Exit, Voice, and Loyalty - Albert O. Hirschman (Harvard University Press, 1970)

Societies build systems and entities to meet social and individual demands.  What do we know, or what can we hope to know, about how members of society react when those constructs fail to meet their goals?  The answer may be beyond economic reasoning.  [302.35]

In this book (written in the late 1960s), Hirschman contrasts two ways of resolving customer dissatisfaction with performance by an organization. 
These are 1.) the way economics see the solution - exit, as in buy from another seller, and 2.) the way political science does - voice, as in protest or complaint. 

In the past forty years, the intellectual and policy trend has been to interpret more and more social issues as fundamentally questions to be addressed by market-based analysis.  We now generally take market solutions as the answer to almost any public policy issue.  We do so even when the basis for a market analysis is weak or provides no guidance.  For example, even if a perfectly competitive market exists, using it as the basis for analysis provides no information about how outcomes or products might be improved.  A firm with higher costs or a defective product should, according to the competitive model, immediately loses all customers and ceases to exist.  Nothing can be done.  Further, in those situations not characterized by the idealization known as a competitive market, forcing the analysis to rely on that model can miss critical aspects of the problem.  It is in the most acute case, a pure monopoly, that a different approach is called for.  Most such monopolies are often thrown into the hands of governments to manage, such as school systems and utilities. The author reminds the reader of the value of the alternate analysis and its broad applicability in many cases where markets may fail.  The author attempts to analyze the means by which customers may respond to failure to deliver satisfactory outcomes: by exit or by voice and how loyalty may impact those decisions.  

The book is worth reading as a reminder of the complexity of public policy and our responses to organizations.  It provides a useful counterexample for mindless application of microeconomic principles to situations that cannot support the required assumptions.  (It should be noted that Kenneth Arrow endorsed this book.)

The book is recommended for anyone concerned about public policy who can accept a noneconomic analysis.

The Paradox of Choice: why more is less - Barry Schwartz (Harper Perennial, 2005)

We live in an economy capable of generating countless variations of a product to meet individual tastes.  The problem arises when we find that we are not capable of managing mentally so many choices.  [153.83]

This book poses an interesting paradox: we live in a world that offers us ever more choice in even our most mundane goods, yet they ability to choose from such a variety makes us less happy with our choices.  Every decision disappoints.  This is particularly true for persons who seek to optimize based on their actions rather than to satisfy some need.

The author invokes a broad range of research in highlighting how too broad a range of choice can lead us to regret decisions because we had unrealistic expectations of the outcome or to constantly compare them with choices not made.  The impact of this paradox is greater stress in our personal lives. 

It also has implications for marketing where product line extension has become the norm (contrary to the warnings of Ries and Trout in the book Positioning of thirty years ago.)  What is a Coke today?  Is it Classic Coke, Coke Zero, Diet Coke...  Schwartz hints that we may become paralyzed by our inability to choose.  Thus, by offering more selection, we get consumers who take no decision or are ultimately dissatisfied with the product they have chosen.

This book is recommended to anyone interested in our consumer society.