| David Gordon |
Mises’s Bureaucracy (1944) is seldom cited, at least by comparison with Human Action and Socialism; but it presents some of his key insights better than anywhere else. Mises contrasts profit-and-loss management with bureaucratic management.
A businessman can always tell how well a section of his enterprise is doing by looking at the profit-and-loss accounts. If a section shows a loss, this fact doesn’t by itself enable him to locate the problem; but at least he is aware that something needs to be done.
Government bureaucracies, by contrast, do not produce goods or services for profit. Lacking the tool of profit-and-loss accounts, they instead must operate according to fixed rules. The well-known failings of bureaucracies, according to Mises, do not primarily stem from deficiencies of character in the government personnel. Rather, resort to fixed rules makes bureaucracies much less flexible than profit-seeking businesses. (Mises’s views on bureaucracy were influenced by his friend Max Weber.)
Mises does not think that attempts to introduce business methods into government can succeed, and he deplores the bad effects of government regulations on private enterprise. These regulations interfere with profit-and-loss accounting.
Bureaucracy is available at the Mises Institute website.