What do you think?
Rate this book
Exit, Voice, and Loyalty: Responses to Decline in Firms, Organizations, and States
An innovator in contemporary thought on economic and political development looks here at decline rather than growth. Albert O. Hirschman makes a basic distinction between alternative ways of reacting to deterioration in business firms and, in general, to dissatisfaction with organizations: one, "exit," is for the member to quit the organization or for the customer to switch to the competing product, and the other, "voice," is for members or customers to agitate and exert influence for change "from within." The efficiency of the competitive mechanism, with its total reliance on exit, is questioned for certain important situations. As exit often undercuts voice while being unable to counteract decline, loyalty is seen in the function of retarding exit and of permitting voice to play its proper role. The interplay of the three concepts turns out to illuminate a wide range of economic, social, and political phenomena. As the author states in the preface, "having found my own unifying way of looking at issues as diverse as competition and the two-party system, divorce and the American character, black power and the failure of 'unhappy' top officials to resign over Vietnam, I decided to let myself go a little."
176 pages, Paperback
First published January 1, 1970
163 people are currently reading
5215 people want to read
About the author
Albert O. Hirschman
69 books137 followersAlbert Otto Hirschman was an economist and the author of several books on political economy and political ideology. His first major contribution was in the area of development economics. Here he emphasized the need for unbalanced growth. He argued that disequilibria should be encouraged to stimulate growth and help mobilize resources, because developing countries are short of decision making skills. Key to this was encouraging industries with many linkages to other firms.
His later work was in political economy and there he advanced two schemata. The first describes the three basic possible responses to decline in firms or polities (quitting, speaking up, staying quiet) in Exit, Voice, and Loyalty (1970). The second describes the basic arguments made by conservatives (perversity, futility and jeopardy) in The Rhetoric of Reaction (1991).
His later work was in political economy and there he advanced two schemata. The first describes the three basic possible responses to decline in firms or polities (quitting, speaking up, staying quiet) in Exit, Voice, and Loyalty (1970). The second describes the basic arguments made by conservatives (perversity, futility and jeopardy) in The Rhetoric of Reaction (1991).
Ratings & Reviews
Friends & Following
Create a free account to discover what your friends think of this book!
Community Reviews
Displaying 1 - 30 of 121 reviews
November 15, 2020
I know virtually nothing about economics, so it surprised me to find that the ideas which Albert Hirschman advanced in this book were considered so novel when he published it in 1970. Hirschman looks at markets where "consumers" find that the "product" they are currently using is suffering a quality decline. What do they do? The classical answer, apparently, is that they shift to a competing product. This sends a signal to the provider of the defective product; they raise their game and stop losing customers, or they go under and are replaced by a more efficient competitor. Either way, the iron logic of the market corrects the problem.
Hirschman argues convincingly that this is far too simplistic. Consumers can indeed abandon the product ("exit"). But in real life, they often don't just get out: instead, they start complaining ("voice"), in the hope that doing so will help the provider improve things before the consumer needs to take the final step of exiting. The customers are generally motivated by a reluctance to leave at once ("loyalty"). It's surprising how many interesting directions there are to go from this initial point. Here are two that caught my attention, one from the book and one from my own experience.
In the book, Hirschman asks us to consider the case of political parties, which we'll imagine are aligned along a conventional left/right axis. If a party has been doing badly in terms of picking up votes, an analysis just in terms of "exit" suggests that it needs to move nearer to the centre: the reason it's losing voters are that its politics are too extreme, so it should correct that. But in fact, political parties often do the exact opposite. They lose voters, and they move further from the center.
The reason, Hirschman says, is that political parties pay a good deal of attention to "voice" as well as "exit"; they're worried when they lose voters, but they're also worried when the party activists criticise the leadership too much. The activists will usually be the more extreme members. Because they're on the outer edge, they're the people least likely to defect to the opposition. Even though they only make up a small proportion of the people who vote for the party, they can often push it in the direction they want. It seems to me that this is what happened in the US in 2015/16. People following "exit" reasoning wanted to move the GOP leftwards, to appeal to more centrist voters. But in fact it moved right, and this was successful at least in part because it energised the far-right base.
The case from my own experience was what happened on Goodreads in 2013. For people who can remember the dim prehistory of the site, there was an unpleasant confrontation between Goodreads management and a large chunk of the membership over new censorship rules. Some people disliked the changes so much that they left, using their "exit" option. But others, including myself and many other core members who valued their online community, didn't just want to give up. We organised highly visible counteractions, culminating in the release of the protest book Off-Topic , and it certainly seemed to us that this is what had an effect: "voice" was more powerful than "exit". There was never any official announcement, but the new rules were quietly abandoned.
Is Hirschman's book just obvious common sense? It seemed to me that it was. But I guess that's one of the hallmarks of a really good new idea. As Thomas Kuhn says, you can't even manage to reconstruct what you were thinking before it entered your consciousness.
______________________
[And the very next day...]
It's interesting to read this recent article from a Hirschman point of view. Is Biden being too exit-focussed?
______________________
[But on Nov 15 2020...]
With all the results in, it looks like Biden called it right: moving to the center was a winning strategy here. He picked up moderate white voters who'd changed their minds about supporting Trump's extreme-right policies and flipped five states.
Hirschman argues convincingly that this is far too simplistic. Consumers can indeed abandon the product ("exit"). But in real life, they often don't just get out: instead, they start complaining ("voice"), in the hope that doing so will help the provider improve things before the consumer needs to take the final step of exiting. The customers are generally motivated by a reluctance to leave at once ("loyalty"). It's surprising how many interesting directions there are to go from this initial point. Here are two that caught my attention, one from the book and one from my own experience.
In the book, Hirschman asks us to consider the case of political parties, which we'll imagine are aligned along a conventional left/right axis. If a party has been doing badly in terms of picking up votes, an analysis just in terms of "exit" suggests that it needs to move nearer to the centre: the reason it's losing voters are that its politics are too extreme, so it should correct that. But in fact, political parties often do the exact opposite. They lose voters, and they move further from the center.
The reason, Hirschman says, is that political parties pay a good deal of attention to "voice" as well as "exit"; they're worried when they lose voters, but they're also worried when the party activists criticise the leadership too much. The activists will usually be the more extreme members. Because they're on the outer edge, they're the people least likely to defect to the opposition. Even though they only make up a small proportion of the people who vote for the party, they can often push it in the direction they want. It seems to me that this is what happened in the US in 2015/16. People following "exit" reasoning wanted to move the GOP leftwards, to appeal to more centrist voters. But in fact it moved right, and this was successful at least in part because it energised the far-right base.
The case from my own experience was what happened on Goodreads in 2013. For people who can remember the dim prehistory of the site, there was an unpleasant confrontation between Goodreads management and a large chunk of the membership over new censorship rules. Some people disliked the changes so much that they left, using their "exit" option. But others, including myself and many other core members who valued their online community, didn't just want to give up. We organised highly visible counteractions, culminating in the release of the protest book Off-Topic , and it certainly seemed to us that this is what had an effect: "voice" was more powerful than "exit". There was never any official announcement, but the new rules were quietly abandoned.
Is Hirschman's book just obvious common sense? It seemed to me that it was. But I guess that's one of the hallmarks of a really good new idea. As Thomas Kuhn says, you can't even manage to reconstruct what you were thinking before it entered your consciousness.
______________________
[And the very next day...]
It's interesting to read this recent article from a Hirschman point of view. Is Biden being too exit-focussed?
______________________
[But on Nov 15 2020...]
With all the results in, it looks like Biden called it right: moving to the center was a winning strategy here. He picked up moderate white voters who'd changed their minds about supporting Trump's extreme-right policies and flipped five states.
March 12, 2025
This is one of those rare books that - despite their deceptive simplicity - contains a fundamental and timeless truth. Hirschman's essential argument is (1) that economic and political/sociological analysis can achieve much more in combination than as separate undertakings; (2) that economic theory has ignored the vital question of quality (as opposed to price and quantity). Both valid points.
His simple yet powerful analytical framework explores how quality deterioration can best be adressed through an balanced interplay between the forces of exit (customers and members leave the organization), voice (quality-conscious customers and members seek to redress the problems from within), and loyalty (the mechanism that makes customers and members "stick it out" and perform voice to the long-term benefit of the organization despite the ready availability of alternatives).
I found one of his examples particularly illuminating: The American public school system has a dysfunctional excess of exit of quality-conscious families leading to a drainage of the very people that would make effective voice possible. Hence the system is locked in a downward spiral of deteriorating quality. It is not my impression that this dynamc has changed in any major way since Hirschman wrote his book. In fact, we have a similar development in Denmark.
His simple yet powerful analytical framework explores how quality deterioration can best be adressed through an balanced interplay between the forces of exit (customers and members leave the organization), voice (quality-conscious customers and members seek to redress the problems from within), and loyalty (the mechanism that makes customers and members "stick it out" and perform voice to the long-term benefit of the organization despite the ready availability of alternatives).
I found one of his examples particularly illuminating: The American public school system has a dysfunctional excess of exit of quality-conscious families leading to a drainage of the very people that would make effective voice possible. Hence the system is locked in a downward spiral of deteriorating quality. It is not my impression that this dynamc has changed in any major way since Hirschman wrote his book. In fact, we have a similar development in Denmark.
May 7, 2025
I liked this a lot! The author is thinking about how firms/organizations/governments identify & respond to declines in the quality of the product they’re producing - essentially arguing that economists focus entirely on “exit,” i.e., consumers exiting the market and switching to a different product, and political scientists focus entirely on “voice,” i.e., political “consumers” staying in the political “market” and speaking up about what’s going wrong… when the reality for both settings is that there’s always some exit AND some voice.
This all would seem obvious - except that 40 years after this book was published I didn’t hear a peep about these basic ideas in my undergrad econ or poli sci classes (and 50 years after this book was published I didn’t hear a peep about these ideas in my grad econ or poli sci classes!). Which speaks, I guess, the poor quality of economics study in the US generally - I have always said that econ is a great field to go into because there’s so much dumb shit being said that it should be pretty easy to sound smart in comparison, and I stand by that lol.
Fwiw I think this book would be very readable for undergrad students as long as they’ve taken the basic intro courses - there’s some technical language but it’s essentially at the standard econ “pls see the appendix for 1-3 theoretical graphs and then handwave the rest” level, the writing is very conversational, and the examples are all still very timely. (See, e.g., the discussion of public vs. private education, and Milton Friedman’s then-recent argument for school vouchers - as the authors says, “Friedman considers withdrawal or exit as the ‘direct’ way of expressing one’s unfavorable views of an organization. A person less well trained in economics might naïvely suggest that the direct way of expressing views is to express them!”.)
This book was written in 1970 so “current” political events are those related to the Vietnam war, particularly what the author critiques as the failure of top officials to resign in protest: “As the former [ie the American] cannot bring himself to contemplate exit from the ‘best’ country, so the latter [ie the American top official] has an overwhelming desire not to sever his ties with the ‘best’ country’s government which, moreover, is the world’s most powerful.” And he quotes James Reston in the NYT in 1969: “‘Most [of those who stayed on] at the critical period of escalation gave to the President the loyalty the owed to the country’” - you could say it’s a niche discussion, but it’s no less relevant today. One interesting element, which feeds into the book’s broader discussion of the importance of the details of market structure - the author quoting someone named James C. Thomson as arguing “that resignation under protest is particularly unattractive for the American Cabinet member because unlike his British counterpart, he has no ‘parliamentary backbench to which to retreat.’”
And a fun thing about reading books from this particular era is how the author at one point mentions that he’s working on a experiment to test his theories with Zimbardo (yes, the Stanford prison experiment guy). Hilariously, the experiment seems to involve recruiting Stanford students into a “hypnosis training” (!) group where they……. make them listen to a bunch of extremely boring lectures on hypnosis so they can see who complains (voice) and who just stops showing up (exit). Never has a pool of subjects been more of a perfect fit for an experiment.
I wrote down a ton of quotes from this book, and it’s very hard to sort through them and figure out which ones I actually want to include, or how to organize them, but here goes:
ON THE VALUE OF “SLACK”
One interesting concept was the idea that “slack,” i.e., resources or energy that are not being used, is actually really key to have because it allows “consumers” to draw on it at key moments: “for voice to function properly it is necessary that individuals possess reserves of political influence which they can bring into play when they are sufficiently aroused. That this is generally so—that, in other words, there is considerable slack in political systems—is well recognized.”
The author doesn’t explicitly draw this comparison, but it seemed to be that one iteration of this slack is the political ‘spinelessness’ he talks about in a political context: “It is nevertheless worth noting that the magnitude of public evils that can today be visited upon all of us by the centers of world power has bestowed ‘functionality’ or social usefulness on protracted spinelessness (failure to exit) provided it turns into spine (voice) at the decisive moment.”
In other words, we should be building slack into the system (whatever that system may be) - because it allows for the generation of healthy feedback mechanisms that will cause the system to improve. I am already an avowed supporter of this concept in a work environment - firing on all cylinders 24/7 is actually dysfunctional, imo - but there are way too many people who don’t appreciate that.
The author touched a little bit on these delusional sci-fi ideas of optimization that are still very much out there: “The wide latitude human societies have for deterioration is the inevitable counterpart of man’s increasing productivity and control over his environment. Occasional decline as well as prolonged mediocrity—in relation to achievable performance levels—must be counted among the many penalties of progress.” … “Recognition of this unpleasant truth has been impeded by a recurring utopian dream: that economic progress, while increasing the surplus above subsistence, will also bring with it disciplines and sanctions of such severity as to rule out any backsliding that may be due, for example, to faulty political processes.” … “These various observations add up to a syndrome, namely, to man’s fundamentally ambivalent attitude toward his ability to produce a surplus: he likes surplus but is fearful of paying its price. While unwilling to give up before as he hankers after the simple rigid constraints on behavior that governed him when he, like all other creatures, was totally absorbed by the need to satisfy his most basic drives.” This is all very “I wrote this in 1970,” but I do think it gets a little bit at the weird moral ideas that are wrapped up in the way a lot of people think about productivity and success.
ON BAD COMPETITION AND GOOD MONOPOLY
“But there are many other cases where competition does not restrain monopoly as it is supposed to, but *comforts and bolsters* it by unburdening it of its more troublesome customers.” Oops!
And generally the idea that when price increases, the customers who care the least about the product will exit first, but when quality decreases, the customers who care the most about the product will exit first.
I thought a lot about the theory of the second best while reading this book - the idea that even if some situation is the so-called “best” outcome, you can’t assume that the “second-best” outcome is anywhere even close to the “best” one. In other words, trying to get closer and closer to “best” does not mean you will actually be improving anything - you might just be making it worse!
ON PUBLIC GOODS
In the case of public goods or public evils “the alternative is now not so much between voice and exit as between voice from within and voice from without (after exit)” because you cannot truly exit the market for a public good/evil.
And more on Vietnam + still relevant today: “The considerable difference between ‘proper’ exit from public goods and the kind of exit (from private goods) thus far discussed is revealed when a customer-member who exits from a public good behaves as though he were exiting from a private one. In a society as dominated by private goods and by styles of behavior acquired in reacting to them as the United States, such confusion may perhaps be expected. Examples from recent history come easily to mind. High officials who disagree with public policies do not blast them when they resign, but present this decision as a purely private one; one leaves because a better offer has come his way, ‘in fairness to my family.’ Similarly young men and women who find American society, its values and the actions of its government not to their tastes are ‘opting out’ as though they could secure for themselves a better set of values and policies without having first changed the existing set.” This is something that I’ve been thinking about almost nonstop for the last few months, frankly, so I appreciated the discussion here! And on that note…
ON EXIT AS AN AMERICAN IDEAL
Oh hey: “The United States owes its very existence and growth to millions of decisions favoring exit over voice.” “Even after the closing of the frontier, the very vastness of the country combined with easy transportation make it far more possible for Americans than for most other people to think about solving their problems through ‘physical flight’ than either through resignation or through ameliorating or fighting in situ the particular conditions into which one has been ‘thrown.’” The author mentions the classic de Tocqueville take on American social conformity here - either you conform perfectly where you are, or you get in your car and drive away to a town where you can conform perfectly the way YOU want to, basically.
So then: “This preference for the neatness of exit over the messiness and heartbreak of voice has then ‘persisted throughout our national history.’” “‘In a real sense physical flight is the American substitute for the European experience of social revolution.’” (quoting Louis Hartz in The Liberal Tradition in America).
“With the country having been founded on exit and having thrived on it, the belief in exit as a fundamental and beneficial social mechanism has been unquestioning. It may account for the strength of the national faith in the virtues of such institutions as the two-party system and competitive enterprise; and in the latter case, for the national disbelief in the economist’s notion that a mark dominated by two or three giant firms departs substantially from the ideal competitive model. As long as one can transfer his allegiance from the product of firm A to the competing product of firm B, the basic symbolism of the national love affair with exit is satisfied.” The national love affair with exit feels extremely accurate - this kind of performative “well, I quit!” that matches up exactly with a scolding, “well if you don’t like it, leave!” mentality.
ON EXIT AND CLASS
The disconcerting conclusion: “the discussion of education which suggested that the role of voice in fending off deterioration is particularly important for a number of essential services largely defining what has come to be called the ‘quality of life.’ Hence, a disconcerting, though for from unrealistic, conclusion emerges: since, in the case of these services, resistance to deterioration requires voice and since voice will be forthcoming more readily at the upper than at the lower quality ranges [since exit to a better quality product is not an option], the cleavage between the quality of life at the top and at the middle or lower levels will tend to become more marked. This would particularly be the case in societies with upward social mobility.” The author doesn’t really go into it, but there were glimmers of critical race theory here that made me nostalgic for law school lol - “upward social mobility of just the talented few from the lower classes can make domination of the lower by the upper classes even more secure than would be achieved by rigid separation” etc.
ON LOYALTY
The author writes about loyalty as one way to cultivate customers that will turn to voice instead of just exiting. That said, I was amused by how (justifiably!) anti-management this book is: “it must be realized the loyalty-promoting institutions and devices are not only uninterested in stimulating voice at the expense of exit: indeed they are often meant to repress voice alongside exit. While feedback through exit or voice is in the long-run interest of organization managers, their short-run interest is to entrench themselves and to enhanced their freedom to act as they wish, unmolested as far as possible by either desertions or complaints of members. Henge management can be relied on to think of a variety of institutional devices aiming at anything but the combination of exit and voice which may be ideal from the point of view of society.”
This cracked me up: “Loyalty to one’s country, on the other hand, is something we could do without, since countries can ordinarily be considered to be well-differentiated products.” Aw, econ. Never change.
ON EXIT VERSUS VOICE
And there there were just some observations about the tradeoff between exit and voice that I thought were interesting:
- In many situations, “those customers who care most about the quality of the product and who, therefore, are those who would be the most active, reliable, and creative agents of voice are for that very reason also those who are apparently likely to exit first in case of deterioration.”However, if they’re already at the top of the market, they *can’t* exit - so voice matters more for higher-“quality” firms/organizations. Conversely, “loyalty,” ie irrational support, is more important at the bottom of the market, to keep consumers from otherwise (justifiably) exiting.
- If you’re used to exiting, your ability to use voice will be underdeveloped.
- And then this: “it is useful to note that the greater the opportunities for exit, the easier it appears to be for organizations to resist, evade, and postpone the introduction of internal democracy even though they function in a democratic environment.” Like a lot of econ, obvious but somehow very beneficial to see it spelled out.
This book was initially published in 1970 by the Harvard UP. I read the seventh printing, the 1981 edition, which was printed in the US with a comedically ominous, minimalist cover design. Thanks to “Brad Bateman Ann Arbor May 1983” for selling or donating this instead of tossing it when he was done!
This all would seem obvious - except that 40 years after this book was published I didn’t hear a peep about these basic ideas in my undergrad econ or poli sci classes (and 50 years after this book was published I didn’t hear a peep about these ideas in my grad econ or poli sci classes!). Which speaks, I guess, the poor quality of economics study in the US generally - I have always said that econ is a great field to go into because there’s so much dumb shit being said that it should be pretty easy to sound smart in comparison, and I stand by that lol.
Fwiw I think this book would be very readable for undergrad students as long as they’ve taken the basic intro courses - there’s some technical language but it’s essentially at the standard econ “pls see the appendix for 1-3 theoretical graphs and then handwave the rest” level, the writing is very conversational, and the examples are all still very timely. (See, e.g., the discussion of public vs. private education, and Milton Friedman’s then-recent argument for school vouchers - as the authors says, “Friedman considers withdrawal or exit as the ‘direct’ way of expressing one’s unfavorable views of an organization. A person less well trained in economics might naïvely suggest that the direct way of expressing views is to express them!”.)
This book was written in 1970 so “current” political events are those related to the Vietnam war, particularly what the author critiques as the failure of top officials to resign in protest: “As the former [ie the American] cannot bring himself to contemplate exit from the ‘best’ country, so the latter [ie the American top official] has an overwhelming desire not to sever his ties with the ‘best’ country’s government which, moreover, is the world’s most powerful.” And he quotes James Reston in the NYT in 1969: “‘Most [of those who stayed on] at the critical period of escalation gave to the President the loyalty the owed to the country’” - you could say it’s a niche discussion, but it’s no less relevant today. One interesting element, which feeds into the book’s broader discussion of the importance of the details of market structure - the author quoting someone named James C. Thomson as arguing “that resignation under protest is particularly unattractive for the American Cabinet member because unlike his British counterpart, he has no ‘parliamentary backbench to which to retreat.’”
And a fun thing about reading books from this particular era is how the author at one point mentions that he’s working on a experiment to test his theories with Zimbardo (yes, the Stanford prison experiment guy). Hilariously, the experiment seems to involve recruiting Stanford students into a “hypnosis training” (!) group where they……. make them listen to a bunch of extremely boring lectures on hypnosis so they can see who complains (voice) and who just stops showing up (exit). Never has a pool of subjects been more of a perfect fit for an experiment.
I wrote down a ton of quotes from this book, and it’s very hard to sort through them and figure out which ones I actually want to include, or how to organize them, but here goes:
ON THE VALUE OF “SLACK”
One interesting concept was the idea that “slack,” i.e., resources or energy that are not being used, is actually really key to have because it allows “consumers” to draw on it at key moments: “for voice to function properly it is necessary that individuals possess reserves of political influence which they can bring into play when they are sufficiently aroused. That this is generally so—that, in other words, there is considerable slack in political systems—is well recognized.”
The author doesn’t explicitly draw this comparison, but it seemed to be that one iteration of this slack is the political ‘spinelessness’ he talks about in a political context: “It is nevertheless worth noting that the magnitude of public evils that can today be visited upon all of us by the centers of world power has bestowed ‘functionality’ or social usefulness on protracted spinelessness (failure to exit) provided it turns into spine (voice) at the decisive moment.”
In other words, we should be building slack into the system (whatever that system may be) - because it allows for the generation of healthy feedback mechanisms that will cause the system to improve. I am already an avowed supporter of this concept in a work environment - firing on all cylinders 24/7 is actually dysfunctional, imo - but there are way too many people who don’t appreciate that.
The author touched a little bit on these delusional sci-fi ideas of optimization that are still very much out there: “The wide latitude human societies have for deterioration is the inevitable counterpart of man’s increasing productivity and control over his environment. Occasional decline as well as prolonged mediocrity—in relation to achievable performance levels—must be counted among the many penalties of progress.” … “Recognition of this unpleasant truth has been impeded by a recurring utopian dream: that economic progress, while increasing the surplus above subsistence, will also bring with it disciplines and sanctions of such severity as to rule out any backsliding that may be due, for example, to faulty political processes.” … “These various observations add up to a syndrome, namely, to man’s fundamentally ambivalent attitude toward his ability to produce a surplus: he likes surplus but is fearful of paying its price. While unwilling to give up before as he hankers after the simple rigid constraints on behavior that governed him when he, like all other creatures, was totally absorbed by the need to satisfy his most basic drives.” This is all very “I wrote this in 1970,” but I do think it gets a little bit at the weird moral ideas that are wrapped up in the way a lot of people think about productivity and success.
ON BAD COMPETITION AND GOOD MONOPOLY
“But there are many other cases where competition does not restrain monopoly as it is supposed to, but *comforts and bolsters* it by unburdening it of its more troublesome customers.” Oops!
And generally the idea that when price increases, the customers who care the least about the product will exit first, but when quality decreases, the customers who care the most about the product will exit first.
I thought a lot about the theory of the second best while reading this book - the idea that even if some situation is the so-called “best” outcome, you can’t assume that the “second-best” outcome is anywhere even close to the “best” one. In other words, trying to get closer and closer to “best” does not mean you will actually be improving anything - you might just be making it worse!
ON PUBLIC GOODS
In the case of public goods or public evils “the alternative is now not so much between voice and exit as between voice from within and voice from without (after exit)” because you cannot truly exit the market for a public good/evil.
And more on Vietnam + still relevant today: “The considerable difference between ‘proper’ exit from public goods and the kind of exit (from private goods) thus far discussed is revealed when a customer-member who exits from a public good behaves as though he were exiting from a private one. In a society as dominated by private goods and by styles of behavior acquired in reacting to them as the United States, such confusion may perhaps be expected. Examples from recent history come easily to mind. High officials who disagree with public policies do not blast them when they resign, but present this decision as a purely private one; one leaves because a better offer has come his way, ‘in fairness to my family.’ Similarly young men and women who find American society, its values and the actions of its government not to their tastes are ‘opting out’ as though they could secure for themselves a better set of values and policies without having first changed the existing set.” This is something that I’ve been thinking about almost nonstop for the last few months, frankly, so I appreciated the discussion here! And on that note…
ON EXIT AS AN AMERICAN IDEAL
Oh hey: “The United States owes its very existence and growth to millions of decisions favoring exit over voice.” “Even after the closing of the frontier, the very vastness of the country combined with easy transportation make it far more possible for Americans than for most other people to think about solving their problems through ‘physical flight’ than either through resignation or through ameliorating or fighting in situ the particular conditions into which one has been ‘thrown.’” The author mentions the classic de Tocqueville take on American social conformity here - either you conform perfectly where you are, or you get in your car and drive away to a town where you can conform perfectly the way YOU want to, basically.
So then: “This preference for the neatness of exit over the messiness and heartbreak of voice has then ‘persisted throughout our national history.’” “‘In a real sense physical flight is the American substitute for the European experience of social revolution.’” (quoting Louis Hartz in The Liberal Tradition in America).
“With the country having been founded on exit and having thrived on it, the belief in exit as a fundamental and beneficial social mechanism has been unquestioning. It may account for the strength of the national faith in the virtues of such institutions as the two-party system and competitive enterprise; and in the latter case, for the national disbelief in the economist’s notion that a mark dominated by two or three giant firms departs substantially from the ideal competitive model. As long as one can transfer his allegiance from the product of firm A to the competing product of firm B, the basic symbolism of the national love affair with exit is satisfied.” The national love affair with exit feels extremely accurate - this kind of performative “well, I quit!” that matches up exactly with a scolding, “well if you don’t like it, leave!” mentality.
ON EXIT AND CLASS
The disconcerting conclusion: “the discussion of education which suggested that the role of voice in fending off deterioration is particularly important for a number of essential services largely defining what has come to be called the ‘quality of life.’ Hence, a disconcerting, though for from unrealistic, conclusion emerges: since, in the case of these services, resistance to deterioration requires voice and since voice will be forthcoming more readily at the upper than at the lower quality ranges [since exit to a better quality product is not an option], the cleavage between the quality of life at the top and at the middle or lower levels will tend to become more marked. This would particularly be the case in societies with upward social mobility.” The author doesn’t really go into it, but there were glimmers of critical race theory here that made me nostalgic for law school lol - “upward social mobility of just the talented few from the lower classes can make domination of the lower by the upper classes even more secure than would be achieved by rigid separation” etc.
ON LOYALTY
The author writes about loyalty as one way to cultivate customers that will turn to voice instead of just exiting. That said, I was amused by how (justifiably!) anti-management this book is: “it must be realized the loyalty-promoting institutions and devices are not only uninterested in stimulating voice at the expense of exit: indeed they are often meant to repress voice alongside exit. While feedback through exit or voice is in the long-run interest of organization managers, their short-run interest is to entrench themselves and to enhanced their freedom to act as they wish, unmolested as far as possible by either desertions or complaints of members. Henge management can be relied on to think of a variety of institutional devices aiming at anything but the combination of exit and voice which may be ideal from the point of view of society.”
This cracked me up: “Loyalty to one’s country, on the other hand, is something we could do without, since countries can ordinarily be considered to be well-differentiated products.” Aw, econ. Never change.
ON EXIT VERSUS VOICE
And there there were just some observations about the tradeoff between exit and voice that I thought were interesting:
- In many situations, “those customers who care most about the quality of the product and who, therefore, are those who would be the most active, reliable, and creative agents of voice are for that very reason also those who are apparently likely to exit first in case of deterioration.”However, if they’re already at the top of the market, they *can’t* exit - so voice matters more for higher-“quality” firms/organizations. Conversely, “loyalty,” ie irrational support, is more important at the bottom of the market, to keep consumers from otherwise (justifiably) exiting.
- If you’re used to exiting, your ability to use voice will be underdeveloped.
- And then this: “it is useful to note that the greater the opportunities for exit, the easier it appears to be for organizations to resist, evade, and postpone the introduction of internal democracy even though they function in a democratic environment.” Like a lot of econ, obvious but somehow very beneficial to see it spelled out.
This book was initially published in 1970 by the Harvard UP. I read the seventh printing, the 1981 edition, which was printed in the US with a comedically ominous, minimalist cover design. Thanks to “Brad Bateman Ann Arbor May 1983” for selling or donating this instead of tossing it when he was done!
September 14, 2019
Hirschman majd 50 éves kötete arra vállalkozik, hogy nekimegy a klasszikus közgazdaságtan alaptételének (ami azóta már, gyanítom, nem annyira alaptétel), a „láthatatlan kéz” elméletének. Eszerint ugyanis a szabadversenyes kapitalizmus egyik tartópillére az, hogy ha egy vállalat termelékenysége csökken, akkor a vásárlók elpártolnak a cégtől (a szerző ezt nevezi kivonulásnak), ami a céget arra inspirálja, hogy javítson saját hatásfokán – és csiribú-csiribá, a szabadversenyes kapitalizmus máris regenerálta önmagát. Hirschman szerint azonban ez nincs így, mert 1.) ha a gyenge teljesítés általános (akár összejátszás folytán), akkor a kivonulók legfeljebb egy másik, ugyanolyan rosszul teljesítő céghez tudnak kivonulni, az meg halottnak a csók 2.) manapság szinte minden vállalatnak van kihasználatlan kapacitása („slack”), amiből esetleg el tudnak karistolni egy darabig még akkor is, ha jelentős számú vásárló hagyja faképnél őket 3.) itt vannak az úgynevezett „lusta monopóliumok” is, akik megelégednek azokkal a vásárlókkal, akik túl enerváltak, vagy egyenesen hülyék ahhoz, hogy alternatív szolgáltatásokkal váltsák le őket – mert Állam bácsi dotálja őket, úgyhogy igazából nem is szorulnak vásárlókra (igen, rád nézek, Magyar Posta, MÁV, meg a többi posztszoci szörnyszülött). Ebből következik, hogy a szimpla kivonulás nem elegendő visszacsatolás ahhoz, hogy üdvös változást idézzen elő – ám ahhoz, hogy kerek legyen a történet, Hirschmannak nem csak cáfolnia kell az elméletet, hanem új modellt is kénytelen alkotni*. Ennek érdekében bevezeti egyfelől a tiltakozás fogalmát, amelynek során a vásárlók nem otthagyják az adott vállalatot, hanem megmaradva vásárlónak, tiltakoznak a minőségromlás ellen. A szerző szerint ez az elem a kivonulással kiegészülve (lehetne) az igazi biztosítéka a szabadverseny öngyógyulásának – más kérdés, hogy a vásárlótól jóval több energiabefektetést igényel, mint a kivonulás. A harmadik fogalom pedig a hűség, ami akár racionális, akár irracionális (gondoljunk csak a magyar válogatott szurkolóira, nyehehe), Hirschman rendszerében meglehetősen pejoratív fogalom, mert lehetővé teszi, hogy a vállalatok megmaradjanak rossz beidegződéseiknél. Ezeknek a fogalmaknak a kombinációjával pedig már nagyon szép új modellt lehet alkotni.
Persze szép, vagy nem szép, el nem olvastam volna, ha csupán a közgazdaságra vonatkozna. De Hirschman rendszerében az a nagyszerű, hogy kábé mindenre rá lehet húzni – a pártpolitikai változásokra, az oktatásra, sőt: az Egyesült Államok egész történelmére is**. A kivonulás és a tiltakozás ezeknek a rendszereknek az öngyógyításában is elengedhetetlen, elég a totalitárius rezsimekre gondolni, amelyek lehetetlenné teszik őket, és ezzel rendesen el is veszítik sanszukat a megújulásra. Ez a sokszólamúság, és Hirschman széleskörű közgazdasági, pszichológiai és politológiai tudása az, amitől ez a rövid kötet olyan fontossá válik – annyira fontossá, hogy 1984-ben még a magyar Művelődési Minisztérium is kénytelen volt lefordítani. Azzal együtt, hogy a közgazdaságtan azóta már bizonyára számos változáson ment keresztül, kifejezetten inspiráló, nehéz, de velős szövegnek éreztem.
Update 2019: És arra kellett rájönnöm, hogy a közösségi oldalak esetében is tökéletesen megállja a helyét mindaz, amit Hirschman állít. Ha ugyanis egy oldal a tiltakozás lehetőségét szimplán technikai eszközökkel a felületen kívülre szorítja, akkor a kivonulás és hűség kettőse önmagában sosem lesz képes feloldani a működési anomáliákat. Mert egyedül a tiltakozás, a pozitív értelemben vett tiltakozás az, ami visszacsatolást jelent a működtető részére a problémákról - persze ha a működtetőt nem érdeklik a problémák, látni sem akarja őket, az már az ő baja. Mert a problémák attól még ott lesznek.
* "…egy modellt sohasem a tények – bármekkora cáfolóerejük van ezeknek egyébként –, hanem mindig csak egy másik modell hatására vetnek el a tudósok.” (a Streeten-Kuhn maxima)
** Hisz az USA születése is egy gigantikus kivonulás eredménye: az európai „szolgáltatásokkal” elégedetlen kivonulók alapították, és az egész Vadnyugat-mítosz is a kivonulás mítosza – hogy a pionír, ha nem találja a helyét keleten, elmehet a messzi nyugatra, a szűzföldekre, hogy a két kezével teremtsen magának szerencsét.
Persze szép, vagy nem szép, el nem olvastam volna, ha csupán a közgazdaságra vonatkozna. De Hirschman rendszerében az a nagyszerű, hogy kábé mindenre rá lehet húzni – a pártpolitikai változásokra, az oktatásra, sőt: az Egyesült Államok egész történelmére is**. A kivonulás és a tiltakozás ezeknek a rendszereknek az öngyógyításában is elengedhetetlen, elég a totalitárius rezsimekre gondolni, amelyek lehetetlenné teszik őket, és ezzel rendesen el is veszítik sanszukat a megújulásra. Ez a sokszólamúság, és Hirschman széleskörű közgazdasági, pszichológiai és politológiai tudása az, amitől ez a rövid kötet olyan fontossá válik – annyira fontossá, hogy 1984-ben még a magyar Művelődési Minisztérium is kénytelen volt lefordítani. Azzal együtt, hogy a közgazdaságtan azóta már bizonyára számos változáson ment keresztül, kifejezetten inspiráló, nehéz, de velős szövegnek éreztem.
Update 2019: És arra kellett rájönnöm, hogy a közösségi oldalak esetében is tökéletesen megállja a helyét mindaz, amit Hirschman állít. Ha ugyanis egy oldal a tiltakozás lehetőségét szimplán technikai eszközökkel a felületen kívülre szorítja, akkor a kivonulás és hűség kettőse önmagában sosem lesz képes feloldani a működési anomáliákat. Mert egyedül a tiltakozás, a pozitív értelemben vett tiltakozás az, ami visszacsatolást jelent a működtető részére a problémákról - persze ha a működtetőt nem érdeklik a problémák, látni sem akarja őket, az már az ő baja. Mert a problémák attól még ott lesznek.
* "…egy modellt sohasem a tények – bármekkora cáfolóerejük van ezeknek egyébként –, hanem mindig csak egy másik modell hatására vetnek el a tudósok.” (a Streeten-Kuhn maxima)
** Hisz az USA születése is egy gigantikus kivonulás eredménye: az európai „szolgáltatásokkal” elégedetlen kivonulók alapították, és az egész Vadnyugat-mítosz is a kivonulás mítosza – hogy a pionír, ha nem találja a helyét keleten, elmehet a messzi nyugatra, a szűzföldekre, hogy a két kezével teremtsen magának szerencsét.
December 25, 2021
read for Reboot EVL book club!
a little bit dry / too econ-y for my tastes + I think you can get most of the content of this book from wikipedia/summaries but the ideas in here are pretty interesting. essentially describes the two dominant responses to declines in organizations (or decline in quality of products) of exit (leaving, or stopping to buy a product) and voice (attempting to advocate for change). loyalty (mostly separate) is formulated here as at attachment which makes people more likely to voice vs. exit.
I thought initially that the combination of exiting/voicing with consumer products and organizations was sort of bizarre (and still do) but hirschmann does a pretty good job of exploring how they differ. generally found the second half of this more interesting / compelling but in general I think EVL is a really compelling framework for describing interactions w/ orgs and a lot of examples/concepts from here will def stick with me
a little bit dry / too econ-y for my tastes + I think you can get most of the content of this book from wikipedia/summaries but the ideas in here are pretty interesting. essentially describes the two dominant responses to declines in organizations (or decline in quality of products) of exit (leaving, or stopping to buy a product) and voice (attempting to advocate for change). loyalty (mostly separate) is formulated here as at attachment which makes people more likely to voice vs. exit.
I thought initially that the combination of exiting/voicing with consumer products and organizations was sort of bizarre (and still do) but hirschmann does a pretty good job of exploring how they differ. generally found the second half of this more interesting / compelling but in general I think EVL is a really compelling framework for describing interactions w/ orgs and a lot of examples/concepts from here will def stick with me
December 29, 2021
First half is dry and reading a summary of the main concepts there would suffice. I enjoyed the second half a lot - the exit, voice, loyalty framework is useful and I liked the concrete and theoretical examples given.
Maybe unsurprising but kind of amazing how well these concepts still hold up and how much clarity they provide on organizational, work, and governance issues - the concepts are a great jumping off point for discussions of whistleblowing, evaluating “change from the inside,” psychological attachments to work/institutions, etc.
Maybe unsurprising but kind of amazing how well these concepts still hold up and how much clarity they provide on organizational, work, and governance issues - the concepts are a great jumping off point for discussions of whistleblowing, evaluating “change from the inside,” psychological attachments to work/institutions, etc.
December 8, 2011
I don't know where I read or how I heard that this was a mind-blowing read, but the book has been on my shelf forever and I kept meaning to get around to it when I had the chance. There should have been no rush.
The book is mercifully short, more of a philosophical pamphlet than anything else, and it presents itself as what was then (in 1970) a surprising speculative foray by an economist into political science. In this book, Hirschman compares and contrasts two strategies to decline in a product or in a political organization, either leaving (stop purchasing the product or exit the organization) or fighting (complaining about a product or voicing one's concern about an organization). Using the language of economics he shows that these options can be either complements or substitutes at different times, and he does make a convincing case that economists and political scientists have ignored how these options can interact to surprising effect. For instance, the exit of wealthy consumers to some competing companies can paradoxically strengthen a monopoly, since it means the exit of those most likely to voice complaints about a monopoly's power. He also makes the interesting point that while economists in the past have focused on price competition, they have ignored the effects of quality, and that declines in the quality of a product (or in the nature of an organization) may have contradictory effects to the one predicted by economic theory. So while marginal consumers may stop using a product first after a slight price rise, more affluent and even more attached consumers may leave or complain about a product first upon a slight decline in quality.
Mostly though, the book is a lot of political speculation with little evidence (which Hirschman even cottons to at times), combined with some half-hearted nods to once fashionable psychological theories. In the end, this is probably more interesting as a piece of intellectual history than anything else.
The book is mercifully short, more of a philosophical pamphlet than anything else, and it presents itself as what was then (in 1970) a surprising speculative foray by an economist into political science. In this book, Hirschman compares and contrasts two strategies to decline in a product or in a political organization, either leaving (stop purchasing the product or exit the organization) or fighting (complaining about a product or voicing one's concern about an organization). Using the language of economics he shows that these options can be either complements or substitutes at different times, and he does make a convincing case that economists and political scientists have ignored how these options can interact to surprising effect. For instance, the exit of wealthy consumers to some competing companies can paradoxically strengthen a monopoly, since it means the exit of those most likely to voice complaints about a monopoly's power. He also makes the interesting point that while economists in the past have focused on price competition, they have ignored the effects of quality, and that declines in the quality of a product (or in the nature of an organization) may have contradictory effects to the one predicted by economic theory. So while marginal consumers may stop using a product first after a slight price rise, more affluent and even more attached consumers may leave or complain about a product first upon a slight decline in quality.
Mostly though, the book is a lot of political speculation with little evidence (which Hirschman even cottons to at times), combined with some half-hearted nods to once fashionable psychological theories. In the end, this is probably more interesting as a piece of intellectual history than anything else.
December 29, 2021
first half of the book is very econ-y, and in general I think the book uses a lot of econ jargon that is not particularly useful for the average reader who wants a comparison of exit & voice as mechanisms for expressing dissent/providing institutional feedback. second half of the book has more interesting political theory + provocative ideas about exit as the classic American action, for example.
minus 1 star for what I felt was a lack of clarity in the writing - there were so many counterexamples and multiple ways to interpret things that it was somewhat easy to get lost, I wish the author had zoomed back out more frequently and re-stated the main claims concisely throughout each chapter!
minus 1 star for what I felt was a lack of clarity in the writing - there were so many counterexamples and multiple ways to interpret things that it was somewhat easy to get lost, I wish the author had zoomed back out more frequently and re-stated the main claims concisely throughout each chapter!
May 3, 2020
Presents a surprisingly powerful set of simple conceptual tools (“exit”, “voice”, “loyalty”) and uses them to analyse the deterioration and recuperation of firms and non-firm organisations. Especially enjoyed the chapters on two-party systems and the book’s thorough engagement with questions of political organisation. A healthy and dynamic balance between exit and voice seems to be ideal. Abrupt exit can destabilise markets, permit inertia and incompetence, and—at worst—abdicate the fight against “evil”. The voice, too, can be neutralised through institutionalisation, or result in disturbed radicalisation (commiserations to what’s left of the “moderate” wing of the Republican party.) Loyality acts as a sort of brake on exit in order to give organisations time to address dysfunction. The scope of Hirschman’s book is broad. I’m currently working through Carl Schmitt’s writings; this provides a nice compliment.
(The picture is complicated when you keep in mind the dynamic political landscape. Radicalism is relative to the Overton window. But this is an economist’s book: the value of a model is that it has useful applications, not that it explains all phenomena.)
For the pessimistically-minded, this book provides a certain framework to view the intractability of the climate “question” through. The industrial system has domesticated voice (“Yes, climate scientists, protest groups, environmentally-minded consumers can of course voice their concerns, as long as they stay within the bounds of sensible discourse. Somebody needs to speak truth to power...”) and neutralised exit—look at what becomes of those who attempt to exist on the periphery if a pipeline needs building or a forest needs clearing. Subsequently, civilisation (responding neither to voice nor exit) exists as a totalitarian organisation.
None of this is necessarily surprising, but it strongly challenges the naïveté of the political scientist’s faith that the system will rationally self-correct to avert disaster. In the end, exit is for the rich and voice is for the poor. The capitalists quietly build their bunkers as society fractures into the bellum omnium contra omnes.
(The picture is complicated when you keep in mind the dynamic political landscape. Radicalism is relative to the Overton window. But this is an economist’s book: the value of a model is that it has useful applications, not that it explains all phenomena.)
For the pessimistically-minded, this book provides a certain framework to view the intractability of the climate “question” through. The industrial system has domesticated voice (“Yes, climate scientists, protest groups, environmentally-minded consumers can of course voice their concerns, as long as they stay within the bounds of sensible discourse. Somebody needs to speak truth to power...”) and neutralised exit—look at what becomes of those who attempt to exist on the periphery if a pipeline needs building or a forest needs clearing. Subsequently, civilisation (responding neither to voice nor exit) exists as a totalitarian organisation.
None of this is necessarily surprising, but it strongly challenges the naïveté of the political scientist’s faith that the system will rationally self-correct to avert disaster. In the end, exit is for the rich and voice is for the poor. The capitalists quietly build their bunkers as society fractures into the bellum omnium contra omnes.
March 4, 2024
Really liked this reasonably short but very clear treatise on how people deal with bad performance. The analysis offers a good framework, especially to think about politics and incentives in public companies. It can really help you understand why certain policy strategies have backfired and why some organisations just don't improve their functioning.
May 18, 2024
Traditionally, economics thinks of a hyper competitive world where you slip up and you perish. How does the slip up happen? Traditionally, we think of a world with every company making the same product within a market and pricing it at some market determined price. A slip up is perhaps an increase in costs. When that happens -- bam! All customers abandon ship, the company fails and perhaps a new company takes its place.
But that's not what happens in real life. Customers do switch products, but they tend to stay on longer. They complain and get free coupons after their complaint. They may have inertia. They may love the product too much.
Over the years, economists have thought of reasons why exit may not happen instantly. There may be costs of using a new product. There may be monopolies. There may be small differences in product characteristics so that any substitute is not a perfect substitute.
Hirschman's contention in this classic is that real life is even more complicated. Even though Exit, Voice, and Loyalty was published in the 70s I think the points Hirschman makes are still relevant.
First, Hirschman points out that quality declines are an important part of the story. Sometimes the quality of the product we use falls. And even though this product may have competitors from other firms, people don't choose to shift.
Second, and fundamentally, people instead resort to raising their voice rather than exiting. Now this is not something economics would traditionally consider. Why would a customer raise their voice rather than just exiting?
Hirschman brings to bear the implications of voice in economics, a mechanism well recognized in other fields such as political science. (He also goes the other way --- looking at the implications of exit in areas where voice has been the dominant mechanism of study; these chapters have fascinating implications for the study of politics.)
Hirschman analyzes a number of situations where people may choose voice over exit. This can include quality differentials being important so that the customer of a luxury product would much rather push the firm to do better than choose a sub-quality product. Or it may be because loyalty to a product or organisation makes them willing to try and reverse the decline in quality through voice rather than exiting.
In fact, if we believe that closing down a firm entails many welfare costs --- think bankruptcy and loss of jobs --- we could actually want to have more voice, so that customers/members push the organisation back to efficiency and quality. This would mean not having too much competition, because then people would jump ship too easily. But it also means not having too little competition otherwise the organisation may not have an incentive to change their behaviour. It depends.
An interesting feature of the discussion is the idea of "slack" in the economy. Typically things don't operate at perfect efficiency. Managers don't work as hard as they can. What that means is that firms and organisations deteriorate, and there is therefore a mechanism for a decline in performance that is very organic. Voice may be a messy non-market way of redressing this tendency towards decline. As Hirschman puts it,
The book's merits are also the reason why modern economists don't pay too much attention to it. Hirschman is concerned with thinking through real world outcomes in all their complexity. In that framework, there is not a lot of scope to write down a simple model focusing on one or two mechanisms at the cost of others. It's the lack of that model that has led to the book being ignored today.
But that's not what happens in real life. Customers do switch products, but they tend to stay on longer. They complain and get free coupons after their complaint. They may have inertia. They may love the product too much.
Over the years, economists have thought of reasons why exit may not happen instantly. There may be costs of using a new product. There may be monopolies. There may be small differences in product characteristics so that any substitute is not a perfect substitute.
Hirschman's contention in this classic is that real life is even more complicated. Even though Exit, Voice, and Loyalty was published in the 70s I think the points Hirschman makes are still relevant.
First, Hirschman points out that quality declines are an important part of the story. Sometimes the quality of the product we use falls. And even though this product may have competitors from other firms, people don't choose to shift.
Second, and fundamentally, people instead resort to raising their voice rather than exiting. Now this is not something economics would traditionally consider. Why would a customer raise their voice rather than just exiting?
Hirschman brings to bear the implications of voice in economics, a mechanism well recognized in other fields such as political science. (He also goes the other way --- looking at the implications of exit in areas where voice has been the dominant mechanism of study; these chapters have fascinating implications for the study of politics.)
Hirschman analyzes a number of situations where people may choose voice over exit. This can include quality differentials being important so that the customer of a luxury product would much rather push the firm to do better than choose a sub-quality product. Or it may be because loyalty to a product or organisation makes them willing to try and reverse the decline in quality through voice rather than exiting.
In fact, if we believe that closing down a firm entails many welfare costs --- think bankruptcy and loss of jobs --- we could actually want to have more voice, so that customers/members push the organisation back to efficiency and quality. This would mean not having too much competition, because then people would jump ship too easily. But it also means not having too little competition otherwise the organisation may not have an incentive to change their behaviour. It depends.
An interesting feature of the discussion is the idea of "slack" in the economy. Typically things don't operate at perfect efficiency. Managers don't work as hard as they can. What that means is that firms and organisations deteriorate, and there is therefore a mechanism for a decline in performance that is very organic. Voice may be a messy non-market way of redressing this tendency towards decline. As Hirschman puts it,
It is our contention that non market forces are not necessarily less "automatic" than market forces.
The book's merits are also the reason why modern economists don't pay too much attention to it. Hirschman is concerned with thinking through real world outcomes in all their complexity. In that framework, there is not a lot of scope to write down a simple model focusing on one or two mechanisms at the cost of others. It's the lack of that model that has led to the book being ignored today.
Want to read
March 9, 2019 Casual, brief and witty theoretical economics. Actually a unification of economics, political science, and this other thing.
The prose is deceptively plain, like say Anscombe. There's basically no data, it's all intuition pumps. (But I share most of his intuitions, which surprised me.)
Some key premises:
* Nonmarket forces matter.
* Dissent helps us. It is extremely rich data for anyone who cares about doing good work, and so lasting.
* If there were only rational (critical and disloyal) customers, the economy would collapse.
* Exit (market pressure) and Voice (nonmarket pressure).
* (TODO (...) )
I've never seen such a clear analysis of nonmarket forces - and since I find them ugly and hopeless traps for activists, it's good to be challenged.
He cracks open a massive neglected topic: we had studied macroeconomic slack (depressions, where your whole system is suddenly sluggish and unresponsive) extensively, but not microeconomic slack - Why don't firms maximise output, in healthy macro regimes? Because they're made of individuals who don't? Because of internal conflict requiring suboptimal compromises? Because it serves a latent function?
There's also a surprising focus on social / personal decay - the idea that our new productive power allows for an unprecedented range of decadence, failures, mutation load... There's certainly some evidence for that. But also selection-as-repair and post-traumatic growth:
Read it slowly. I found it really clear, but I don't know if that's because I'm already fairly grounded in economics.
He has a touching pride in political science, in a 1950s Apollonian way, and much of this criticises economists' costly bias in favour of exit:
Has the field since done much to vindicate this pride?
The best argument against Exit, which I usually favour, is that it speeds up and deepens a group's decay: the people who get sick of drama and then leave are likely to be the more thoughtful and virtuous.
Worth serious study, but if all you take from this review is taking both market and nonmarket forces seriously, and thinking about when to use each, then it's still likely to be some help.
The prose is deceptively plain, like say Anscombe. There's basically no data, it's all intuition pumps. (But I share most of his intuitions, which surprised me.)
Some key premises:
* Nonmarket forces matter.
* Dissent helps us. It is extremely rich data for anyone who cares about doing good work, and so lasting.
* If there were only rational (critical and disloyal) customers, the economy would collapse.
* Exit (market pressure) and Voice (nonmarket pressure).
* (TODO (...) )
I've never seen such a clear analysis of nonmarket forces - and since I find them ugly and hopeless traps for activists, it's good to be challenged.
He cracks open a massive neglected topic: we had studied macroeconomic slack (depressions, where your whole system is suddenly sluggish and unresponsive) extensively, but not microeconomic slack - Why don't firms maximise output, in healthy macro regimes? Because they're made of individuals who don't? Because of internal conflict requiring suboptimal compromises? Because it serves a latent function?
There's also a surprising focus on social / personal decay - the idea that our new productive power allows for an unprecedented range of decadence, failures, mutation load... There's certainly some evidence for that. But also selection-as-repair and post-traumatic growth:
Firms and other organisations are conceived to be permanently and randomly subjected to decline and decay. This radical pessimism, which views decay as an ever-present force constantly on the attack, generates its own cure; for as long as decay is hardly in undisputed command at all times, it is likely that the very process of decline activates certain counter-forces.
Read it slowly. I found it really clear, but I don't know if that's because I'm already fairly grounded in economics.
He has a touching pride in political science, in a 1950s Apollonian way, and much of this criticises economists' costly bias in favour of exit:
I hope to demonstrate to political scientists the usefulness of economic concepts and to economists the usefulness of political concepts. This reciprocity has been lacking in recent interdisciplinary work as economists have claimed that the concepts developed for the purpose of analyzing phenomena of scarcity and resource allocation can be successfully used for explaining political phenomena as diverse as power, democracy and nationalism. They have thus succeeded in occupying large portions of the neighbouring discipline.
Has the field since done much to vindicate this pride?
The best argument against Exit, which I usually favour, is that it speeds up and deepens a group's decay: the people who get sick of drama and then leave are likely to be the more thoughtful and virtuous.
Worth serious study, but if all you take from this review is taking both market and nonmarket forces seriously, and thinking about when to use each, then it's still likely to be some help.
December 6, 2021
This was a interesting study of error correction mechanisms that are present in a firm, and the implications of those mechanisms.
Short but super dense (written in the 1960s/70s and uses arcane language and sentence structures). Would recommend reading to anyone interested in understanding businesses – but specially if you’re interested in understanding two-sided platforms/marketplaces (where the presence of multiple parties is critically important to the value of a platform). If you’re short on time, just read Chapters 1, 2, 3, and the first half of Chapter 7 and figure out their implications yourself
My main takeaways were:
1. When stakeholders of a service are unhappy with it – they have 3 choices: switch over to another service, voice their complaints to management, or suffer in silence
2. Management becomes aware of an absolute or relative deterioration in quality if users complain to them or if there is a drop in revenue. Without these mechanisms, it can be difficult for management to even know what’s going wrong and solve for it
3. In markets where competing services are easily available, customers can just leave without telling management why. This results in a loss of valuable learning opportunities. Management can know that something is wrong, but might not know exactly what. And if management doesn’t care about decreasing revenues (like government managed airlines or railways), a lack of customers that would’ve otherwise “raised hell” leads to crappier products
4. Inculcating “loyalty” – an almost irrational feeling of attachment to an organization – is a really important tool for management in competitive markets. If customers are loyal, they are more likely to voice their discontent before choosing the “exit” option – therefore giving management valuable feedback on how to improve a product
5. Listening to what customers are saying – before they even think about exiting – and improving products based on that becomes super important for businesses operating in competitive markets. The same applies for political parties, sport clubs, and other organizations
Short but super dense (written in the 1960s/70s and uses arcane language and sentence structures). Would recommend reading to anyone interested in understanding businesses – but specially if you’re interested in understanding two-sided platforms/marketplaces (where the presence of multiple parties is critically important to the value of a platform). If you’re short on time, just read Chapters 1, 2, 3, and the first half of Chapter 7 and figure out their implications yourself
My main takeaways were:
1. When stakeholders of a service are unhappy with it – they have 3 choices: switch over to another service, voice their complaints to management, or suffer in silence
2. Management becomes aware of an absolute or relative deterioration in quality if users complain to them or if there is a drop in revenue. Without these mechanisms, it can be difficult for management to even know what’s going wrong and solve for it
3. In markets where competing services are easily available, customers can just leave without telling management why. This results in a loss of valuable learning opportunities. Management can know that something is wrong, but might not know exactly what. And if management doesn’t care about decreasing revenues (like government managed airlines or railways), a lack of customers that would’ve otherwise “raised hell” leads to crappier products
4. Inculcating “loyalty” – an almost irrational feeling of attachment to an organization – is a really important tool for management in competitive markets. If customers are loyal, they are more likely to voice their discontent before choosing the “exit” option – therefore giving management valuable feedback on how to improve a product
5. Listening to what customers are saying – before they even think about exiting – and improving products based on that becomes super important for businesses operating in competitive markets. The same applies for political parties, sport clubs, and other organizations
December 19, 2012
This little book has been on my to-read list for a while, but I was finally prompted to pick it up by the recent death of Albert Hirschman. I'm very glad I did. The concepts of "exit" and "voice" have percolated into culture enough that I went into the book kind of feeling like I already knew what it was about, and in a sense I did. Nonetheless, I really enjoyed reading it. Hirschman is a supremely clear thinker and writer. When he makes an argument, he usually refrains from employing equations, but his exposition is so clear that I can tell he could write out the equations if he wanted to (and he sometimes does, in the appendix), and I can see the outlines of them myself.
I strongly recommended this book to Elise because, even though it was written quite some time ago, it has many direct application to current debates over public education, many of which Hirschman even discusses explicitly. I imagine almost anyone would find applications to their lives or their areas of interest.
I strongly recommended this book to Elise because, even though it was written quite some time ago, it has many direct application to current debates over public education, many of which Hirschman even discusses explicitly. I imagine almost anyone would find applications to their lives or their areas of interest.
November 26, 2023
هرشمن در این کتاب به تعریف مفاهیم خروج و اعتراض می پردازد و جایگاه مرسوم آن ها در علم اقتصاد و سیاست ولی در ضمن کتاب ایراداتی به جریان متعارف اقتصاد وارد می دارد و جایگاه های متفاوتی برای خروج و اعتراض با کمک مثال های عینی معرفی می کند.
مطالعه این کتاب احتمالا برای کسانی که با علم اقتصاد آشنا باشند راحت تر است.
«۴ آذر ۰۲»
مطالعه این کتاب احتمالا برای کسانی که با علم اقتصاد آشنا باشند راحت تر است.
«۴ آذر ۰۲»
May 25, 2021
There’s a grain of truth at the bottom of this which is important — if institutions are riven by internal dynamics (rather than being unified optimizers) AND if consumers/members aren’t atomized rationalizers (i.e. they have powerful roles/buying power or are willing to sacrifice themselves for a cause) then it can certainly happen that internal pressure campaigns cause change. For some types of institutions this is an important dynamic (in terms of causal power, not necessarily for good), and in some not.
What I disagree with is the idea that in that particular range the most useful way to think of the clashes between personalities and power bases is the concept of “voice”. A better concept for what is going on might be “force”. But both are imprecise. I know the author would blame my training, but I worry about any single concept’s power to explain the strange indeterminate range between competition and complete chaos. The little knowledge of game theory I have suggests a ‘folk theorem’ that in repeated games of this type, almost anything can go, given starting beliefs. And humans will believe anything!
But maybe I’m over claiming on behalf of the Author. This is a nice concept and mechanism he re-introduces, but not an earth shattering one.,
Ok p good overall but I’m left with a bunch of questions:
>why firms should “care” about voice from someone who will never exit is unclear
>clearly is a behavioral analysis (why voice and not free ride?) but H really wants to make this seem like more of a rational process
>if voice can happen from outside, why such an emphasis on the dichotomy
>not enough of a distinction between the atomized situations and the market/bargaining power situations
>on page 100 H is incorrect that loyalty is needed to preserve equilibria in positive externality to other users institutions (I.e. stable platforms def exist)
This is in addition to my lingering concern that most stuff people “voice” over are not objective goods but controversial preferences. If that’s true then most voice is just tit for tat wastes of energy
Also he doesn’t take a stance on whether hippies are good or not (although he is strongly anti-vietnam)! Take a stand!
What I disagree with is the idea that in that particular range the most useful way to think of the clashes between personalities and power bases is the concept of “voice”. A better concept for what is going on might be “force”. But both are imprecise. I know the author would blame my training, but I worry about any single concept’s power to explain the strange indeterminate range between competition and complete chaos. The little knowledge of game theory I have suggests a ‘folk theorem’ that in repeated games of this type, almost anything can go, given starting beliefs. And humans will believe anything!
But maybe I’m over claiming on behalf of the Author. This is a nice concept and mechanism he re-introduces, but not an earth shattering one.,
Ok p good overall but I’m left with a bunch of questions:
>why firms should “care” about voice from someone who will never exit is unclear
>clearly is a behavioral analysis (why voice and not free ride?) but H really wants to make this seem like more of a rational process
>if voice can happen from outside, why such an emphasis on the dichotomy
>not enough of a distinction between the atomized situations and the market/bargaining power situations
>on page 100 H is incorrect that loyalty is needed to preserve equilibria in positive externality to other users institutions (I.e. stable platforms def exist)
This is in addition to my lingering concern that most stuff people “voice” over are not objective goods but controversial preferences. If that’s true then most voice is just tit for tat wastes of energy
Also he doesn’t take a stance on whether hippies are good or not (although he is strongly anti-vietnam)! Take a stand!
July 16, 2023
I picked up this small book by chance in a second-hand store in Belfast.
It's a slim one, though it is dense with ideas, somehow reminding me of Small Is Beautiful: Economics as if People Mattered.
The premise of the book is that all organizations are subject to lapses from functional behavior for various accidental reasons (think entropy), and that an organization can learn about the decline through the two mechanisms of recovery: exit (e.g., declining numbers of members or sales), and voice (e.g., increasing number of complaints).
Most of the book then examines how exit, voice, and loyalty interplay in different types of organizations or circumstances.
Especially interesting were some broader insights about human societies, economics, and politics, for example:
• How the presence of competition weakens public services
• Why individual upward social mobility hurts the chances of a lower group moving up as a whole
• That organizations that suppress both exit and voice (e.g., criminal gangs, totalitarian regimes) are less viable than those which do not
• How two competing organizations in a duopoly situation are likely to become more and more similar
• That radicalization of political movements may be explained by higher sensitivity to voice than exit
While I expect that the ideas from this book will be less impactful compared to Schumacher's work, I still think it will make a nice addition to my set of lenses (or mental models) through which I can view the world.
It's a slim one, though it is dense with ideas, somehow reminding me of Small Is Beautiful: Economics as if People Mattered.
The premise of the book is that all organizations are subject to lapses from functional behavior for various accidental reasons (think entropy), and that an organization can learn about the decline through the two mechanisms of recovery: exit (e.g., declining numbers of members or sales), and voice (e.g., increasing number of complaints).
Most of the book then examines how exit, voice, and loyalty interplay in different types of organizations or circumstances.
Especially interesting were some broader insights about human societies, economics, and politics, for example:
• How the presence of competition weakens public services
• Why individual upward social mobility hurts the chances of a lower group moving up as a whole
• That organizations that suppress both exit and voice (e.g., criminal gangs, totalitarian regimes) are less viable than those which do not
• How two competing organizations in a duopoly situation are likely to become more and more similar
• That radicalization of political movements may be explained by higher sensitivity to voice than exit
While I expect that the ideas from this book will be less impactful compared to Schumacher's work, I still think it will make a nice addition to my set of lenses (or mental models) through which I can view the world.
October 29, 2022
Although at first I was hesitant about reading this book as it is mainly about economy (which is not a particular interest of mine), I found this book to be very interesting, amusing, and generally applicable. Hirschman explains the different ways that customers or members of organizations react to a decline in the quality of a product or an organization: either through exit (leaving for a competing firm/organization) and voice (complaining and voicing concerns and dissatisfaction). He explains the benefits, costs, and effects of these tactics and stressed their ambiguities. He also makes things a little more complicated by introducing loyalty, explaining that some customers or members have the incentive of loyalty to stay at a company or organization for longer and remain sensitive to the well-being of the company/org even if they decide to exit.
To my surprise, this book is highly applicable to many other aspects of society, not only the economy and political organizations. I believe that Hirschman's very clever insight would be very useful when thinking and writing about a very wide array of topics (very great for sociology too!). Overall, a very fun, exciting, and insightful read.
To my surprise, this book is highly applicable to many other aspects of society, not only the economy and political organizations. I believe that Hirschman's very clever insight would be very useful when thinking and writing about a very wide array of topics (very great for sociology too!). Overall, a very fun, exciting, and insightful read.
May 21, 2020
Interesting, but longer than it needed to be.
I decided to read this book because I had heard about the core argument of the paper: an investigation of the two main ways that people exert pressure on companies and organizations, exit and voice. That was enough to entice me into reading it. Hirschman does a good job of elaborating on the argument, though I don't really feel that I needed to read a whole book on the subject -- a journal article length (20-30 pages) would have been sufficient to communicate the argument with a sufficient amount of nuance for me.
I also found it sometimes difficult to get through, partly because it's an academic book, but more specifically an academic book from 50 years ago. The extensive references to late-60s US politics were interesting, and pretty clearly dated the book in that regard.
Overall I'm not sure if I'd necessarily recommend it -- find some solid summaries of his argument online, and that would give you 95% of the important information from the book.
I decided to read this book because I had heard about the core argument of the paper: an investigation of the two main ways that people exert pressure on companies and organizations, exit and voice. That was enough to entice me into reading it. Hirschman does a good job of elaborating on the argument, though I don't really feel that I needed to read a whole book on the subject -- a journal article length (20-30 pages) would have been sufficient to communicate the argument with a sufficient amount of nuance for me.
I also found it sometimes difficult to get through, partly because it's an academic book, but more specifically an academic book from 50 years ago. The extensive references to late-60s US politics were interesting, and pretty clearly dated the book in that regard.
Overall I'm not sure if I'd necessarily recommend it -- find some solid summaries of his argument online, and that would give you 95% of the important information from the book.
October 30, 2024
A rec from Larry Summers and I can see why. This is a very unique book. It develops a theory of economic and political change that both seems extremely relevant to politics at the moment (for example why it’s actually a plausible threat that the left wing would not be voting for Kamala even though the standard intuition (and the Hotelling model in econ) says they still would) and a theory that would also modify major baseline economic models just by including a dimension of “quality” (and it’s possible deterioration) and the concept of “microeconomic slack”. I need to think more about incorporating a quality dimension into baseline models and I already know that “microeconomic slack” is something I’m into and will one day apply to an econ topic for me, but don’t know what to do with it just yet.
May 7, 2023
Have you ever wondered why, after an election loss in the USA, democrats always threaten a “move to Canada,”* and republicans always threaten a “civil war?”**
If so, this book attempts an empirical explanation for such behavior.***
* Why do they only threaten to move to majority white countries?
** Not that anyone cares, but the 1776 founders brutally squashed such domestic rebellions in their own lifetimes (Shay’s rebellion, the whiskey rebellion, et al).
*** How far can you get in life by actually reading footnotes and appendix? They shouldn’t be glossed over in this book.
If so, this book attempts an empirical explanation for such behavior.***
* Why do they only threaten to move to majority white countries?
** Not that anyone cares, but the 1776 founders brutally squashed such domestic rebellions in their own lifetimes (Shay’s rebellion, the whiskey rebellion, et al).
*** How far can you get in life by actually reading footnotes and appendix? They shouldn’t be glossed over in this book.
April 13, 2023
Why the dynamics of exit, voice, and loyalty has not been further studied after publication is somewhat mysterious. As Hirschmann correctly predicted, its sphere of influence encapsulates politics and social sciences. My personal experience can attest to that claim: I kept applying the model with success to the Hong Kong protests. There is little evidence to suggest that similar treatments for a political party, a revolution, a brand or even a cult cannot bear fruit.
The pity is ours that the model never gained wider currency despite the explanatory power. So powerful that it can even shed light on itself. Adherents of neoclassical economics will dismiss its shortcomings as given and misinterpreted. The more people exit, the smaller the voice. As the mainstream school of thought with a massive following, the inertia to undo any usurpations is strong.
The exit-voice-loyalty model challenges the basic notion that deliberation has a little role in the figurine called ‘homo economicus’. We all make decisions that *seem* irrational. The underlying logic of the model straightens out the worry from a behaviourist viewpoint, and weaves the new and old model together. Indeed more convoluted, but in fact more realistic. We no longer have to treat every agent as a flattened datum.
The pity is ours that the model never gained wider currency despite the explanatory power. So powerful that it can even shed light on itself. Adherents of neoclassical economics will dismiss its shortcomings as given and misinterpreted. The more people exit, the smaller the voice. As the mainstream school of thought with a massive following, the inertia to undo any usurpations is strong.
The exit-voice-loyalty model challenges the basic notion that deliberation has a little role in the figurine called ‘homo economicus’. We all make decisions that *seem* irrational. The underlying logic of the model straightens out the worry from a behaviourist viewpoint, and weaves the new and old model together. Indeed more convoluted, but in fact more realistic. We no longer have to treat every agent as a flattened datum.
July 22, 2021
Introduces interesting and promising concepts, but largely fails to develop or explore any of them in anything more than a handwavy way.
December 30, 2024
An excellent book. Like his other book The Rhetoric of Reaction: Perversity, Futility, Jeopardy, Hirschman's Exit, Voice, and Loyalty is a great example of clear writing, robust argumentation, and useful ideas. Hirschman provides useful language for phenomena that we see every day and provides a helpful framework for thinking about how organizations can and/or should respond to feedback from their stakeholders.
For example, in the classic case of a competitive market, management receives feedback in two ways: (1) customers stop buying the firm’s products. As a result, management should (if possible) seek to rectify whatever problems have caused customers to opt out. (2) Customers express their dissatisfaction directly to management or to some other authority to which management is subordinate or through general protest addressed to anyone who cares to listen: this is the voice option. As a result, management once again engages in a search for the causes and possible cures of customers’ and members’ dissatisfaction.
Hirschman suggests that all organizations (e.g., governing bodies, associations, political parties, churches, etc.), not just companies, are subject to similar forces as their "quality" changes. To the previousy mentioned "exit" and "voice," he adds a third force, "loyalty," which can also arise in some circumstances:
(1) Exit: Members leave if the organization strays too far from their preferences.
(2) Voice: Members advocate for change within the organization.
(3) Loyalty: Members support the organization even as it diverges from their preferences
That core insight is worth the price of admission, but that's not all! Hirschman writes actual books not bloated blog posts. After introducing this framework, he walks through how the three concepts apply in sample scenarios and offers a fairly rigorous analysis of how, why, and when we might expect each of the three forces to arise, be effective, and dominate the others.
Exit and Voice
In most market-based interactions, exit is the natural response to dissatisfaction and will generally be the dominate force. One key insight downstream from this observation is that the farther you move from a "perfectly competitive market"—or some analogous concept for non-market organizations—the more important "voice" becomes. In the extreme case of a total monopoly—or single non-replicable organization without substitutes in the non-market case—the value of exit is severely diminished and voice tends to dominate.
Consider public services which are subject to some combination of exit and voice and have little chance of inspiring widespread loyalty in anyone but the most committed ideologue. The canonical example is public education where, in the event of a decline in quality, some parents will complain to the administrators or the school board or other government officials, but at some point, the most quality conscious parents and students will begin to exit, either by moving to a different school district or opting out in favor of an alternative to public school (charter, private, homeschool). The effect is twofold: first, with fewer students, quality may decline further, and second, there will now be fewer quality-conscious parents to provide feedback via voice, so the voice signal is diminished.
Now consider something like the US Postal Service, where legal barriers prevent alternatives and management has little incentive to respond to feedback. Here, a choice to exit would accomplish little other than deprive the user of mail service entirely. So dissatisfied users are left to merely voice concerns. Though without any meaningful threat of exit, the organization's incentives to respond to direct complaints are greatly diminished. Instead, feedback is mediated by electoral politics. A notoriously...slow...process.
You can overlay these concepts on various political squabbles and it becomes clear that, in many cases, a useful way to frame the debate is in terms of which of these three mechanisms should be used, or even which should be available at all. For instance, free-market liberals and libertarian types will often emphasize creating and/or preserving opportunities for exit as a way to improve/maintain quality in debates on public policy: school choice, cryptocurrency, immigration, and healthcare are all examples of this. Similarly, those with a progressive orientation tend to be more inclined toward activism (a form of voice). They often emphasize the need to retain a captive, collective venue for that voice to be operative and therefore seek to limit options for exit. Single-payer healthcare, public education, and public transit are good examples here. Hirschman keeps the discussion mostly descriptive, largely avoiding personal value judgements, but his own progressive viewpoint does shine through a bit in a few places in this regard.
Loyalty
Hirschman's third concept of "loyalty" interacts with the other two and its presence changes how the others operate. For example, fans of a struggling sports team have many outside options that to an external observer appear to be substitutes, yet exit is not an option. There will always be plenty of grumbling, Monday morning quarterbacking, and calling for coaching changes, but—if they aren't fair weather fans—Knicks fans will still be Knicks fans. On the other hand, consider religions, which seek to build strong a strong sense of attachment and position themselves as "unsubstitutable" just as sports teams. But here, the resulting loyalty inhibits both exit and voice. Why is that? Hirschman suggests that the distinguishing feature between these two cases of loyalty is the cost of entry and exit to the organization. In the case of religion, the high "cost of entry," e.g., changes to lifestyle, suppresses voice by encouraging Motivated Reasoning in members as concerns or dissatisfaction arise. Meanwhile, a high "cost of exit," e.g., loss of community, directly suppresses exit.
On a societal level, I again find this to be a helpful analytical lens since similar effects almost certainly appear in organizations that have taken on some characteristics of religion, e.g., political parties/movements. On a personal level, it's helpful to honestly consider how loyalty might be operating in my own decision making with respect to the organizations I interact with and hopefully reduce my use of motivated reasoning.
Conclusion
Each of these mechanisms plays an important role to incentivize high quality goods, services, and non-market organizations. If nothing else, it's useful to have concrete language to label things that we see every day. Choosing to eat Shake Shack for lunch because the local Chipotle "has really gone downhill?" That's exit. Attending a school board, HOA, or community discussion meeting? That's voice. Swallowing criticism when your favored political candidate says something dumb? That's loyalty. But it's also worth going a step further to think through which actions are most likely to have the desired effect when faced with quality decline in an organization you interact with.
Finally, as a matter of personal philosophy, I tend to favor exit where possible. This passage from Hirschman is a banger:
Whether physical or figurative, what is more American than the exit offered by an unsettled frontier? It truly is the ultimate "paradigm of problem-solving" as we seek "escape from the bondage of the past." Open the frontier(s)!
For example, in the classic case of a competitive market, management receives feedback in two ways: (1) customers stop buying the firm’s products. As a result, management should (if possible) seek to rectify whatever problems have caused customers to opt out. (2) Customers express their dissatisfaction directly to management or to some other authority to which management is subordinate or through general protest addressed to anyone who cares to listen: this is the voice option. As a result, management once again engages in a search for the causes and possible cures of customers’ and members’ dissatisfaction.
Hirschman suggests that all organizations (e.g., governing bodies, associations, political parties, churches, etc.), not just companies, are subject to similar forces as their "quality" changes. To the previousy mentioned "exit" and "voice," he adds a third force, "loyalty," which can also arise in some circumstances:
(1) Exit: Members leave if the organization strays too far from their preferences.
(2) Voice: Members advocate for change within the organization.
(3) Loyalty: Members support the organization even as it diverges from their preferences
That core insight is worth the price of admission, but that's not all! Hirschman writes actual books not bloated blog posts. After introducing this framework, he walks through how the three concepts apply in sample scenarios and offers a fairly rigorous analysis of how, why, and when we might expect each of the three forces to arise, be effective, and dominate the others.
Exit and Voice
In most market-based interactions, exit is the natural response to dissatisfaction and will generally be the dominate force. One key insight downstream from this observation is that the farther you move from a "perfectly competitive market"—or some analogous concept for non-market organizations—the more important "voice" becomes. In the extreme case of a total monopoly—or single non-replicable organization without substitutes in the non-market case—the value of exit is severely diminished and voice tends to dominate.
Consider public services which are subject to some combination of exit and voice and have little chance of inspiring widespread loyalty in anyone but the most committed ideologue. The canonical example is public education where, in the event of a decline in quality, some parents will complain to the administrators or the school board or other government officials, but at some point, the most quality conscious parents and students will begin to exit, either by moving to a different school district or opting out in favor of an alternative to public school (charter, private, homeschool). The effect is twofold: first, with fewer students, quality may decline further, and second, there will now be fewer quality-conscious parents to provide feedback via voice, so the voice signal is diminished.
Now consider something like the US Postal Service, where legal barriers prevent alternatives and management has little incentive to respond to feedback. Here, a choice to exit would accomplish little other than deprive the user of mail service entirely. So dissatisfied users are left to merely voice concerns. Though without any meaningful threat of exit, the organization's incentives to respond to direct complaints are greatly diminished. Instead, feedback is mediated by electoral politics. A notoriously...slow...process.
You can overlay these concepts on various political squabbles and it becomes clear that, in many cases, a useful way to frame the debate is in terms of which of these three mechanisms should be used, or even which should be available at all. For instance, free-market liberals and libertarian types will often emphasize creating and/or preserving opportunities for exit as a way to improve/maintain quality in debates on public policy: school choice, cryptocurrency, immigration, and healthcare are all examples of this. Similarly, those with a progressive orientation tend to be more inclined toward activism (a form of voice). They often emphasize the need to retain a captive, collective venue for that voice to be operative and therefore seek to limit options for exit. Single-payer healthcare, public education, and public transit are good examples here. Hirschman keeps the discussion mostly descriptive, largely avoiding personal value judgements, but his own progressive viewpoint does shine through a bit in a few places in this regard.
Loyalty
Hirschman's third concept of "loyalty" interacts with the other two and its presence changes how the others operate. For example, fans of a struggling sports team have many outside options that to an external observer appear to be substitutes, yet exit is not an option. There will always be plenty of grumbling, Monday morning quarterbacking, and calling for coaching changes, but—if they aren't fair weather fans—Knicks fans will still be Knicks fans. On the other hand, consider religions, which seek to build strong a strong sense of attachment and position themselves as "unsubstitutable" just as sports teams. But here, the resulting loyalty inhibits both exit and voice. Why is that? Hirschman suggests that the distinguishing feature between these two cases of loyalty is the cost of entry and exit to the organization. In the case of religion, the high "cost of entry," e.g., changes to lifestyle, suppresses voice by encouraging Motivated Reasoning in members as concerns or dissatisfaction arise. Meanwhile, a high "cost of exit," e.g., loss of community, directly suppresses exit.
On a societal level, I again find this to be a helpful analytical lens since similar effects almost certainly appear in organizations that have taken on some characteristics of religion, e.g., political parties/movements. On a personal level, it's helpful to honestly consider how loyalty might be operating in my own decision making with respect to the organizations I interact with and hopefully reduce my use of motivated reasoning.
Conclusion
Each of these mechanisms plays an important role to incentivize high quality goods, services, and non-market organizations. If nothing else, it's useful to have concrete language to label things that we see every day. Choosing to eat Shake Shack for lunch because the local Chipotle "has really gone downhill?" That's exit. Attending a school board, HOA, or community discussion meeting? That's voice. Swallowing criticism when your favored political candidate says something dumb? That's loyalty. But it's also worth going a step further to think through which actions are most likely to have the desired effect when faced with quality decline in an organization you interact with.
Finally, as a matter of personal philosophy, I tend to favor exit where possible. This passage from Hirschman is a banger:
[E]xit has been accorded an extraordinarily privileged position in the American tradition, but then, suddenly, it is wholly proscribed...from a few key situations. The United States owes its very existence and growth to millions of decisions favoring exit over voice. ... This preference for the neatness of exit over the messiness and heartbreak of voice has then “persisted throughout our national history.” The exit from Europe could be re-enacted within the United States by the progressive settlement of the frontier, which Frederick Jackson Turner characterized as the “gate of escape from the bondage of the past.” Even though the opportunity to “go West” may have been more myth than reality for large population groups in the eastern section of the country, the myth itself was of the greatest importance for it provided everyone with a paradigm of problem-solving. Even after the closing of the frontier, the very vastness of the country combined with easy transportation make it far more possible for Americans than for most other people to think about solving their problems through “physical flight” than either through resignation or through ameliorating and fighting in situ the particular conditions into which one has been “thrown.” The curious conformism of Americans, noted by observers ever since Tocqueville, may also be explained in this fashion. Why raise your voice in contradiction and get yourself into trouble as long as you can always remove yourself entirely from any given environment should it become too unpleasant?
Whether physical or figurative, what is more American than the exit offered by an unsettled frontier? It truly is the ultimate "paradigm of problem-solving" as we seek "escape from the bondage of the past." Open the frontier(s)!
October 31, 2015
This is a gem of a book. Hirschman has a tremendous eye for counterintuitive and ironic possibilities--in this book, it is an unusual view about the relationship between economic growth and behavior. Most of us assume, as Hirschman says, that developed capitalism is filled with tension and strivers. The model of the profit-maximizing firm is a model that assumes firms are constantly struggling against the PPF. Instead, Hirschman suggests, developed capitalism reduces the price we pay for slacking off. Highly productive economies may be consistent with a wide degree of sub-optimal performance.
This thesis leads Hirschman to address three mechanisms for dealing with slack. One is exit, or the ability to leave. The other is voice, or the ability to push for change within an organization. Finally, Hirschman proposes a theory of loyalty in which loyalty raises the costs of exit in order to increase the probability of voice. The theory is functionalist--loyalty is a way of reducing the temptation to be a quitter.
Hirschman raises some skepticism about the value of loyalty in his discussion of Vietnam war planning, which might generalize. Is it really the case that loyalty's the functional adaptation? Intuitively, it seems to me that many people have a bias toward organizations or associations of which they're members. Lots of people stay in bad relationships because they feel that they'd betray their partner if they left. Part of the issue is the cost of forming new organizations as well as the cost of leaving them. If the costs of forming are high, then loyalty and reform 'from the inside' become more valuable. But if the cost of a new organization is relatively lower, then loyalty matters less.
This book also has important insights for theories of political power. There is a parallel, Hirschman notes, between the fear of the rent-extracting monopolist and the domineering political power in political theory, especially republican theory. However, Hirschman suggests that one of the advantages of power is the ability to slack off. Monopolists tend to get lazy, and perhaps political power tends toward incompetence and decline.
In a world of slack, the measure of political power is how quickly you can mobilize voice. Drawing on Dahl, Hirschman suggests that slack actually makes political power more efficient by making successful mobilization a reliable indicator of popular interest.
There's lots else here--the interaction between voice and exit being the obvious one. It's status as a classic of political economy is well-deserved.
This thesis leads Hirschman to address three mechanisms for dealing with slack. One is exit, or the ability to leave. The other is voice, or the ability to push for change within an organization. Finally, Hirschman proposes a theory of loyalty in which loyalty raises the costs of exit in order to increase the probability of voice. The theory is functionalist--loyalty is a way of reducing the temptation to be a quitter.
Hirschman raises some skepticism about the value of loyalty in his discussion of Vietnam war planning, which might generalize. Is it really the case that loyalty's the functional adaptation? Intuitively, it seems to me that many people have a bias toward organizations or associations of which they're members. Lots of people stay in bad relationships because they feel that they'd betray their partner if they left. Part of the issue is the cost of forming new organizations as well as the cost of leaving them. If the costs of forming are high, then loyalty and reform 'from the inside' become more valuable. But if the cost of a new organization is relatively lower, then loyalty matters less.
This book also has important insights for theories of political power. There is a parallel, Hirschman notes, between the fear of the rent-extracting monopolist and the domineering political power in political theory, especially republican theory. However, Hirschman suggests that one of the advantages of power is the ability to slack off. Monopolists tend to get lazy, and perhaps political power tends toward incompetence and decline.
In a world of slack, the measure of political power is how quickly you can mobilize voice. Drawing on Dahl, Hirschman suggests that slack actually makes political power more efficient by making successful mobilization a reliable indicator of popular interest.
There's lots else here--the interaction between voice and exit being the obvious one. It's status as a classic of political economy is well-deserved.
November 13, 2016
The book looks at the economic incentives of dissent, characterizing consumers as agents who have different levels of emotional investment in the quality of a product or a service (the product can also be membership in an organization, such as a state or a religion), and who react to random quality lapses in the market via two main channels: (a) exit (switching to a competitor), and (b) voice (complaining, becoming politically engaged, and campaigning). The break-even point between the two is influenced by loyalty, which in some cases of organizations, such as family, nation, or even religion, are forced upon the consumer a priori via prohibitive exit costs.
This sounds like nothing new, and a simplistic model, but the novelty comes next.
I think the book is quite adept at explaining how a very "taught economy", such as a maximally-competitive [free] market, can get trapped in negative feedback loops where competition eliminates first the mobile customers who care most about quality, leaving behind those customers who manifest inertia (quality-price plasticity) and fail to protest enough in order to salvage the organization from bad management.
I think this approach advocates for a "slack economy", where reserve productivity can be implemented cheaply to counter dissent forces on per-need basis in order to avoid backlash.
The book also explains the circumstances under which high amounts of competition push the equilibrium point of the market towards less competitive products, which goes against what normally gets taught in the Chicago school of thought.
On the other hand--and this might be more timely--the book attempts to explain what happens when the quality of the product goes down, but monopolistic phenomena affecting loyal customers who always choose voice over exit (usually those consumers with no escape, such as voters in a two-party system) clash with the more mobile quality-elastic consumers and with the profit-guided incentives of the organization as a whole, lowering overall performance.
It was quite cool, and it's only 130 pages long. Whether you agree with it or not, it should be intellectually challenging (or at least, it was for me).
This sounds like nothing new, and a simplistic model, but the novelty comes next.
I think the book is quite adept at explaining how a very "taught economy", such as a maximally-competitive [free] market, can get trapped in negative feedback loops where competition eliminates first the mobile customers who care most about quality, leaving behind those customers who manifest inertia (quality-price plasticity) and fail to protest enough in order to salvage the organization from bad management.
I think this approach advocates for a "slack economy", where reserve productivity can be implemented cheaply to counter dissent forces on per-need basis in order to avoid backlash.
The book also explains the circumstances under which high amounts of competition push the equilibrium point of the market towards less competitive products, which goes against what normally gets taught in the Chicago school of thought.
On the other hand--and this might be more timely--the book attempts to explain what happens when the quality of the product goes down, but monopolistic phenomena affecting loyal customers who always choose voice over exit (usually those consumers with no escape, such as voters in a two-party system) clash with the more mobile quality-elastic consumers and with the profit-guided incentives of the organization as a whole, lowering overall performance.
It was quite cool, and it's only 130 pages long. Whether you agree with it or not, it should be intellectually challenging (or at least, it was for me).
June 30, 2018
A rare book that is both insightful and less than two hundred pages. I miss the days when "serious" books got by their content and not by their length. Originally recommended to me by a freshman year professor, Exit, Voice and Loyalty is a classic for a good reason. I was recently reminded of it when in Con Law. Exit, voice and loyalty made a surprise appearance in Bruce Ackerman's article about the role of exit and Carolene Products footnote 4 (if "exit" from unpopular minorities is too easy, it makes it difficult organize activism. While it seems like it would be a disadvantage to be clearly identifiable as a minority, the ability to "cover" comes with its own problems). Some of the examples and politics are a bit outdated, and Hirshman clearly has his political sympathies (Ralph Nader gets a few honorable mentions, as does Eugene McCarthy), but this book is worth reading for the timeless principles Hirshman articulates as well as the breadth and creativity that he brings to economics.
The basic idea of the book is that there are two major responses to declines in firms or organizations. The first is exit, "vote with your feet" to stop buying the product or to quit the organization. The second is voice, to raise a ruckus by protest. Hirshman notes that economists tend to think of exit as the exclusive response, while political scientists tend to focus on the voice mechanism.
In Hirshman's model, firms face random quality deterioration that is correctable if management responds to either exit or voice. Hirshman makes the interesting note that for management to respond and correct, exit cannot be too fast or too slow, since aggressive exit would lead to the collapse of the firm before response. Exit also fails to correct firm decline, if the consumer just aimlessly cycles through what are substantially the same firms (some radicals argue that political parties allow the status quo through exactly this mechanism. Voters unhappy with one party exit it and switch to another, only to be disappointed and so-on, when in fact the problem is the system itself).
Voice can be a residual to exit, in some situations (such as monopoly or in autocracies) it may be possible that exit is impossible, and voice is the only response. Voice can also be a substitute to exit, consumers may protest before they stop buying a product. Voice is also more complicated in that members of an organization and consumers must consider the chance that their voice will be effective, and the worthwhileness of a correction compared to the certainty of another existing product. For that reason, organizational memberships and major purchases are likely to be places where voice is used as a substitute to exit.
The most interesting parts of the book come from the interactions between exit and voice. A special difficulty is that the consumers that are most quality conscious (consumers probably face different utilities from different quality levels, making it impossible to translate quality to effective price decreases) and thus in the best position to exercise voice to alert management to failure are also the most likely to exit in response to a decline in quality, leaving the firm to continue to decline. The examples that Hirshman uses are interesting, from Nigerian railroads (they were bad at the time because being publicly funded, management was not sensitive to exit, and the alternatives of cars allow quality sensitive consumers to exit the railroad), to shareholders who quickly sell instead of protesting to management (no longer strictly true, with the rise of activist shareholders. In a sense Hirshman anticipates this, as he mentions that there may be ways to make the voice mechanism more successful/less costly). Hirshman even argues that in some cases, monopolies want to create an exit option to rid itself of troublesome protestors, thereby making even competition a tool of monopolies. A fascinating chapter is Hirshman's answer to the failure of the medium voter theorem. The medium voter theorem predicts that all political parties move towards the center in order to maximize the number of voters. Hirshman notes the failure of this model when political parties consistently produce extreme candidates. Hirshman's answer is that the party may not be responsive to edge voters who exit the party if the party moves on the idealogical spectrum, but more responsive to the "captive" members of the party who voice. These captive members tend to be ideologues who want "purer" candidates.
There is a lengthy chapter on loyalty that explores some interesting ideas as well. Hirshman mentions that loyalty may be useful because it slows the exit of members and consumers, giving firms a chance to correct their decline. Loyalty many case consumers/members to be less sensitive to initial decline but more willing to use voice than others past a certain threshold. A loyalist's threat to exit is a combination of voice and exit, and organizations that make it impossible to threaten exit (that penalize threats of exit with death for example) collapse quickly. Finally, Hirshman discusses situations where loyalists cannot truly exit the organization, therefore turning their decision to exit into balance of the shame of staying in an organization and the chance of reforming "from the inside".
The chapter on applying the concepts to American politics is a little dated but still thoughtful. Hirshman notes that the US is a country formed out of those who "exited" other societies. One of the most thought provoking arguments in this chapter was that high achieving minorities tended to exit their cultural group, depriving that group of those most able to use voice to protest the injustices towards that minority. Hirshman notes in the book, that was the reason that political movements had been focusing on group upward mobility rather than individual upward mobility.
Hirshman ends the book with the note that organizations may have varying responses to exit and voice. That leads to the simple conclusion that to fix much decline, steps should be taken to either make the organization more sensitive to existing voice or exit or make it easier for voice/exit to come out. However, there might not be a stable optimal mix of voice/exit because those mechanisms are also subject to decline (Hirshman gives the example of LBJ administration institutionalizing dissent, keeping major players from resigning and affecting policy by allowing them to "air their conscience").
In short, highly recommended reading.
The basic idea of the book is that there are two major responses to declines in firms or organizations. The first is exit, "vote with your feet" to stop buying the product or to quit the organization. The second is voice, to raise a ruckus by protest. Hirshman notes that economists tend to think of exit as the exclusive response, while political scientists tend to focus on the voice mechanism.
In Hirshman's model, firms face random quality deterioration that is correctable if management responds to either exit or voice. Hirshman makes the interesting note that for management to respond and correct, exit cannot be too fast or too slow, since aggressive exit would lead to the collapse of the firm before response. Exit also fails to correct firm decline, if the consumer just aimlessly cycles through what are substantially the same firms (some radicals argue that political parties allow the status quo through exactly this mechanism. Voters unhappy with one party exit it and switch to another, only to be disappointed and so-on, when in fact the problem is the system itself).
Voice can be a residual to exit, in some situations (such as monopoly or in autocracies) it may be possible that exit is impossible, and voice is the only response. Voice can also be a substitute to exit, consumers may protest before they stop buying a product. Voice is also more complicated in that members of an organization and consumers must consider the chance that their voice will be effective, and the worthwhileness of a correction compared to the certainty of another existing product. For that reason, organizational memberships and major purchases are likely to be places where voice is used as a substitute to exit.
The most interesting parts of the book come from the interactions between exit and voice. A special difficulty is that the consumers that are most quality conscious (consumers probably face different utilities from different quality levels, making it impossible to translate quality to effective price decreases) and thus in the best position to exercise voice to alert management to failure are also the most likely to exit in response to a decline in quality, leaving the firm to continue to decline. The examples that Hirshman uses are interesting, from Nigerian railroads (they were bad at the time because being publicly funded, management was not sensitive to exit, and the alternatives of cars allow quality sensitive consumers to exit the railroad), to shareholders who quickly sell instead of protesting to management (no longer strictly true, with the rise of activist shareholders. In a sense Hirshman anticipates this, as he mentions that there may be ways to make the voice mechanism more successful/less costly). Hirshman even argues that in some cases, monopolies want to create an exit option to rid itself of troublesome protestors, thereby making even competition a tool of monopolies. A fascinating chapter is Hirshman's answer to the failure of the medium voter theorem. The medium voter theorem predicts that all political parties move towards the center in order to maximize the number of voters. Hirshman notes the failure of this model when political parties consistently produce extreme candidates. Hirshman's answer is that the party may not be responsive to edge voters who exit the party if the party moves on the idealogical spectrum, but more responsive to the "captive" members of the party who voice. These captive members tend to be ideologues who want "purer" candidates.
There is a lengthy chapter on loyalty that explores some interesting ideas as well. Hirshman mentions that loyalty may be useful because it slows the exit of members and consumers, giving firms a chance to correct their decline. Loyalty many case consumers/members to be less sensitive to initial decline but more willing to use voice than others past a certain threshold. A loyalist's threat to exit is a combination of voice and exit, and organizations that make it impossible to threaten exit (that penalize threats of exit with death for example) collapse quickly. Finally, Hirshman discusses situations where loyalists cannot truly exit the organization, therefore turning their decision to exit into balance of the shame of staying in an organization and the chance of reforming "from the inside".
The chapter on applying the concepts to American politics is a little dated but still thoughtful. Hirshman notes that the US is a country formed out of those who "exited" other societies. One of the most thought provoking arguments in this chapter was that high achieving minorities tended to exit their cultural group, depriving that group of those most able to use voice to protest the injustices towards that minority. Hirshman notes in the book, that was the reason that political movements had been focusing on group upward mobility rather than individual upward mobility.
Hirshman ends the book with the note that organizations may have varying responses to exit and voice. That leads to the simple conclusion that to fix much decline, steps should be taken to either make the organization more sensitive to existing voice or exit or make it easier for voice/exit to come out. However, there might not be a stable optimal mix of voice/exit because those mechanisms are also subject to decline (Hirshman gives the example of LBJ administration institutionalizing dissent, keeping major players from resigning and affecting policy by allowing them to "air their conscience").
In short, highly recommended reading.
December 27, 2012
I read this book on Nick's strong recommendation (and lucky me, I also benefited from his marginalia). He had pitched it to me as an economist's very clear rendering of the interplay among "exit, voice, and loyalty," ideas extremely applicable to contemporary education reform. I actually found Hirschman to be a little bit difficult to follow - but that's with my high school-level of economics knowledge. I was, though, intrigued by Hirschman's use of school choice as an illustration of "exit" (leaving an organization/institution when its quality declines) and "voice" (making a fuss in an effort to encourage quality improvement). When Hirschman talks about school choice, he is pretty much only talking about the choice to opt out of public schools by sending your kids to private school instead. But, I think the notions of exit, voice, and loyalty also very much apply to today's ever-growing charter school movement. Historians of American education policy will almost always discuss economist Milton Friedman's seminal essay "The Role of Government in Education," but Hirschman, too, is, I think, an important economist for current education researchers, reformers, and policymakers to understand.
July 13, 2017
The central ideas developed in this book - 'exit', 'voice', and 'loyalty' - are tremendously useful for reasoning about the nature and dynamics of organizations. The book itself -- even at its meagre length -- felt far too long. The crux of the ideas can simply be explained more-than-adequately in a handful of pages (the Wikipedia article will suffice, really).
The book did add a few observations that I found improved my thinking on the subject. The explicit assertion that 'exit' tends to crowd out 'voice' is interesting and seems accurate; 'exit' tends to be used first by those who would tend to be more effective in the application of 'voice', which diminishes the power of 'voice' in practice.
The analysis of 'loyalty' (in the present Hirschman-ian sense - basically, some preference for 'voice' over 'exit') was also better-developed in the book than I've seen elsewhere. Hirschman characterizes situations where organizations tend to experience high levels of 'loyalty' - in 'primordial human groupings' such as the family or tribe, as well as in other organizations where there exist high entry fees and high exit penalties.
One should certainly become acquainted with the ideas of exit, voice, and loyalty. This book itself is weakly recommended.
The book did add a few observations that I found improved my thinking on the subject. The explicit assertion that 'exit' tends to crowd out 'voice' is interesting and seems accurate; 'exit' tends to be used first by those who would tend to be more effective in the application of 'voice', which diminishes the power of 'voice' in practice.
The analysis of 'loyalty' (in the present Hirschman-ian sense - basically, some preference for 'voice' over 'exit') was also better-developed in the book than I've seen elsewhere. Hirschman characterizes situations where organizations tend to experience high levels of 'loyalty' - in 'primordial human groupings' such as the family or tribe, as well as in other organizations where there exist high entry fees and high exit penalties.
One should certainly become acquainted with the ideas of exit, voice, and loyalty. This book itself is weakly recommended.
August 9, 2015
Based on what at first appear to be three overly-simple concepts: "Exit", "Voice", and "Loyalty", Hirschman manages to model and illuminate a wide range of phenomena from the domains of economics, politics, and management. Some of the debates raging at the time his book was published (late 1960s, early 70s) seem just as alive and unresolved today, e.g., whether public school vouchers (a form of Exit) should lead to higher performance through competition or lower performance through siphoning off the best students. Hirschman doesn't argue simply for increased Voice (i.e., loyal dissent) at the expense of Exit (i.e., switching sides), but rather calls on the reader to avoid becoming too comfortable with either approach. The "central point of the book" (p. 42) appears to be that one shouldn't get too comfortable with either dominant mode (i.e., Exit for economics; Voice for politics). Rather, it is often the lesser-used, less-automatic mode of engagement that leads to positive organizational change.
This entire review has been hidden because of spoilers.
Displaying 1 - 30 of 121 reviews