This year marks the fiftieth anniversary of Albert Hirschman’s Exit, Voice and Loyalty: Responses to Decline in Firms, Organizations, and States. It remains an important book with many continuing lessons for us today, especially when our political systems appear more dysfunctional than ever before. Hirschman’s framework is also worth reexamining in light of modern technological developments. It could help us understand how new technological capabilities might give the public greater opportunities to be heard by state actors and potentially alter their behavior.
In his book, Hirschman discussed the interplay between “voice” and “exit” for businesses, organizations, and even governments. “Voice” represents efforts to appeal to higher authorities and encourage them to change an objectionable state of affairs. “Exit” represents any effort to escape the suboptimal state of affairs altogether. He opened his book with the following observation:
Under any economic, social, or political system, individuals, business firms, and organizations in general are subject to lapses from efficient, rational, law-abiding, virtuous, or otherwise functional behavior. No matter how well a society’s basic institutions are devised, failures of some actors to live up to the behavior which is expected of them are bound to occur, if only for all kinds of accidental reasons. Each society learns to live with a certain amount of such dysfunctional or misbehavior; but lest the misbehavior feed on itself and lead to general decay, society must be able to marshal from within itself forces which will make as many of the faltering actors as possible revert to the behavior required for its proper functioning.
Albert O. Hirschman
He went on to discuss how “repairable lapses” (in both firms and governments) might be best addressed and to what degree loyalty of individuals (as customers or as citizens) might affect that balance. In this regard, Hirschman argued that there is an important interplay between voice and exit that is often underappreciated.
“The chances for voice to function effectively as a recuperation mechanism are appreciably strengthened if voice is backed up by the threat of exit, whether it is made openly or whether the possibility of exit is merely well understood to be an element in the situation by all concerned.” Hirschman felt this was equally true for governments, noting that, “exit has an essential role to play in restoring quality performance of government, just as in any organization,” and that even the mere threat of exit could bolster our voices, both individually and collectively.
Innovation as Checks and Balances
In my recent book for the Cato Institute, I build on Hirschman’s insights to consider how entrepreneurialism and innovative activities might be reconceptualized as types of voice and exit. Evasive Entrepreneurs: How Innovation Improves Economies and Governments argues that entrepreneurialism and innovative acts can be viewed as mini-rebellions or marginal revolts that challenge the status quo and can often help bring about positive change through small acts of technologically enabled creativity and resistance to the status quo.
The best thing about innovation as a form of exit is that it falls short of the more radical kind of exit the term conjures up in our minds. Recall Thomas Jefferson’s famous assertions that “a little rebellion now and then is a good thing, and as necessary in the political world as storms in the physical,” and that revolutionary acts needed to be undertaken every 20 years in an effort to “preserve the spirit of resistance” and keep government accountable to the people. In some ways, it is easier than ever to sympathize with Jefferson’s call for periodic resets of our government. Yet periodic rebellions would entail repeated revolutionary acts that would be difficult to accomplish and certainly highly disruptive to society and economy alike. Upending our political regimes and institutions every few decades is not optimal.
The framers of the U.S. Constitution hoped to avoid that result by instead protecting individual rights and crafting a formal system of checks and balances. Through that system, the power of government over the people would be limited, and methods of recourse would be available to the public to reset government in more peaceful ways that would be less damaging to society than continuous rebellions and revolutions.
Alas, over the past century, government blew right through those barriers and made a mockery of those constitutional constraints. Both legislative and judicial checks and balances have been eroded to the point that they now exist mostly in name only.
Innovation as Relief Valve
If our traditional mechanisms for recourse have failed, how then should we go about addressing the “repairable lapses” using “voice” and “exit” today? While we should never abandon efforts to use democratic and constitutional means of limiting state power, the ongoing evolution of technology can provide another way of keeping governments in line.
Government officials are today confronted with a public that is more empowered by “technologies of resistance”—devices and platforms that let citizens openly defy (or perhaps just ignore) public policies that limit their liberty or freedom to innovate. When the public uses new technological capabilities to challenge outdated and ineffective policies, it can help undo past mistakes or constrain the worst tendencies of lawmakers and regulators going forward.
For example, modern information technologies have quite literally given the public greater voice—domestically and globally—letting people express their opinions about, and take actions to challenge, the power of nation-states, their laws, and their leaders. “The information technologies of the twenty-first century have enabled the public, composed of amateurs, people from nowhere, to break the power of the political hierarchies of the industrial age,” argues my Mercatus Center colleague Martin Gurri in his important book, The Revolt of the Public and the Crisis of Authority in the New Millennium. It is also harder (but not impossible) for nation-states to control public opinion, dissent, and protests because of these new democratized technological capabilities, including smartphones, instant messaging, and social media platforms.
By giving citizens additional voice and exit options beyond politics, innovative activities can act as a check on government power and encourage a realignment of laws and regulations that have grown outdated, burdensome, unwieldy, inefficient, or even unjust. These mini-revolts act as a sort of relief valve dissipating pressures that build up in a political system—all without resorting to radical action.
Some scholars fear that modern digital technologies have instead given the masses too much of a voice and threaten to become a destabilizing force for nation-states or that these technologies are undermining democracy and the rule of law. In his 2015 book, Disruptive Power: The Crisis of the State in the Digital Age, Taylor Owen argued that, “the state is losing its status as the pre-eminent mechanism for collective action,” and that while “the state had a virtual monopoly on the ability to shape the behavior of large numbers of people, this is no longer the case.” “Enabled by digital technology,” Owen argued, “disruptive innovators are now able to influence the behavior of large numbers of people without many of the societal constraints that have developed around state action.” Despite Owen’s qualms, there is much to be gained from the technological evolution he worries about.
Evasive Entrepreneurs Bring Positive Change
My new book documents many examples of how innovative activities are contributing to society by giving the public voice and exit opportunities. It documents how these efforts are forcing state actors to reconsider archaic and unwise policies in the process.
Think back to the late 2000s and the launch of sharing economy platforms like Uber and Airbnb. Though sometimes vilified for the way they pushed the envelope and used evasive strategies to gain leverage in regulatory negotiations, consider the alternatives these innovators faced had they not done so. For many decades, economists and other reform-minded policy advocates made the case for liberalizing local transportation and hospitality sector regulations that were hopelessly inefficient and hurt competition and consumer choice. However, those reform advocates made very little progress despite the weight of their evidence. Markets remained largely closed to competition, and incumbents remained safely protected from threats of new entrants and innovations. Consumers bore the cost of these protectionist public policies and they were forced to live with fewer choices, higher prices, and poor service. Again, this dismal state of affairs represented the norm for many decades.
Then, Uber and Airbnb came along and changed the entire conversation in just a few short years. Had Uber and Airbnb not taken the “permissionless innovation” path they did, would we even be talking about the ride-sharing sector and all these sharing economy innovations we enjoy today? People didn’t realize what they were missing until evasive entrepreneurs went out and created it. Today no one except for old taxi and hotel companies would advocate an outright ban on such competitors, even if those companies started out playing by a different set of rules. By pushing back against what Timothy Sandefur refers to as our growing “permission society” and blazing their own trail through acts of evasive entrepreneurialism (i.e., the threat of exit), these firms were able to gain the leverage to have a conversation with regulators on better terms (i.e., voice) and offer citizens important new options they did not have previously.
Citizens have gained many other voice and exit opportunities thanks to modern innovations. In Technology and the End of Authority, Cato Institute research fellow Jason Kuznicki suggests that we are witnessing the rise of what he calls “technocratic de-government” through “technologies, both physical and social, that will allow us more often to do without the coercion that is inherent to governing and thus to the state.” The growing multiplicity of technological tools and capabilities, he argues, poses “an ongoing challenge to political authority.”
The rise of Bitcoin, other cryptocurrencies, and various blockchain applications offer further examples of this. Tyler Cowen argues, “a blockchain is actually a form of governance and that is what makes it such a potentially radical idea.” While the disruptive potential of Bitcoin and blockchain technologies is sometimes overplayed, governments are already struggling to adapt to these new realities. The same is true for many other sectors and technologies that I discuss in my book—quantum computing, artificial intelligence and autonomous systems, immersive technologies (like virtual reality), 3D printers, the Internet of Things, advanced medical applications, and more. In each case, technological genies are escaping from their bottles, giving the public more voice and exit options, and putting pressure on state actors. In some cases, these genies will have some troubling applications and ramifications, and new policies may be needed to address worst-case outcomes. For the most part, however, these technologies will empower the public and improve their lives in important ways. Preemptive restrictions should be a last resort.
When entrepreneurialism and innovation act to challenge the status quo, such mini-rebellions can have a salubrious effect on the quality of government administration. Creative acts and the innovations they give rise to can help us improve government by keeping public policies fresh, sensible, and in line with common sense. Dissenting through innovation can help make public officials more responsive to the people by reining in the excesses of the administrative state, making government more transparent and accountable, and ensuring that our civil rights and economic liberties are respected.
If technological innovation can help us check governments’ worst tendencies and improve the quality of our public policies and institutions—all without resorting to radical action—then there is a strong moral case for defending it. That moral case is even stronger still because, by giving the public additional voice and exit options, innovation can help citizens pursue lives of their own choosing and help our leaders better appreciate what the “will of the people” and “consent of the governed” really mean in practice.