Written by: rhbaker275 on October 20, 2014

I have always been skeptical of books on economics. It probably goes back to the single professor that I had in an economics introductory class early in my undergraduate work. In his mono-tone voice and dry sense of humor, he was able to do very little to electrify what I had already determined to be a phlegmatic and unsalable topic. Albert Hirschman frames the preface to his book, Exit. Voice, and Loyalty: Responses to Decline in Firms, Organizations and States, with the phrase “there must be a lot assumptions hidden there somewhere”[1] as the reaction to a single paragraph in a previous writing and the inspiration for his present work. I had my presuppositions as I began reading. Hirschman in an early statement, however, caught my intrigue and interest. He states, “… economists have paid little attention to repairable lapses of economic actors”[2] and he notes that the concepts he discovered in research would “be applicable not only to economic operators such as business firms, but to a wide variety of noneconomic organizations and situations.”[3]

Why do firms fail or operate at levels below capacity in quantity and quality? Hirschman challenges the traditional position of market economist that performance decline is primarily determined by change in the factors of supply and demand and that the “invigorating qualities of competition”[4] provide for firms or social bodies to fail. From this perspective, failure ought to occur and competition fills the void in products and services created when a firm fails. This position, whether generally accepted or pushed to an extreme, fails to consider that there are other factors, perhaps not associated with market economics, that can cause a body to fail to produce at an optimum level.

I benefited from Hirschman’s discussion of taunt and slack economies. It is necessary to understand the concepts as they fundamental to following Hirschman throughout the book. The concepts, it seems, can be expressed in terms as juxtaposed paradoxes. Taunt can be expressed as economic efficiencies or as “barely getting by.”[5]This could be expressed as simple living; or in the case of producing only the necessary products in the necessary quantity. Slack has a similar dimensional perspective. It can be expressed as an excess; having abundance with, presumably, a better quality of life; or it can be an excess created by deterioration in quality. From an economic perspective, taunt is to operate at an optimum level while slack is to operate or produce at something less than the optimum while remaining at a level of satisfaction to those purchasing the product or social experience.

Customers of a firm’s product or participants in a social organization can respond to dissatisfaction by exercising the option of exit or voice. Exit is to abandon a firm for a better or cheaper product or leave and organization for one that better represents the views or social needs of the participant. Voice is to exercise the option to try and change the product. Exit and voice have economic and political components. When economies such as price or quality are at stake in a competitive free market, exit will generally result as the consumer seeks a cheaper or better product. When the customer has some control or influence or when exit is not an option, the customer can advocate (voice) their dissatisfaction and the need for change. Hirschman indicates that while “exit is the predominant reaction to decline … voice might be efficacious in arresting it”[6] in both public agencies and in business enterprise. One of the key factors is the presence of loyalty. The option to exit is tempered by loyalty; “As a rule … loyalty holds exit at bay and activates voice.”

Concerning quality, this week I experienced a serious decline in direct relationship with the function of demand. By this I mean the demand exceeded the limits of time. I was actively engaged this past week in an intensive local ministry mission conference integrated/expanded with an area ministry of developing the leadership of lay people in the church. In the face of this demanding engagement, I have opted to post late rather than not at all. Having read the book, I did find a number of applications in relation to involvement in the church’s mission.

In one conference, a missionary related their experience when they arrived on assignment to the church in Costa Rica. The pastors of local congregation had been receiving living subsidies so they could serve in ministries. They served in very poor communities that could not provide pastoral support. It was decided that outside support would be given to the pastors. This resulted in creating several problems within the community. Immediately it caused an inequity between the people and the pastor. The people in the community experienced a lower standard of living and suffered greater need than the pastor who had the outside resources. It changed the relationship between the pastor and the people and created an unsustainable situation for the pastors if the outside funds were to stop.

I viewed this as a superficial imposition of “slack” on the economic and social relationships in the communities where outside funds were injected without allowing indigenous input, control and accountability. In fact, according to the missionary, when they arrived the program which had been in place for considerable years had caused, to state it bluntly, the pastors to become “downright lazy.” They were neglecting pastoral responsibilities and had developed an attitude of “position entitlement.” Pastors simply did not have to do the work because the funds were there. In addition to the relational problems between the pastor and the people, the church members had also become complacent. With the pastor being supported by outside funding, there was no longer felt need to give. This was a sad and difficult situation but not one without resolution. By allowing voice to the people and indigenous input that spoke louder than the outside organizational voices the funding program was changed. There was, of course, love and grace and the inspiration of the Spirit as pastors and the people came together in love and holiness. It took twelve years for the missionary to “work themselves” out of job. The people came to a “taunt” economic, social and religious environment where they responded together in living and working in the context of their culture. Support is still available but it is within a cultural and social framework that responds and relates in a just and loving distribution to the needs and desires of the people.

[1] Albert O. Hirschman, Exit, Voice, and Loyalty: Responses to Declin in Firms, Organizations and States (Cambridge, MA: Harvard University Press, 1970), vii.

[2] Ibid., 1, emphasis original.

[3] Ibid., emphases mine.

[4] Ibid., 21.

[5][5] Ibid., 8.

[6] Ibid., 46.

About the Author

rhbaker275