Exit, Voice, and Loyalty

"Albert Hirschman is one of the most creative thinkers we have in economics. Exit, Voice, and Loyalty was picked by the Times Literary Supplement as one of the most influential books of the last century. They key idea is that when things are going wrong in democratic societies and market economies, people have two options: exit and voice. Now, what did Hirschman mean by exit and voice? Say you are in a restaurant and your soup is too salty. One option is too storm out. That’s exit. The other option is to call the waiter over and say, ‘Please bring the soup back and ask the chef to make it less salty.’ That’s voice. His book inspired me to look at unions through somewhat different eyes than most economists. People too often think that workers have only one choice in the competitive market: if you don’t like your job, get another. But there is another choice – you can go to the employer, individually or as a group, and say, ‘let’s change what’s not working’. That’s what unions do. Get the weekly Five Books newsletter This simple notion of voice runs through Hirschman’s work. Voice is what democracy is all about. When we don’t like how things are going in America, we don’t exit or expatriate. We vote – we voice our concerns to our elected representatives; we try to effect change to make our country better. I took the key insight of Hirschman’s analysis and applied it to unions, pointing out that unions give workers a mechanism for voice as a group. They help resolve workplace grievances; bring helpful suggestions to the attention of management; and lower turnover, which benefits firms. These hypotheses were strongly backed up by the all the data we and other people have looked at. Giving voice to workers is one of the key benefits that unions bring, to society, to the economy and to the individual firms where they are organised. There is one other element. Organised labour represents workers’ voices in our broader democracy. Of course, when they support one party, the other party doesn’t like them too much. I think that’s what we are seeing now."

"Economics is largely the study of what the brilliant Albert Hirschman called “exit.” If you don’t like a product, you stop buying it and instead purchase an alternative, exercising your ability to exit the product. Giving consumers multiple options is essential for ensuring their ability to exit any given option, something that both restrains prices and can also promote innovation and expand quality and choice. Support Five Books Five Books interviews are expensive to produce. If you're enjoying this interview, please support us by donating a small amount . Hirschman, however, points out that in society more broadly, and even in the economy specifically, “exit” is not our only option—we also have voice. We can complain about a product in an effort to get it improved, either because we are loyal to a product or because it is a monopoly we have no choice about using—think your local cable provider. Unions can use voice to improve workplace conditions. Voters at the national level almost exclusively use voice to influence public policy, although there is also some exit at the state and local levels in response to the incentives associated with policies. Hirschman’s model reinforces the importance of competition because in conventional markets it is a complement to voice and critical for helping people get what they want. In this way, exit and voice can be complements; the threat of exit makes companies listen to the voice exercised by their customers. “In society more broadly, and even in the economy specifically, “exit” is not our only option—we also have voice” But Hirschman also sensitizes us to the fact that too many economists, most notably Milton Friedman , reach too enthusiastically for exit solutions to everything without asking whether there is a role for voice or whether exit might undermine that role for voice. For example, competition for schools—like school choice vouchers—expands the role for exit, but may undermine the voice of key constituencies for school improvement. So, competition has an important place, but may not work everywhere."