Exit, Voice, and Skills Arbitrage

What benefit can we expect to gain, if we elect to exit malfunctioning economic circumstance, should it become difficult to express voice or loyalty in these environments? In a recent post, Tim Harford explains that while exit remains an option for citizens in mature economies, many feel more constrained in this regard than was once the case. Hence he asks, "What should we do when things go wrong?"

Typically, we think of exit and voice as complementary. Your complaints will be taken more seriously if you can credibly threaten to leave, as anyone who has called to cancel a mobile phone contract can attest. But sometimes exit can silence voice.

Unfortunately, as Harford also notes, one's ability to exit isn't particularly threatening to political parties, "especially not the hardliners who would rather lose than compromise." Alas, when "extremists are delighted" and "moderates quit in disgust", political paralysis is often the result.

The political nature of exit, voice, and loyalty, tends to affect the market potential of nations as well. For instance, since U.S. healthcare is such a commanding portion of GDP, one can forget these markets were constructed so as to intentionally leave market potential incomplete. Just as politicians lack concern for citizens who choose exit over voice, so too the special interests that prefer human capital requirements to restrict market capacity. Even though much of healthcare market exit is far from obvious, there's one important exception. In recent years stories have emerged regarding people in public places who are clearly in need of emergency care, yet they refuse ambulances and assistance to ensure they do not experience financial difficulties afterward.

Skills arbitrage has become one of the main mechanisms responsible for encouraging market exit. Where once people arbitraged their time for mutual assistance, some are more likely now to arbitrage skill sets in highly specific ways that require extensive human capital investment. However, the time based services markets which have resulted, are not near as efficient as one might expect. As "the best of the best" become the last ones standing in formal assistance roles, more citizens become resigned to abandoning services which they no longer have permission to actively provide for themselves or others.

Again, it also helps to consider skills arbitrage roles in the general equilibrium circumstance of national governments. Large nations in particular struggle to coordinate the skills arbitrage of knowledge providers, since only so much of any nation's wealth can be redirected towards full monetary compensation for human capital.

For purposes of general equilibrium, skills arbitrage has largely cornered value in exchange activities, at least for now. Even so, this need not prevent a reemergence of value in use healthcare in the form of time arbitrage. New organizational capacity could make it feasible for participating groups to build much needed skills, as formal value in use economic settings. Defined equilibrium options could help restore a fuller use of knowledge and skill in society. Even though skills arbitrage sometimes results in extensive market exit, time arbitrage might provide ways to ensure that citizens don't continue exiting healthcare markets - especially in moments when they need them most.