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...
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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." Dennis C. Mueller - Public Policy This is an imaginative little book. Its message should be of use to economists, political scientists, and all those interested in policy questions related to these areas. Hirschman starts his argument by assuming that in time all organizations (firms, bureaus, political parties, governments, and so on) develop slack and experience a deterioration in the quality of their output. The clients of a declining organization have two options for reversing this trend: exit and voice. And much of the book is devoted to an explication of the ways in which these options operate, their relative advantages and weaknesses, the interdependence between them...It is in these discussions of current problems and institutions, however, that I find the book most rewarding. His basic point, that there exists a symbiosis between exit and voice, is certainly valid and significant. Its importance gets driven home by the way Hirschman applies the idea to various current issues. One emerges from the book feeling he has obtained a new analytic insight into policy questions which can be applied again and again.
1. Introduction and Doctrinal BackgroundEnter "exit" and "voice"Latitude for deterioration, and slack in economic thoughtExit and voice as impersonations of economics and politics2. ExitHow the exit option worksCompetition as collusive behavior3. VoiceVoice as a residual of exitVoice as an alternative to exit4. A Special Difficulty in Combining Exit and Voice5. How Monopoly Can be Comforted by Competition6. On Spatial Duopoly and the Dynamics of Two-Party Systems7. A Theory of LoyaltyThe activation of voice as a function of loyaltyLoyalist behavior as modified by severe initiation and high penalties for exitLoyalty and the difficult exit from public goods (and evils) 8. Exit and Voice in American Ideology and Practice9. The Elusive Optimal Mix of Exit and VoiceAppendixesA. A simple diagrammatic representation of voice and exitB. The choice between voice and exitC. The reversal phenomenonD. Consumer reactions to price rise and quality decline in the case of several connoisseur goodsF. The effects of severity of initiation on activism: design for an experiment (in collaboration with Philip G. Zimbardo and Mark Snyder) Index
\ Economic JournalThis unusual and subtle book is...an exercise in interdisciplinary analysis focused on the interaction between market and non-market forces affecting the process of development and decline...Professor Hirschman develops a theory of loyalty as a key factor in the interaction between voice and exit: loyalty is shown to postpone exit and to make voice more effective through the possibility of exit.\ \ \ \ \ New YorkerOne of the masterpieces of contemporary political thought.\ — Malcolm Gladwell\ \ \ \ Public PolicyThis is an imaginative little book. Its message should be of use to economists, political scientists, and all those interested in policy questions related to these areas. Hirschman starts his argument by assuming that in time all organizations (firms, bureaus, political parties, governments, and so on) develop slack and experience a deterioration in the quality of their output. The clients of a declining organization have two options for reversing this trend: exit and voice. And much of the book is devoted to an explication of the ways in which these options operate, their relative advantages and weaknesses, the interdependence between them… It is in these discussions of current problems and institutions, however, that I find the book most rewarding. His basic point, that there exists a symbiosis between exit and voice, is certainly valid and significant. Its importance gets driven home by the way Hirschman applies the idea to various current issues. One emerges from the book feeling he has obtained a new analytic insight into policy questions which can be applied again and again.\ — Dennis C. Mueller\ \ \ \ \ \ The Economic JournalThis unusual and subtle book is…an exercise in interdisciplinary analysis focused on the interaction between market and non-market forces affecting the process of development and decline… Professor Hirschman develops a theory of loyalty as a key factor in the interaction between voice and exit: loyalty is shown to postpone exit and to make voice more effective through the possibility of exit.\ \ \
