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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
About the author
Albert O. Hirschman
71 books118 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).
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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.
December 14, 2020
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 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 right now.
His simple yet powerful analytical framework explores how quality deterioration can best be adressed through an 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 right now.
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.
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.
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.
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.
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»
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.
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.
October 4, 2016
Alright...so at risk of sounding like some uneducated visagoth (sp?), I'm giving this a whooping 2-stars.
While I appreciate stream-of-consciousness theory as much as the next guy in conversation, I don't much appreciate it when it's in book form and is not very insightful/surprising and spends 100+ pages rehashing the same thing. I don't know if this is more outdated than anything, but I wasn't very impressed. Back when this was published, however, I'm sure it made more of an impression.
Sorry Hirschman!
While I appreciate stream-of-consciousness theory as much as the next guy in conversation, I don't much appreciate it when it's in book form and is not very insightful/surprising and spends 100+ pages rehashing the same thing. I don't know if this is more outdated than anything, but I wasn't very impressed. Back when this was published, however, I'm sure it made more of an impression.
Sorry Hirschman!
May 28, 2013
This is one of those quiet classics of social science and should be familiar to every student of organizations, policy, community or public affairs. Hirshman's sensible argument is that when faced with a decision or policy you disagree with or doubt, you can leave (exit), disagree (voice) or be a good follower and go along quietly (loyalty).
Goodreads also shows a 46 page Reconsideration of Hirschman's text by Ulrich Arnswald, but I've not been able to track it down.
Goodreads also shows a 46 page Reconsideration of Hirschman's text by Ulrich Arnswald, but I've not been able to track it down.
January 4, 2022
Great framework for thinking about organizational change. Hirschman does a nice job bringing new thinking to standard economic principles. Is a bit dry, though, so only read if you are in the mood for something academic.
Read
March 18, 2024i havent had so many new research ideas in such a short span in a long time
April 23, 2021
an economic theory of how a dysfunctional institution might decline or improve due to its patrons exercising two important powers at their disposal: exit and voice. exit can mean stop attending meeting, buying from a competitor, switching political parties, or emigrating from a country. voice can mean publicly criticizing, leaving reviews, writing letters, lobbying for a change in leadership, calling for regulation.
exit is the power an economist usually talks about. exit makes sense under conditions of perfect competition, where rival products are nearly identical. customers switch from buying your almond milk to the competitor's, depriving your declining firm of their revenue.
voice is something economists talk about less, political scientists more. this is because voice makes sense when there is some loyalty to the institution and exit is not an option: think of a political party, a country, a club.
so far so intuitive, and this is everything i knew about hirschman's ideas on this topic before reading the book. that basic concepts constitute the first third or so of the book.
but being an economist, hirschman wants to explain how voice can also by thought about in economic terms. voice makes sense when competition is imperfect. importantly, he notes that even for a single firm the availability of competition is relative to characteristics of that firm's customers, which may vary. customers may vary in their sensitivity to quality: some are "alert" and others are "inert." and the more alert customers vary among themselves in the particular qualities they appreciate: these are the "connoisseurs". the connoisseurs may find few rival products to switch to because their tastes are too diffuse for economies-of-scale to kick in and ensure a taut competitive market. and if exit is not feasible for the connoisseurs, they will tend to use voice instead: groaning, writing letters, calling for new regs, etc. this means that firms may be more influenced by exit powers at lower end of quality scale and more influenced by voice at the upper end.
so much for the basic economic argument. but this isn't primarily a book about business; its about all kinds of institutions, and how this trading off between exit and voice among patrons/members can arise and what the effects will be. a few applications:
* among political parties the ideologues are less likely to exit than the centrists, which means radicals are more likely to use voice. that's interesting because it cuts against the conclusions of median voter model that says parties will moderate and end up nearly identical.
* as countries move up the technological ladder, they become more similar to each other. this allows the talented to emigrate, diminishing their voice within the country. country-loyalists will therefore seek to curb the brain drain, reinforcing monopoly so as to amp of the power of voice to help those with less marketable talents.
* the black power movement rejects exit via individual bootstrapping success stories for similar reasons: keep the powerful voices needed to bring about social justice.
* a presidential administration may have dissenters in its ranks exercising voice to no effect. this is a case where more exit might be better: daniel ellsberg's departure cited as good example during vietnam war.
this book is more theoretical and quantitative than hirschman's two other best known books: rhetoric of reaction and his passions and interests. those were histories of ideas. page for page the other two books are more pleasant and insightful reads, but this one is understandably more influential because the analysis here is more widely applicable.
a final note on form: i love that hirschman includes little tables that summarize the main arguments and classifications at the end of this book and rhetoric of reaction. it's admirably modest and read-friendly to boil a long and subtle argument down to a couple tables with dimensions corresponding values of the main variables in play and cells populated with illustrative examples. more writers should do this.
exit is the power an economist usually talks about. exit makes sense under conditions of perfect competition, where rival products are nearly identical. customers switch from buying your almond milk to the competitor's, depriving your declining firm of their revenue.
voice is something economists talk about less, political scientists more. this is because voice makes sense when there is some loyalty to the institution and exit is not an option: think of a political party, a country, a club.
so far so intuitive, and this is everything i knew about hirschman's ideas on this topic before reading the book. that basic concepts constitute the first third or so of the book.
but being an economist, hirschman wants to explain how voice can also by thought about in economic terms. voice makes sense when competition is imperfect. importantly, he notes that even for a single firm the availability of competition is relative to characteristics of that firm's customers, which may vary. customers may vary in their sensitivity to quality: some are "alert" and others are "inert." and the more alert customers vary among themselves in the particular qualities they appreciate: these are the "connoisseurs". the connoisseurs may find few rival products to switch to because their tastes are too diffuse for economies-of-scale to kick in and ensure a taut competitive market. and if exit is not feasible for the connoisseurs, they will tend to use voice instead: groaning, writing letters, calling for new regs, etc. this means that firms may be more influenced by exit powers at lower end of quality scale and more influenced by voice at the upper end.
so much for the basic economic argument. but this isn't primarily a book about business; its about all kinds of institutions, and how this trading off between exit and voice among patrons/members can arise and what the effects will be. a few applications:
* among political parties the ideologues are less likely to exit than the centrists, which means radicals are more likely to use voice. that's interesting because it cuts against the conclusions of median voter model that says parties will moderate and end up nearly identical.
* as countries move up the technological ladder, they become more similar to each other. this allows the talented to emigrate, diminishing their voice within the country. country-loyalists will therefore seek to curb the brain drain, reinforcing monopoly so as to amp of the power of voice to help those with less marketable talents.
* the black power movement rejects exit via individual bootstrapping success stories for similar reasons: keep the powerful voices needed to bring about social justice.
* a presidential administration may have dissenters in its ranks exercising voice to no effect. this is a case where more exit might be better: daniel ellsberg's departure cited as good example during vietnam war.
this book is more theoretical and quantitative than hirschman's two other best known books: rhetoric of reaction and his passions and interests. those were histories of ideas. page for page the other two books are more pleasant and insightful reads, but this one is understandably more influential because the analysis here is more widely applicable.
a final note on form: i love that hirschman includes little tables that summarize the main arguments and classifications at the end of this book and rhetoric of reaction. it's admirably modest and read-friendly to boil a long and subtle argument down to a couple tables with dimensions corresponding values of the main variables in play and cells populated with illustrative examples. more writers should do this.
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