Participatory budgeting – Wisdom of crowds at work

12. June 2008 – 14:24 by Bengt Feil

In 2004 James Surowiecki in his famous book “The Wisdom of Crowds: Why the Many Are Smarter Than the Few and How Collective Wisdom Shapes Business, Economies, Societies and Nations” discussed at length how collective decisions are made and that they can be much more rational and “correct” than those of a single or few experts. He uses examples form the fields of economy, politics and everyday life to support this point. I will try to describe another case where the wisdom of crowds seems to be working – participatory budgeting.

It is often stated that citizens only try to gain individual advantages and therefore are unwilling to provide ideas about how to consolidate public spending. There is also the argument that the high complexity of public budgeting makes it almost impossible for citizens to take rational and useful decisions about how to change it. But if you look at the results of participatory budgeting projects this does not seem to be the case.

To support my argument I would like to talk about the results of such projects in the German cities of Hamburg and Freiburg. These two projects have been implemented by the TuTech Innovation GmbH. In the case of Hamburg all participants had the ability to change each budget item in a range from -50% to +50%. In Freiburg this range was even bigger with -100% to +100%. The fear that citizens may behave irrational was not fulfilled as the most extreme change of an item in Hamburg was -21% in average of the given sum. Overall the citizens did decide to save a considerable amount of money. These savings were distributed among all items of the budget. In Freiburg the results are similar. Even with the possibility to change items form 0-200% of their original value the most drastic change is -24%.

It may be that citizens follow their own interest while deciding how to change public budgets but the sum of these interests provides a rational and non radical result. If the reasons, which participants in the two projects could give for their changes, are also taken into account the argument that citizens only try to gain individual advantages does not seem to be valid. Most of the participants did keep in mind the common good.

The second part of Surowieckies thesis is that experts are less good in finding the right decision that a large group of participants. With this in mind participatory budgeting seems to be a valuable tool to make the right decisions about public budgets.

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