Public Choice III

In his book Exit, Voice, and Loyalty (1970), Albert Hirschman developed the useful distinction between processes in which individuals express their preferences via entry or exit decisions, and those in which some form of written, verbal, or voice communication is employed. An example of the first would be a market for a private good in which buyers indicate their attitudes toward the price-quality characteristics of a good by increasing or decreasing (entry or exit) their purchases. An example of the exercise of voice to influence a price-cost nexus would be a complaint or commendation of the product delivered to the manufacturer. A necessary condition for the effective use of exit is obviously that the potential users of this option be mobile: and full mobility of both buyers and sellers (free entry and exit) is an assumption underlying all demonstrations of market efficiency. In contrast, the literature focusing on voting processes, public choice and political science, has almost exclusively assumed (most often implicitly) that exit is not an option. The boundaries of the polity are predefined and inclusive; the citizenry is fixed.