One of the questions that I have been thinking a lot is why hasn't a revolution broke out in China yet. Why do people choose to suffer in silence instead of voicing out the unjust? Why do so many people defend and embrace a deteriorating leadership with zest despite all the wrongdoings that it has committed? And after a few words with Prof Sobel on the topic, he suggested me to read "Exit, Voice and Loyalty" to acquire an intellectual framework in thinking about these issues. It is a little book of mere 126 pages but has in it burst of insightful and interesting ideas that intersect economics with politics. Some of the ideas seem counter-intuitive to economists but are nevertheless extremely relevant in understanding today's political economy.
Exit and Voice are the two main approaches that customers-members of organization can adopt in response to lapse in quality of the service/products that the organizations produce. In the traditional competitive market model the exit of the customers is hailed as the "Invisible Hand" at work, that is, market responses inflict pressure on management to improve quality of the products so only the best firms survive. In this sense the more elastic demand is the better it is for the functioning of the economic system. The exit option, however, is not usually available in political systems, leaving voice the only feedback mechanism. Moreover in totalitarian states neither voice nor exit is possible, which opens up scope for the discussion on loyalty.
One of the interesting observations that comes out from this discussion is the relation between a stable democracy and the political activism of the people governed. It is usually assumed that the proper functioning of a democracy requires an active and alert population but empirical studies on voting patterns have demonstrated considerable apathy of the public. But since democracy has fared well in apathy, it suggests that the relationship is more intrigued - to the extent that apathy is present, the leadership has time to respond to demand for better governing from the more vocal group in the population. Putting it in economics terminology, if the demand for better governing is completely elastic, a slight drop in services provided will translate to a total withdrawal of the support for the government, render any recuperation attempt by the government useless.
Another insight that is a clear blow to economic thinking is that sometimes monopoly serves the public better than when competition is present. How is that so? When the presence of competing firms creates the illusion that a better product is available, consumers will try to seek a non-existent alternative in the market instead of effectively using either Voice or Exit whereas under monopoly, consumers can focus their energy in improving existing circumstances. The main idea is that collusive behavior among competitors may result in wasteful resources and this is not far from describing competitive political system. In this context existence of competition creates an excuse for leadership to bring forth more fundamental changes that would have been desired in the absence of competitions.
So the foregoing paragraphs are more like summaries instead of a reflection and there are much more interesting notes that I have made to myself while reading the book, but I will skip the those here and instead incorporate questions that I have in the discussions follow.
First comment. The study of organizational stability comes in two dimension: Vertical hierarchy and horizontal linkage. The leader and the member are nodes in a gigantic network, each made up of cluster of agents interacting with each other. So if the quality of service deteriorates, members of a highly integrated network would find it more difficult to use Exit instead of Voice. This can be used to the advantage of the leadership as the cost of exit is now much higher to its members.
Secondly, even in the absence of any feedback mechanism, if upward mobility is fluid in the network, the prospect of improvement in one's relative social standing will dampen the frustrations of its members. In the book, the author argues that strong upward mobility strengthens the voice options because "everyone has a strong motivation to defend the quality of his life at his station". This inference assumes that the deterioration of services affects everyone uniformly and has neglected how one will try to improve his situation in the status quo before even considering using either Voice or Exit. So if the channels of upward mobility becomes rigid and deprives members of the bottom class access to a better life, Voice or Exit now become much more attractive compared to before.
Third comment on self-deception. I find the discussion on unconscious loyalty and self-deception particularly illuminating. In more abstract terms, the member's sense of self is internalized in the system. The more the members invest to acquire a stake in the system, the more the system sucks out his/her consciousness. When there are enough number of people invest greatly into the system, for example, when corruption is prevalent, the system now takes on a life of its own.
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