Gut instinct, or efficient markets?

Slate is running an interesting dialog between Malcolm Gladwell and James Surowiekci, two of the New Yorker's best writers, and authors of the recent books Blink and The Wisdom of Crowds.

Blink is about instances when a snap judgement (relying on murky subconscious processes) may actually be superior to reasoned decision making. Surowiecki's book documents cases where the aggregate wisdom of many individuals is superior to that of a lone expert (the efficient market!). If the two notions seem hard to reconcile, join the club and read the dialog.

Surowiecki's thesis is one I've thought a lot about. In instances where the answer to a problem takes a fairly simple form ("What is the value of a share of Microsoft?" or "How many pennies are in this jar?"), it is plausible that the aggregation of all opinions eliminates biases in a useful way. While the market may be far from completely efficent, it is nevertheless hard to beat it consistently. (Don't try this with questions like "How do we reconcile quantum mechanics with general relativity?", though. In that case it might be better to ask the acknowledged expert than the crowd.)

On the other hand, I suspect that in many cases people's intuition is just plain bad, and systematic reasoning offers better results. (At least, that's my gut instinct ;-) For example, it is well documented from behavioral finance that people have a very bad innate understanding of probabilities and risk. This doesn't exclude the possibility that for certain questions, like "can I trust this guy with my girlfriend?", perhaps evolution has provided us with a lot of hard-wired machinery to quickly deduce the answer.

From David Brooks' review of Blink in the Times:
"Gladwell says we are thin-slicing all the time -- when we go on a date, meet a prospective employee, judge any situation. We take a small portion of a person or problem and extrapolate amazingly well about the whole. A psychologist named Nalini Ambady gave students three 10-second soundless videotapes of a teacher lecturing. Then she asked the students to rate the teacher. Their ratings matched the ratings from students who had taken the teacher's course for an entire semester. Then she cut the videotape back to two seconds and showed it to a new group. The ratings still matched those of the students who'd sat through the entire term."

Note added: the last election combined elements of Blinkish thin-slicing, as well as purported Wisdom of Crowds. It looks like the crowd trusted their gut instincts (rather than systematic reasoning?) and elected Bush. We'll see whether that was a better decision than an "expert" like me would have made ;-)