if that’s what people want; otherwise, they’ll buy the ones made out of cheaper wood because they’re cheaper.
If you try to sell the cheaper pencils at the more expensive pencils’ price, you lose the information about what people want and meanwhile someone undercuts you and eats your lunch.