Albert O. Hirschman: Exit, Voice, and Loyalty: The American Tradition of Exiting

Malcolm Gladwell provided a fascinating portrait of the late economist Albert O. Hirschman in an article in The New Yorker: The Gift of Doubt: Albert O. Hirschman and the Power of Failure. Gladwell recounted Hirschman’s rather interesting life and described some of his economic contributions. Hirschman was somewhat unusual as economists go in that he seemed more interested in how and why things worked in practice rather than in assembling or testing economic theories. Gladwell referred to one work of Hirschman’s that seemed particularly relevant today even though it was first published in 1970. Some aspects of that treatise will be discussed here.

Hirschman wrote Exit, Voice, and Loyalty: Responses to Decline in Firms, Organizations, and States in order to investigate the means by which people can address problems that inevitably arise in the associations to which they belong. Although he discusses issues related to businesses, it is clear that the greater interest and relevance lies in the applications to social organizations and political parties.

"Under any economic, social, or political system, individuals, business firms, and organizations in general are subject to lapses from efficient, rational, law-abiding, virtuous, or otherwise functional behavior....Each society learns to live with a certain amount of such dysfunctional or mis-behavior; but lest the misbehavior feed on itself and lead to general decay, society must be able to marshal from within itself forces which will make as many of the faltering actors as possible revert to the behavior required for its proper functioning."

It is convenient to think of a perceived dysfunction of a company or organization as a decline in "quality." One response to a decline in quality is to leave and move to another company or organization. That is the "exit" option. A second response would be to speak up and campaign for a change in performance on the part of the company or organization. That is the "voice" option. The decision to utilize the exit or the voice response can be modified by the presence of loyalty, which can be considered an emotional attachment.

How these factors interplay in various situations is discussed in some detail. The case of a two-party political system will serve as a relevant example.

Consider a liberal party with a center-left distribution of political leanings, and a conservative party with a center-right distribution. There will be some overlap at the center and people who are in that region would find it relatively easy to switch allegiance if they became unhappy with their current party. Exit would be the most likely response to dissatisfaction. On the extremes are people for whom the gap with the other party is too great to bridge. The only response available to them, lacking a third party, is to stay and express themselves within their current party—the voice option. It will be the extremes of either party that will be the most vocal and the most demanding of change.

Economic analyses tended, at the time, to predict that political parties would tend to move to the center—to maximize the number of potential members. This simple analysis by Hirschman makes it clear that the opposite effect is more likely. Given the current state of our politics, Hirschman certainly nailed it.

There are a number of observations that can be made about the dynamics of groups and their members using similar reasoning. Here we will consider Hirschman’s claim that the United States has a society in which the exit option is too readily chosen. In discussing the role of exit and voice in American society and in its history he makes this statement:

"My principle point—and puzzlement—is easily stated: exit has been accorded an extraordinarily privileged position in the American tradition...."

He suggests, as a way of explanation, that the country was founded and peopled by individuals who had chosen 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 country people had fled to was so huge that the option to re-exit was available to them and to their children.

"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’."

The notion of escape from unpleasant circumstances by packing up and leaving is firmly ingrained in the national psyche.

"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 for problem-solving."

Hirschman injects this quote from Louis Hartz:

"In a real sense physical flight is the American substitute for the European experience of social revolution."

He also suggests that this habit of exiting has continued long after the entire country was settled.

"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’."

Hirschman refers to examples that would have been familiar to one who had just lived through the 1960s. It would be too early to be aware of the phenomenon Bill Bishop refers to in his book The Big Sort: Why the Clustering of Like-Minded America is Tearing Us Apart. Bishop has documented the gradual aggregation of people into almost "tribal" enclaves of residents who tend to have the same values and, in particular, vote in the same way. Hirschman may have been unaware of this trend, but he would not have been surprised.

"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?"

The habit of resorting to exit rather than face the trials of voice even plays a role in propagating income inequality.

"The traditional American idea of success confirms the hold which exit has had on the national imagination. Success—or what amounts to the same thing, upward social mobility—has long been conceived in terms of evolutionary individualism. The successful individual who starts out at a low rung of the social ladder, necessarily leaves his own group behind as he rises; he ‘passes’ into, or is ‘accepted’ by the next higher group. He takes his immediate family along, but hardly anyone else."

The meritocratic system of which we are so proud is an effective way of extracting those who might have been successful at exercising voice in support of their cohorts and rendering them socially ineffective.

"....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...."

Hirschman also leaves us with a warning that the exit tendency endangers our system of public education. He discusses Milton Friedman’s injection of market mechanisms into education. The choice of exit makes sense when dealing with commodities for which there are numerous venders. If a consumer is unhappy with a company’s product, he will likely move on to another company looking for a better result. Is this the kind of thinking that solves problems in school systems?

Friedman’s advice:

"Parents should express their views about schools directly, by withdrawing their children from one school and sending them to another, to a much greater extent than is now possible. In general, they can now take this step only by changing their place of residence. For the rest, they can express their views only through cumbrous political channels."

Hirschman has a problem with Friedman’s description of exit as a "direct" expression of displeasure.

"....I am citing the above passage as a near perfect example of the economist’s bias in favor of exit and against voice. In the first place, 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 naively suggest that the direct way of expressing one’s views is to express them!"

He is also upset with Friedman for suggesting avoidance of the normal democratic process and the responsibilities of citizenship.

"....the decision to voice one’s views and efforts to make them prevail are contemptuously referred to by Friedman as a resort to ‘cumbrous political channels.’ But what else is the political, and indeed the democratic, process than the digging, the use, and hopefully the slow improvement of these very channels."

Adherents to Friedman’s logic are pushing for state-supported alternatives to public education. The inevitable result of such policies would be to render our current public schools as little more than warehouses for the children of the poor and unfortunate.

Thanks to Albert O. Hirschman! His simple analysis has provided numerous insights.

He provides a new perspective on one of our favorite phrases:

"When the going gets tough, the tough get going."