Exit and Voice

Hirschman's Famous Distinction

Albert O. Hirschman’s Exit, Voice, and Loyalty articulates an important distinction between how markets and government treat individuals. With a market, dissatisfaction gets translated into exit. With government, dissatisfaction gets translated into voice.

Consider the choice of schools for your children. Suppose that you are unhappy with the local public school. What can you do about it?

One answer is to meet with school officials, attend school board meetings, or even organize a campaign to unseat the school board. These are ways of exercising voice.

Another answer is to switch schools, either by moving to a different location with a public school you think you will prefer or by sending your children to private school. These are ways of exercising exit.

Advocates for exit say that it puts the consumer in the driver’s seat. As long as the market provides enough choices, every consumer can be happy. Businesses that satisfy consumers will be successful, and businesses that fail to do so will go bankrupt.

One problem with exit is that the consumer does not communicate explicitly what the business is doing wrong. The business has to figure out for itself why consumers are leaving. Of course, the business has a strong incentive to do so. Even if consumers are voting with their feet, you want to get in touch with their voice to better understand what you must do to improve.

Exit relies on individual action. To be effective, voice usually requires collective action. If one person complains about how math is being taught in third grade, the pressure on administrators to change is not as strong as if an organized group of ten households complains.

Cities make exit difficult by bundling their services. Suppose you really like the way that your local government runs schools, but you think that it’s road maintenance system is corrupt and ineffective. There is no way for you to pay taxes for what like without also paying taxes for what you don’t like. It’s like Cable TV. To get the channels you like, you have to pay for a package that includes channels that you never watch.

Exit relies on competition. Voice relies on being able to talk a monopoly service provider into being effective and responsive.

Libertarians much prefer exit. But getting from here to there is difficult. Designing an exit mechanism for public services can be a challenge. And getting permission to implement an exit mechanism, such as school choice or health savings accounts, is a huge challenge: it requires voice!

This essay is part of a series on human interdependence.