Democracy School organization

The Problem of Public Schools in a Liberal Democracy: Insights from Albert Hirschman’s “Exit, Voice, and Loyalty”

Exit, Voice, and Loyalty – a book you can’t get out of your head – was written Albert Hirschman, a political economist and total mensch (read his obituary). I find his framework is immensely useful in thinking about schools. The core argument is that political and economic organizations are responsive to different kinds of customer feedback. The former respond to voice, in which dissatisfied actors mobilize their voices inside the organization to snap it into shape. The latter respond to exit, in which unhappy customers stop buying one product and change to another. Schools find themselves in an unhappy middle ground. They are political institutions, so they are vulnerable to voice, but the response they spur is exit. For advantaged consumers who are unhappy with their school, the easiest option is not to stay and fight for change but simply to exit to a private school or another school district (fight is harder than flight). Exit solves the issue for the unhappy customer but leaves the school and its remaining students worse off.  It fixes one family’s private-good problem (getting a better education for their child) at the expense of the public good (by undercutting the education of other people’s children).

Hirschman Cover

Here’s a chart showing the defining characteristics of exit vs. voice:

Exit                                                                                        Voice

Simple, crude (buy it, don’t)                                      Nuanced (graduated)

Neat                                                                                         Mess

Impersonal                                                                           Personal

Secret                                                                                      Public

Easy (drop one, pick one)                                            Stressful, complex

Can’t miss for consumer                                              Uncertain for consumer

Indirect (unintended effect on org)                      Direct (intended effect on org)

Individual                                                                               Collective

Treats org as private good                                          Treats org as public good

As is clear from looking at this comparison, exit enjoys a lot of advantages over voice.  It’s easy and uncomplicated (just buy another product), it doesn’t require coordination with other people, and it solves your individual problem immediately.  Voice is more effective at telling the organization what the problem is (with exit it has do market research to find out what went wrong) and it’s essential when the problem is with a public good (collective action is needed to deal with organizations that provide benefits to the public at large).  But collective action is time-consuming and labor-intensive, and successful results are anything but certain.

In addition, exit occupies a privileged place in American culture.  Think about it: the entire country is based on exit — people emigrating from countries where things weren’t working out and arriving in the US to start afresh.  Even after getting here, they tended to continually move west to escape conditions that were not to their satisfaction.  Immigration and internal migration are central the American character.  And exit meshes nicely with the American passion for individualism.  Why stay and fight to improve your community when you can just pull up stakes and make a new life for yourself elsewhere?  This takes care of your needs even if it’s detrimental to the community you left.

So where does loyalty come in? In what ways is it rational?

    • It raises the threshold of exit, allowing the organization time to correct things.
    • If exit too easy, the organization won’t have time to correct itself before failing.
    • Raising the threshold for exit also increases motivation to use voice; if it’s hard to leave, you are move likely to stay and fight.
    • Note: this is a story about the intersection of individual choices and organizational functionality.

When exit, voice, and loyalty work as advertised, organizations fix themselves; but often the system doesn’t work.  A case in point is the consulting gig that first gave Hirschman the insight about exit and voice.  He was called in to deal with a problem in the Nigerian national railway system.   The system was working fine until it had to face increasing competition with trucking for moving goods around the country.  Somehow this competition made the railways less efficient, even though in theory it’s supposed to increase efficiency.  Why?  Because when business exited from the trains to trucks, this served not as a wakeup call but a safety valve.  The most demanding customers moved their business, which took away the angry voices that had afflicted the railways, while at the same time the railways, as a government agency, did not lose a corresponding amount of public funding.  The result was a win-win for the railway operators — less work for the same money.

As a state organization, the railway was vulnerable to voice, but its failures provoked customers to exit instead.  The latter solved their problem with no muss, no fuss.  It was the railway that suffered instead.  Hirschman calls this phenomenon a “lazy public monopoly.”  Public schools can find themselves in the same situation.  They’re political organizations that are vulnerable to voice but they provoke exit in their most demanding customers.  The latter move to another district or send their kids to private schools, which solves their problem.  But the district they left doesn’t necessarily lose funding in proportion to the loss of students, since the state appropriations are supplying the funding rather than student tuition.  And the bonus is that they got rid of the loudest complainers.  Another dysfunctional win-win for the organization.

Look at the chart below to see the four different possibilities that occur when you cross two key variables.  One is whether an organization is sensitive to exit or voice; the other is whether organizational decline provokes exit or voice.Hirschman Table

In this scheme, the two functional cells are 1 and 4, when the organization provokes the consumer response to which it is vulnerable — political organizations provoke voice and market organizations provoke exit.  The problems arise in the other two cells.  Cell 2 is the case of a de facto private monopoly — think Microsoft or Comcast.   Theoretically, they’re both vulnerable to exit, but it’s really hard to escape their clutches.  Where can you go?  So you’re stuck trying to grin and bear it or you resort to futile efforts to voice your complaints on an endless phone tree. 

Cell 3 is the unresponsive public monopoly, like public schools.  If you look at the chart, you can see where the school choice advocates are coming from.  They say that since the schools are not vulnerable to exit, we need to make them so — by turning these political organizations into market entities.  If schools were dependent on funding by consumers wielding vouchers rather than on government appropriations, they would need to respond to consumer wishes or watch the vouchers go to competitor schools.  So you move schools from cell 3 to cell 1.

But the same chart suggests another fix.  Move schools from cell 3 to cell 4.  Since they’re political organizations that are vulnerable to voice, you need to set up conditions so that school failures provoke unhappy consumers to exercise voice. 

In a country grounded in exit, that is is more easily said than done.  A liberal democracy can’t simply ban private schools or deny wealthy school districts the right to supplement state funds with local resources, both of which would be seen as an unacceptable infringement on individual rights.   But you can increase the floor of funding for public schools to a level that private schools and rich school districts would not longer enjoy a large advantage in providing quality education.  If your public schools are very good, there’s little incentive to exit. 

And you can make the political case for increasing funding by demonstrating that, even though consumers currently can provide their children with a better education by exiting the local public school, they can’t exit from a society where the deficient education of other people’s children harms everyone’s quality of life.  You can exit from schooling as a private good but you can’t exit it as a public good.  

(Here’s a PDF of this piece.)


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