I just learned that Albert Otto Hirschman, the economist who wrote Exit, Voice and Loyalty, died in December 2012 as I was traveling across Java. Perhaps, this is an opportune time to review Exit, Voice and Loyalty which was published in 1970. I read the book some years back.

The idea presented in the book is pretty widely known now. So if one is to read about the book now, one would probably go, ”what is the big deal?” But you see, that idea came from this particular book. It is an influential book. At the very least, Hirschman was the one who formalized the very intuitive idea of dealing with disagreement in an organization.

The New York Times in its obituary of Hirschman told a story of William Safire and Albert Hirschman. William Safire was an amazing writer. I remember enjoying his sometimes hilarious column at The New York Times. Being an expert on language, he wanted to learn the origin of the term “exit strategy.” Safire traced it back to Hirschman.[1]

That is one proof how influential the book is.

Exit, Voice and Loyalty introduces a simple idea. A person in an organization has two options: exit and voice. The organization can be anything. It could be marriage, firm or even a state. It should be noted that the full title of the book is Exit, Voice and Loyalty: Responses to Decline in Firms, Organizations and States.

A member of an organization is a member of an organization because he or she agrees with it to some extent. Depending on how tolerant the member is to the differences, he or she may decide to first voice out against the disagreement in hope to affect the position of the organization. The member does so because he or she cares about the organization.

If the divergence of position becomes too great, the member may decide to leave the organization altogether. The decision to leave may hurt the organization as the organization loses members.

The two options interact with each other. Some members have no opportunity to leave and so they employ the voice option to express their dissatisfaction. For Malaysia, the easiest example may involve Muslims where apostasy is hard if not impossible given all the restrictions imposed. This may explain why some Muslims are very critical of the religion, or at least the one sanctioned by the state in Malaysia. Of course, that is not the only reason for criticism. Many criticize the way Islam is practiced in Malaysia because they care about Islam. There’s loyalty in the religion. To them, leaving is impossible not because they are not allowed to leave, but because leaving is unimaginable.

So, loyalty is the glue that encourages the use of the voice option. Exit option is exercised if the glue fails.

The exit and voice option and its interplay which involves the notion of loyalty is probably best demonstrated in political settings. Application of the idea within political parties is probably the most widely known.

Another application involves immigration. I think I have written something about this as part of my degree requirement in what seems like a long time ago. It is easy to see how robust the model is. How many people have migrated out of Malaysia because they disagree with the prevailing policy?

What is interesting is that when a country has an authoritarian setting when the voice option can be deadly and exit is not really an option for one reason or another. I am unsure if this particular example is presented in the book itself but on Wikipedia:

Exit need not be physical, but can be mental or emotional. For example, under communism, many could not physically exit the country, but did not want to participate in the system either. In these cases, citizens could be said to exit from civic or political participation, as they were neither loyal to the party nor were they willing to voice their dissatisfaction (except for noted times of dissent, e.g., 1956 in Hungary, 1968 in Prague and the Revolutions of 1989) because doing so could lead to imprisonment, exile, or even death. Many thus mentally and emotionally exited their countries for the duration of a repressive regime they did not agree with but felt they could not fight or topple. The consequences of this exit can sometimes provide an explanation for why voter turnout is often low in countries where free elections are being held for the first time in years (or ever). [Exit, Voice and Loyalty. Wikipedia. Accessed on January 11 2013]

This obviously is not a comprehensive review. But what I can say is that it can be an enlightening reading, even if it is a common idea. It is not a thick book but there can multiple pow moments when you would go wow. You should read it as a tribute to a great economist.

Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved
[1] — In 2003, William Safire, the columnist for The New York Times who also wrote the On Language column for The New York Times Magazine, led an informal search for the roots of the phrase ”exit strategy.” The search led to economists, who pointed to Mr. Hirschman, who denied culpability, sort of.

”Did he coin the phrase?” Mr. Safire wrote after interviewing Mr. Hirschman. ”No; it’s nowhere in his book. He used exit option. ”˜It was a somewhat new concept then,’ Hirschman recalls. ”˜I used exit to indicate a possibility, a strategy. When you are dissatisfied, you can use your voice option or your exit option. It is not so different from the political use today. Speak up or get out.’ ” [Nelson Benjamin Albert Hirschman, Optimistic Economist, Dies at 97. The New York Times. December 23 2012]

2 Responses to “[2644] Albert Hirschman, and Exit, Voice and Loyalty”

  1. on 17 Jan 2013 at 02:54 Will Smith

    Hirschman is also notable for inventing the Herfindahl-Hirchman index, which measures market concentration (in simple terms, is there a monopoly or similar situation). Unfairly, Herfindahl got most of the credit, see http://www.jstor.org/stable/1818582?seq=1

  2. on 06 Feb 2013 at 22:37 Hafiz Noor Shams

    Thanks. This will be useful so some of my possible side projects.