The Economics of Privatization, I: The Dynamics of Exit

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The Economics of Privatization, I: The Dynamics of Exit
1 Summary
Hirschman's work focuses primarily on examining the different behaviors that consumers may exhibit when in a situation where they feel their needs are not met. The three major behaviors focused on are exit, voice, and loyalty. In terms of business, the consumer has numerous options they can take when dissatisfied. Therefore, when consumers feel the product does not serve their desired needs, they may voice their complaint to the producer of that good (Hirschman, 1970). At the same time, they may opt for loyalty, which entails waiting for changes to meet their needs. However, there are cases when a consumer may opt to go for a competitor's product, which mainly entails exiting. The same occurs from the political and social perspectives in question. When an individual is in a relationship that they feel is unhealthy, they may opt to voice their concern, become lax, and hope that the situation will change with time (voice), or opt to exit the relationship by living it.
Additionally, Hirschman demonstrates that voice and exit are integral representations of the union between economics and politics. In this case, exit represents Adam Smith's perspective of the invisible hand. Due to this, sellers and buyers feel free to stay in multiple places. They are free to move from one consumer or supplier to another, destroying and creating relationships as they do so. Additionally, the voice is usually a political form because it involves putting matters out there so they can be resolved. According to Hirschman (1970), voice and exits interact uniquely. Based on the perceptions provided, this is how an organization that allows for criticism and feedback avoids exits. Also, consumers who believe their voices are being heard tend to be loyal. Furthermore, when an organization is okay with consumers leaving, the most likely issue is that there is no room for voice.
Furthermore, the importance of loyalty in an organization is discussed from a political and economic standpoint. When consumers are loyal to an organization, the cost-benefit analysis is effective because they feel compelled to voice their dissatisfaction. As a result, the organization is given grace even when things are not going well because they have consumers who believe their voices will be heard and changes will be made. Hirschman also believes that the three behaviors are interchangeable and that studying one is impossible without studying the other two (Hirschman, 1970). It is wrong to assume that one can study the likelihood of customers voicing their complaints or criticisms without considering the possibility of them leaving.
Additionally, Hirschman demonstrated that when a behavior is chosen, it most likely causes another behavior to occur. An example is when a consumer threatens to leave, as there is a possibility that a room for voicing people's feedback will be created. Most organizations ensure their customers can voice their grievances instead of losing them to their competitors.
The connection between Hirschman's work and previous work
According to Samuel (2019), institutional reform occurs for various reasons, including the need to make necessary changes for better outcomes. In this case, charter schools are schools that are permitted to operate in different countries and exist with the intent of improving e...