Exit and Voice
By Arnold Kling
Michael Munger points out how a competitive marketplace gives greedy, impersonal merchants an incentive to behave as if they love him.
Of course, I would prefer the “Everyone loves Mikey!” explanation. If I am treated well, it should be because I am special. The fact that markets create dependencies without subjugation means that I am served well for the benefit of the server; other market participants are prevented from treating me badly not by their good character but by their desire for profits.
In his essay, Munger tells an anecdote about how he used the threat of taking his business elsewhere to induce a merchant to give him what he deserved.
Recently, I wanted to do something similar. I had two separate bills from a merchant due the same day, so I sent my payments in separate checks in separate envelopes. The merchant cashed one of the checks, but for some reason the other check came back to the merchant with a notation “no such account.”
A couple months later, I received a notice from the merchant saying that since I had failed to respond to a previous notice, I was going to have to pay interest and late fees on the past due amount. I attempted to contact the merchant to figure out what had gone wrong, but the phone number on the notice only had voice mail prompts, with no way to speak to a human being.
Three days after I received the interest/penalty notice, I received a letter stating that my check had not been honored. This apparently was the “previous notice” to which I had not responded. It also was when I found out about the “no such account” mixup. Once again, I had no way of contacting a human being at the merchant to state my case, and to point out that the other check that they cashed successfully was written on the same account as “no such account.”
Do you think I will ever use this merchant again? Well, of course I will. It’s the IRS.
Back in college, there was a famous book by A.O. Hirschman, called Exit, Voice and Loyalty. As I recall, the idea was that moving your business elsewhere may not communicate effectively to the business what they are doing wrong. Perhaps being forced to stick with the business will cause you to exercise “voice.”
To heck with that. Give me exit anytime.