The Purest Political Economist of Them All: Albert Hirschman’s Legacy

by Joshua Tucker on June 12, 2013 · 2 comments

in Newsletters,Obituary

Continuing our collaboration with the APSA Political Economy newsletter, today we present the second of four obituaries of prominent political economists who recently passed away, with Tufts University political scientist Daniel Drezner writing on Albert Hirschman.

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When Albert Hirschman passed away late last year there was an outpouring of testimonials from economists and political scientists (Economist 2012; Farrell 2012; Fukuyama 2012; Sethi 2012; Tabarrok 2012).  At first glance, such a reaction might seem out of proportion to Hirschman’s record.  There is no “Hirschman” school of thought in political economy.  Indeed, he was not a paradigm-builder in any sense of the word, being somewhat dubious of paradigmatic approaches altogether (Hirschman 1970a).  Hirschman did not turn out many Ph.D. disciples; according to first-hand accounts he was an abysmal teacher (Adelman 2013, p. 419).  By the standards of economics, Hirschman was not particularly sophisticated in his methods or modelling.  Krugman (1994) characterizes Hirschman’s Strategy of Economic Development (1958) as an “understandable but wrong” response to the failures of the economic development literature precisely because of the “discursive, non-mathematical style” of Hirschman’s effort.

Nevertheless, Hirschman’s intellectual legacy is quite secure.  The Social Science Research Council’s highest award is the Albert O. Hirschman Prize – which recognizes “academic excellence in international, interdisciplinary social science research, theory, and public communication.”  A cursory glance at Hirschman’s citation count suggests that his influence on the social sciences is both wide and deep.  He is already the subject of at least three book-length treatments of his intellectual legacy (Rodwin and Schön 1994; Meldolesi 1995; Adelmen 2013).

How did Hirschman have such wide-ranging impact with such an idiosyncratic approach?  Precisely because he was so idiosyncratic.  Hirschman was unconcerned with paradigmatic or disciplinary boundaries, which enabled him to develop some of the key building blocks of how to think about political economy.  Anyone working on issues of economic power, economic development or economic ideas cannot do so without either building on or tangling with Hirschman’s legacy.  An exhaustive survey of his contributions would go far beyond these pages, but even a brief glance at Hirschman’s principal ideas advanced in his major works in political economy reveal the extent of his influence.

Substance

Hirschman’s first book, National Power and the Structure of Foreign Trade (1945), is emblematic of Hirschman’s scholarly prescience.  The experience of the 1930s piqued Hirschman’s interest in how states could use foreign economic policy as an instrument of statecraft. His exploration of the “influence effect” of trade stressed the conscious creation of “conditions which make the interruption of trade of much graver concern to its trading partners than itself (Hirschman 1945, p. 16).”  In thinking about how great powers could create such conditions, National Power turned traditional beliefs about how to amass economic power on their head.  Mercantilists had posited that economic power was gained in world politics by exporting more than importing, thereby building up reserves of wealth.  Hirschman observed that foreign trade becomes an instrument of national power only if trading partners benefitted more from the bilateral relationship than they would from substitute partners.  Inculcating incentive-compatible trade relations among others – to the point of running trade deficits – is one way that states augment their ability to use the influence effect.  Hirschman upended traditional realpolitik takes on global political economy in making this point (Drezner 2010).

In thinking through the precise methods through which states could enhance their national power through foreign trade, Hirschman (1945, p. 26) developed building blocks to think about asymmetric dependence (Wagner 1988), market power (Krasner 1976), economic statecraft (Baldwin 1985), and more for later generations of international political economy scholarship.  Consider that in the span of ten pages, Hirschman observed that the pursuit of national power did not necessarily sacrifice the pursuit of national plenty – a theme Jacob Viner (1948) would elaborate on soon in World Politics.  He further speculated (1945, p. 29) that expanded trade would lead to the creation of “commercial fifth columns” by creating interest groups within the targeted countries that would have a vested interest in not alienating the trade partner.  This presaged the “second image reversed” literature that Peter Gourevitch (1978) developed thirty years afterwards.  Hirschman (1945, p. 31) discussed the concept of “exclusive complementarity” that could be developed between two economies through an open trading relationship.  Three decades later, Klein, Crawford and Alchian (1978) labeled this idea “asset specificity,” a concept that became a conceptual cornerstone of literatures on industrial organization and political bargaining.  As an aside, Hirschman also developed what is now the standard metric used to measure market concentration, the Herfindahl–Hirschman Index (Adelman, p. 217).  National Power plays the role in IPE akin to Schelling’s (1960) Strategy of Conflict in security studies – an ür-text that contained fragments of ideas to be developed by later generations of political economists.

Hirschman’s most famous work, Exit, Voice, and Loyalty (1970b), also had theoretical and empirical ramifications far beyond the animating question of how consumers react to a deterioration in the quality of a supplier’s good or service.  Hirschman noted that the standard economic response to deteriorating quality was to exit and find a suitable substitute in the marketplace.  Another option, however, was to exercise voice as a way of making the supplier respond to negative feedback.  While exit and voice could be used in combination, it was likely that the threat of exit would cause the skills needed to use voice to atrophy – and vice versa.  Loyalty – or, as some political scientists would say now, identity – acted as a brake on exit and an enabler of voice.

In marrying exit and voice together, Hirschman generated a number of counterintuitive hypotheses that continue to resonate today.  Perhaps the most obvious was the notion that both economic and political actors possessing some degree of monopoly power preferred to see customers exit rather than use voice.  Authoritarian governments, for example, might prefer to see political dissidents exit the country as asylum-seekers rather than stay and foment unrest.  Indeed, Hirschman noted that Latin American governments had used this strategy in the past.  At the same time, in follow-on work Hirschman (1978) acknowledged that exit – or voting with one’s feet – could also spur states into more positive reform efforts.  This ambivalence about the relative effects of exit versus voice is one reason why Exit, Voice, and Loyalty is easily cited, but harder to convert into a more workable theory of political economy (Gehlbach 2006; Drezner 2007).

 

Style

There are three stylistic tropes that run through Hirschman’s oeuvre.  First, he was singularly dedicated to the idea that political scientists and economists could profit from a mutual exchange of ideas – as opposed to economists dictating terms to political scientists.  This was a central element of Exit, Voice, and Loyalty (1970b, p. 19) in particular:  “Exit and voice, that is, market and non-market forces, that is, economic and political mechanisms, have been introduced as two principal actors of strictly equal rank and importance.  In developing my play on that basis, I hope to demonstrate to political scientists the usefulness of economic concepts, and to economists the usefulness of political concepts (emphasis in original).”

Second, Hirschman’s ideas are difficult to separate from his prose.  It is striking that both Exit, Voice, and Loyalty and The Passions and The Interests (1977) are such slender books.  This is not because they are thin on content.  Rather, it is because Hirschman wrote so clearly, enabling him to express his ideas with remarkable economy.  In doing so he might have unintentionally handicapped those of us fumbling to regurgitate his ideas.  As Adelman (2013, p. 10) notes, in trying to describe Hirschman’s books and essays, “their lucidity often left me paraphrasing what was rendered much better in the original.”  Adelman is not alone in this quandary – in a letter to Hirschman, Quentin Skinner conceded that, in trying explaining one of Hirschman’s arguments to his students, “the points I try to make to them about it are in fact in the essay itself (Adelman 2013, p. 10).”  Time-consuming investments are necessary to become adept in the ways of formal modelling, sophisticated econometrics or interpretive methods.  Hirschman’s work suggests that the same can be said of elegant prose.

Finally, as a gifted writer himself, over time Hirschman came to care more about how ideas and rhetoric were deployed in political discourse.  The Passions and The Interests (1977) was a challenge to Max Weber’s well-known theory that capitalism emerged out of a Calvinistic search for salvation.  Instead, Hirschman argued that key thinkers and elites saw capitalism as a means through which violent tendencies in man and society could be tamed through the expansion of commercial activity.  The fact that the claims of Montesquieu or James Steuart didn’t quite develop in their intended manner doesn’t vitiate the importance of their arguments or rhetoric.  Indeed, Hirschman’s point was a harbinger of later debates in economic history about the role of ideas in triggering the capitalist revolution (Mokyr 2009; McCloskey 2010).  One of Hirschman’s follow-up projects, The Rhetoric of Reaction (1991), dissected the arguments traditionally used by conservatives to oppose progressive policy reforms.

Albert Hirschman’s pre-academic life was a worthy prequel to Casablanca.  After fleeing Nazi Germany and fascist Italy to Vichy France, Hirschman helped run an escape network to secret some of Europe’s greatest artists and thinkers – including Hannah Arendt, Marc Chagall, and Marcel Duchamp – out of continental Europe (Hirschman 1995, pp. 120-126; Adelman 2013, chapter five).  He eventually crossed the Pyrenees himself on foot, carrying another refugee for miles.  That is quite a first act, one that few in our field today could top.  It is to Hirschman’s credit that his intellectual legacy will far outshine his rather impressive biography.  In many ways, his work is the purest example of political economy since the days of Adam Smith.

 

 

 

REFERENCES


 

Adelman, Jeremy.  2013.  Worldly Philosopher:  The Odyssey of Albert O. Hirschman. Princeton:  Princeton University Press.

 

Baldwin, David A.  1985.  Economic Statecraft.  Princeton:  Princeton University Press.

 

Drezner, Daniel W.  2007.  All Politics Is Global.  Princeton:  Princeton University Press.

 

Drezner, Daniel W.  2010.  Mercantilist and Realist Perspectives on the Global Political Economy.  In The International Studies Encyclopedia, Robert A. Denemark, ed.  New York:  Blackwell.

 

Economist.  2012.  Exit Albert Hirschman.  December 22.  http://www.economist.com/news/business/21568708-great-lateral-thinker-died-december-10th-exit-albert-hirschman

 

Farrell, Henry.  2012.  Albert Hirschman Has Died.  The Monkey Cage, December 11.  http://themonkeycage.org/2012/12/11/albert-hirschman-has-died/.

 

Fukuyama, Francis.  2012.  Albert O. Hirschman, 1915-2012.  The American Interest, December 11.  http://blogs.the-american-interest.com/fukuyama/2013/01/06/albert-o-hirschman-1915-2012/.

 

Gehlbach, Scott.  2006. A Formal Model of Exit and Voice.  Rationality and Society 18, 4:  395-418.

 

Gourevitch, Peter. 1978.  The Second Image Reversed.  International Organization 32, 4:  881-912.

 

Hirschman, Albert O.  1945.  National Power and the Structure of Foreign Trade.  Berkeley:  University of California Press.

 

Hirschman, Albert O.  1958.  The Strategy of Economic Development.  New Haven:  Yale University Press.

 

Hirschman, Albert O.  1970a.  The Search for Paradigms as a Hindrance to Understanding.  World Politics 22, 3:  329-343.

 

Hirschman, Albert O.  1970b.  Exit, Voice and Loyalty.  Cambridge:  Harvard University Press.

 

Hirschman, Albert O.  1977.  The Passions and the Interests.  Princeton:  Princeton University Press.

 

Hirschman, Albert O.  1978.  Exit, Voice and the State.  World Politics 31, 1:  90-107.

 

Hirschman, Albert O.  1991.  The Rhetoric of Reaction.  Cambridge:  Belknap.

 

Hirschman, Albert O.  1995.  A Propensity for Self-Subversion.  Cambridge: Harvard University Press.

 

Klein, Benjamin, Robert Crawford and Armen Alchian, 1978.  Vertical Integration, Appropriable Rents, and the Competitive Contracting Process.  Journal of Law and Economics 21, 2:  297-326.

 

Krasner, Stephen D.  1976.  State Power and the Structure of Foreign Trade.  World Politics 28, 3:  317-347.

 

Krugman, Paul.  1994.  The Fall and Rise of Development Economics.  In Rethinking the Development Experience, Lloyd Rodwin and Donald Schön, eds.  Washington:  Brookings Institution Press.

 

McCloskey, Dierdre.  2010.  Bourgeois Dignity.  Chicago:  University of Chicago Press.

 

Meldolesi, Luca.  1995.  Discovering the Possible.  London:  University of Notre Dame Press.

 

Mokyr, Joel.  2009.  The Enlightened Economy.  New Haven:  Yale University Press.

 

Rodwin, Lloyd, and Donald Schön, eds.  1994.  Rethinking the Development Experience.  Washington:  Brookings Institution Press.

 

Schelling, Thomas.  1960.  The Strategy of Conflict.  Cambridge:  Harvard University Press.

 

Sethi, Rajiv.  2012.  Remembering Albert Hirschman.  Rajiv Sethi, December 11.  http://rajivsethi.blogspot.com/2012/12/remembering-albert-hirschman.html

 

Tabarrok, Alex.  2012.  Albert O. Hirschman:  Life and Work.  Marginal Revolution, December 11.  http://marginalrevolution.com/marginalrevolution/2012/12/albert-o-hirschman.html.

 

Viner, Jacob.  1948.  Power Versus Plenty as Objectives of Foreign Policy in the Seventeenth and Eighteenth Centuries. World Politics 1, 1: 1-29

 

Wagner, R. Harrison.  1988.  Economic Interdependence, Bargaining Power, and Political Influence. International Organization 42, 3: 461-483

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