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Exit, Voice, and Loyalty: Responses to Decline in Firms, Organizations, and States

Albert O. Hirschman

4.15 · Rating details · 727 ratings · 66 reviews

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 switc ...more

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Paperback, 176 pages

Published February 1st 1972 by Harvard University Press (first published January 1st 1970)

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Sep 24, 2020 Manny rated it really liked it

Shelves: linguistics-and-philosophy, well-i-think-its-funny, the-goodreads-experience, history-and-biography

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 los 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.
...more

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Aug 06, 2017 Morten Greve rated it really liked it

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 thr ...more

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Dec 07, 2011 Frank Stein rated it it was ok

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 ...more

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Dec 12, 2012 Nick Klagge rated it really liked it

Shelves: economics

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, ...more

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May 21, 2020 Jacob Cutts rated it really liked it

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 com ...more

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Mar 09, 2019 Gavin marked it as to-read

Shelves: stats, econ

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) custome ...more

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Nov 13, 2016 Adrian S rated it it was amazing

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 in 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). ...more

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Apr 28, 2020 M rated it really liked it

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 agains 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. ...more

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Jun 30, 2018 Vincent Li rated it it was amazing

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, i 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.
...more

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Dec 27, 2012 Elise rated it liked it

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" (le ...more

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Jul 13, 2017 Jared Tobin rated it liked it

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 o ...more

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Aug 09, 2015 Daniel Lovins rated it really liked it

This review has been hidden because it contains spoilers. To view it, click here.

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Oct 04, 2016 Sarah Klammer, High Lady of the Court of Feels rated it it was ok

Shelves: boring, odd-man-out, grad-school, economics

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 H ...more

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May 28, 2013 Roger Lohmann rated it really liked it

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. ...more

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Jul 19, 2018 Michael Lewyn rated it it was amazing

hort but not simple discusssion of how various organizations can change. Most business organizations rely on exit- that is, the threat of customers exiting may cause businesses to respond to market forces. Political and religious organizations are more likely to rely on voice- that is, members' ability to argue for change within the organization. Loyalty encourages people to stay within the organization rather than leaving.

Hirschman applies his theory to some real-world situations. For example, ...more

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Nov 13, 2019 Jeremy rated it it was amazing

This is a fantastic little book. Hirschman makes the obvious in retrospect observation that organizations which lose quality can be influenced by both exit (customers switching companies, members no longer attending and paying dues) and by voice (people complaining).

There are a number of really insightful observations about the implications of considering both exit and voice. Many of my favorite consider the heterogeneity of group members and the interaction between these two options.

For exampl ...more

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Feb 13, 2018 Rebecca rated it liked it

Shelves: non-fiction, political, social-science

This is classic economics that becomes useful for the layman when applied to situations where one is dissatisfied with a product, a company, a country, a political party, a religion, even a family.

Does one take off when there seems to no longer be any benefit or quality there for them?

Does one file a complaint, or speak out, or protest while remaining within?

What is the best way to find improvement and progress for organizations that are unwilling to make changes? Especially organizations wherei ...more

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Mar 06, 2020 Dio Mavroyannis rated it really liked it

Shelves: wtr-econ-law, wtr-history

This is quite a special book to me because it was given to me by my supervisor for my PHD defense. I suspect the main reason he gave it to me is that it touches upon one of my chapters which includes discussions of network value, goods whose value increases with the number of users. The book itself is very interesting from both an economics and political philosophy background. However, I found that the discussion was often unclear, the appendix doesn't help much, it seems to me like a few equati ...more

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Jul 15, 2019 Brian Hanley rated it really liked it

Solid book with a lot of thought-provoking points. Not light summer reading however. Written over 40 years ago the questions raised and the ideas floated absolutely hold water today. Really, really interesting stuff. I particularly enjoyed the conclusion as the author balances the effect of exit and voice on the American experiment which (as is pointed out) only exists as a function of exit.

The book is short in terms of page count but give it some space. This is not one to be rushed through.

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Nov 06, 2019 Jonathan rated it really liked it

pretty dense for its short length, but has some really interesting ideas on integrating exit (more common in market situations) with voice (more common in politics, families, etc) and how a sense of loyalty can shift the balance. really interesting insights on the topic of education (maybe school vouchers aren't such a great avenue?) and elected officials (we need more folks to resign under protest and make their exits count). overall, lots to chew on in this slim book. ...more

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Aug 05, 2018 Cyrus Samii rated it it was amazing

A classic -- Hirschman's most notable work. It develops an analytical framework that applies to political systems just as well to firms and really any other type of organization. This book provides a metaphor that has been the basis of much political theorizing since it's publication. Well worth reading this alongside the biography by Adelman. ...more

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Jan 15, 2019 Elliot rated it liked it

I think I was a bit too distracted when I was reading this to really absorb what it was trying to say. That combined with being a few too many years out of grad school and therefore not in the academic analysis mindset anymore made it a little difficult to get as much out of this as I should have.

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Jun 18, 2019 Milk Badger rated it it was ok

This is a form of conceptual analysis that, as far as I am aware, is no longer seen in the field of economics today, as it largely consists of exploratory armchair conjecture lacking empirical or experimental validation.

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May 22, 2020 Erica DeMond rated it it was amazing

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 the mood for something academic.

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Sep 12, 2017 Jeff rated it liked it

It obviously gives an important framework for understanding feedback mechanisms in economics, but kind of like "Metaphors We Live By" could probably be condensed into a much shorter volume. ...more

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Mar 28, 2019 Will Cotton rated it really liked it

Shelves: sociology, politcal-science-and-economics

Academic writing at its best: brief, systematic, insightful. Worth a read. I anticipate coming back to this one often.

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Aug 15, 2019 Alex rated it it was amazing

Conceptual dynamite can come in small packages. A brilliant, perspective-changing book.

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Apr 26, 2020 Phil Linder rated it it was amazing

Fascinating!

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Oct 29, 2020 Vincent Fong rated it it was amazing

Shelves: economics, politics

Concise little book, friendly for non-economics students

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Sep 20, 2017 Kat rated it it was ok

This is probably a somewhat interesting book for economists, but for the rest of us...not so much.

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About Albert O. Hirschman

Albert O. Hirschman

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Albert 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 skill ...more