So far we have talked about markets and governments intervening in markets as though all economic life takes place in markets. But it doesn't. Mom doesn't charge her kids for lunch, but that's "economic" by any definition---allocating scarce resources (bread, sliced ham, mayonnaise, Coke). You do not charge your friend for a ride to the airport. If you do, it kills the friendship instantly. Suppose you think that you do more for him than he does for you. You won't "exit," as a market demander would if the prices at Macy's looked too high---"doing more for Macy's than Macy's does for you." You'll talk about it, work it out, as friends do.
In other words the market is not always the natural way to do things. When Paul and Rodney send out for a pizza they naturally intend to share it equally, and share the costs, too. The market intrudes a little in their dividing it - if Rodney paid for all of it this time, then Paul is perhaps expected to ask permission to eat, and to offer thanks in exchange. But after it has been established that Rodney is paying the bill this time, Paul does not offer money. In a strict market for pizza what matters is how much money you are willing to give up. In a relationship among friends what matters are such feelings as love, status, duty, envy, and generosity. In such a relationship a market arrangement is often considered offensive, and even unethical. Prices should not rule friendships. That doesn't mean that considerations of money and prudence go by the boards in families and friendships. It just means that virtues other than prudence rule, too.
Similarly, your father does not conduct a market negotiation when he wants you to get up in the morning; he just wakes you up, and shouts at you if he thinks you need it. The slave-holder often used the whip, not always money, as the incentive to get his slaves to work. (Though slave owners, in America and Africa and Russia in did often used money, too.) Your boss "bribes" you to come to work. That's straight pay. But a well-functioning store or office also depends on non-market persuasion. She may make use, for example, f her superior standing - she may be older and wiser or able in some other way to persuade you to grant her loyalty without making a direct market deal.
The difference between what happens inside and outside the marketplace was well captured by the economist Albert Hirschman (1915- ) in a famous trio of ideas: "exit, voice, and loyalty." Suppose you quarrel about dividing the pizza. You can exit, which is to say, get up and leave. Markets operate in large part through exit. There's no point in quarreling with the local grocery store if you think his price of milk is too high. You don't have to put up with a dry cleaner who insults you. You exit, going to a different grocer or a different dry cleaner.
Exit is the market response: you leave the shop or the job when you expect to find a better deal elsewhere.
But, Hirschman noted, can also exercise your voice. You can argue with your roommates about dividing the pizza; you can complain to your alderman about the uncollected garbage. Voice dominates in politics. If you don't like, say, the current foreign policy of the United States you will not easily exit to another country. That's a bigger deal than shifting where you buy your milk. Instead you vote, agitate, write letters to the newspaper editor, join a political party, lobby Congress. The same is true in a family, or even in a business. As long as the family has decided to stay together, it has decided not to resolve disputes by exit. That is, a family - or a family-like business - resolves internal disputes by voice, quietly or loudly as their customs dictate.
Voice is an alternative to the exit response; you exercise voice when you communicate your response, negotiating or arguing.
When your father is deathly ill and needs you at home, you go without argument, even if you had planned to go a rock concert that night. Why? It's a matter, to use Hirschman's third term, of loyalty. Another word for it would be love. You go for the same reason that Scottish highlanders stuck to their chief despite his arrogance, or workers stick with a company even when they have somewhat better chances elsewhere.
Loyalty may be a matter of love and respect, but the news is not all good. It also can be enforced by intimidation and other psychological and physical tricks. Military dictators, for example, tend to secure loyalty from their subordinates through fear. Some radical economists argue that the relationship between workers and their bosses has similarities to the relationship between a people and its dictator.
Loyalty impels you to avoid exit and forsake the opportunity of using voice: you stick to your father, boss, or country because you are loyal.
According to the stereotypes, the merchant exercises exit, the politician voice, the soldier loyalty. Most institutions, though, run on all three, in varying amounts.
Concept Check 5: College course requirements are different dependent upon whether you stress the exit, voice or loyalty options. Try out each as a description.