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Albert Hirschman
What do libertarians think about Hirschman’s arguments? Do they read him? Do they have a sophisticated response?
My take: Albert Hirschman deserves a Nobel Prize in economics. His early work on the unbalanced nature of economic development was pathbreaking. The Rhetoric of Reaction is a brilliant study in intellectual self-deception. As a historian of thought he integrates wonderfully, such as in his study of how commerce shapes mores.
But he would win the Prize for focusing the attention of economists and political scientists on the phenomenon of voice: the ability of consumer or voter complaints to induce improvements in supply. Hirschman was the first modern social scientist to think about this mechanism systematically.
Hirschman first suggested voice gets stronger and more effective when exit is limited. In his (earlier) vision, if you can leave you won't complain. Fidel Castro understood this and let many Cubans go, although of course they complained from Florida. It is sometimes suggested that in a world of school vouchers fewer parents would show up at the school board meeting. Don't yap, just yank your kid.
In reality voice often works best when competitive pressures are strong. HBO is more responsive than was East Germany. You are not wasting your time to complain at Wegman's, or for that matter at this blog. Competition and voice are more likely complements than substitutes. Hirschman admitted and indeed emphasized this point in his later writings.
As far as I know, no one has solved for the proper conditions for when voice is effective. Here is one recent model. The general problem is that the motives for voice are poorly understood.
Here is Paul Krugman on Hirschman. Here is a paper on Hirschman and evolution. Here is a book on Hirschman.
Addendum: Here is Alex on the topic of voice. Sadly he and I will not be having a little spat over this one...
Posted by Tyler Cowen on August 15, 2006 at 04:02 AM in Economics, Political Science | Permalink
Comments
Hear Hear! Hirschman's Exit, Voice and Loyalty is not only a classic, but fun and informative :)
Other economists (and academics in other fields) have studied the organization, but Hirschman was one of the first to explore how underlings could resist (via voice or exit) orders from above. Most economists miss that point b/c they think that non-exit is equivalent to loyalty.
Voice is neither exit nor loyalty and can be constructive or destructive. (Think of Wally in Dilbert.) Although the "cowed" employee, restrained by incentive compatible contracts, is the paradigm for relations within the corporation, reality includes employees pulling the carpet from under their bosses -- often without anyone noticing.
Bottom line: If more people understood Hirschman, organizations would work better -- for all "stakeholders".
Posted by: David Zetland at Aug 15, 2006 2:16:59 PM
It is sometimes suggested that in a world of school vouchers fewer parents would show up at the school board meeting. Don't yap, just yank your kid.
I agree that's wrong. It makes sense to show up at a school board meeting and complain only if you think it's likely to make a difference. And it's likely to make a difference only if the administration has an incentive to make (and others like you) happy. And the possibility of exit is one of the best ways to create that incentive.
Here in Michigan, since the school funding system was reformed, there has been a credible threat of exit. There are no vouchers, but funding comes from the state on a per-student basis, so any students leaving for private, parochial, or charter schools (or even public schools in a neighboring district offering open enrollment) impact the district's bottom line directly (to the tune of about $9000 per student per year).
This is a big change because, before the reform, there was actually a perverse incentive -- students leaving the system were a boon since funding was unaffected and the district had fewer students to educate with those dollars.
My sense is that the local district has become much more responsive to voice and has tried to adopt a 'customer service' approach that was unheard of before.
Posted by: Slocum at Aug 15, 2006 3:33:41 PM
This will be a generally whiney comment (I am
in a whiney mood today). 1) I am not all
that impressed with Hirschman. Yes, he has
had some good ideas, but I do not see him
getting the Nobel, although I know there are
people besides Tyler who think he should.
Maybe if they give it for development again
soon, he will be one of the recipients, but
he is not a Tom Schelling, even if he has
sat at the Institute for Advanced Study being
wise and all lo these many years.
2) OTOH, I am not all that impressed with
Krugman's slam on him and his fellow
high development theorists. Some of this
is based on my own view that Krugman does
not play it straight in his histories on all
this stuff, although he is more out of it
on the regional development side than he is
on the general development econ side.
I am probably being unfair to
Hirschman, but I see others having done
the backward and forward linkages argument
better than Hirschman, being clearer about
returns to scale, and for some reason I am
just not all that impressed with his voice
arguments, although they are not bad.
So, there, enough whining by me. Probably
I am being unfair to Hirschman. He does
write well and knows a lot.
Posted by: Barkley Rosser at Aug 15, 2006 5:13:50 PM
"The Rhetoric of Reaction is a brilliant study in intellectual self-deception."
Who's self-deception? Hirschman's? Or "the reactionaries"?
Hirschman's book singularly fails to engage the "rhetoric" he raises.
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