I'd like to recommend the book The Wisdom of Crowds by James Surowiecki. It mentions Linux development as an example, but more important, it provides specific criteria that determine whether collective knowledge-building projects like open source software are achieving the best decisions they can, given the collective knowledge of a broad set of people.
I'm reading this for other reasons, but it seems so relevant I thought I would make a post. Here's a nice summary from one of the editorial reviews on Amazon.com:
"If four basic conditions are met, a crowd's "collective intelligence" will produce better outcomes than a small group of experts, Surowiecki says, even if members of the crowd don't know all the facts or choose, individually, to act irrationally. 'Wise crowds' need (1) diversity of opinion; (2) independence of members from one another; (3) decentralization; and (4) a good method for aggregating opinions. The diversity brings in different information; independence keeps people from being swayed by a single opinion leader; people's errors balance each other out; and including all opinions guarantees that the results are "smarter" than if a single expert had been in charge."
I would only caution that the book carefully defines these criteria, to show when and how these criteria are met by situations. For instance, not all decentralization automatically leads to wise decisions, although decentralization is necessary for them.