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Iceland's a small country. Following wikipedia statistics, 318000*0.02 = 6360 people would be expected to contribute maximum. Excluding people of non-voting age, and considering that even less have the expertise to contribute, the number of people involved is not much higher than the size of a parliament + advisories.

Also, what about groups that will be misrepresented in the authoring process (e.g. women contribute much less in wikipedia)? I 'm very sceptical about the whole "wisdom of the crowds" politics here.

While your critic is interesting, let me just point out how this way of doing democracy is far superior to any western country.
It's not criticism, i m just skeptical if this model can be scaled to big countries.
I share your skepticism. You see, I have been thinking a lot a bout democracy, decentralization and recent Iceland politics.

My conclusion is that the smaller you go, the more democratic olitics are. Period.

I share my criticism of the political globalisation, just to be laughed of afterward, but I still believe that the smaller, the most democratic, as is explified in a great way by Iceland.

Does that work when you look at small countries of the World? I would have to look but I am thinking "no".

Edit: Found this:

http://en.wikipedia.org/wiki/List_of_countries_by_system_of_...

Of course, the country has to be free from any corporation control. It has to be not that interesting in term of ressources.

Of all the small countries, this leaves, well, ahem... Iceland.

I believe it's mostly a matter of how mature and educated a society is. See counterexample also: the ban of minarets in switzerland (which practices some form of direct democracy)
The news (especially the headlines) are somewhat is misleading on this story. The constitution if Iceland is not being "user generated". It is being written by a council of elected representatives.

The process is broadcast and updated realtime online and there there is a discussion/comments system where the council members are active. But this isn't "crowd-sourcing" in the way Wikipedia is.