Bureaucracy

Summary

Bureaucracy is a short book by Ludwig von Mises, published by Yale University Press in 1944, four years after he arrived in the United States. Written in English for American readers, it examines the difference between the way businesses and government agencies are managed, at a time when the New Deal and wartime controls had greatly expanded the federal administration. Mises begins by distinguishing two methods of management. Profit management, used by businesses in a market economy, is guided by the aim of making a profit. Because profit and loss can be measured by accounting for a whole firm and for each of its branches, owners can give managers wide discretion and judge them by results. Bureaucratic management, by contrast, is management bound to comply with detailed rules set by a superior authority. Mises argues that this is not a defect of particular officials but a necessity: government services such as police, courts and defense have no market price, so their success cannot be measured in money, and the only way to keep officials accountable to the public and the legislature is to bind them by law, budget and regulation. Mises therefore does not condemn bureaucracy as such; he regards it as appropriate for the limited tasks of government. His concern is its extension to fields where profit management could work. He argues that public enterprises, lacking a test of profit, must be run bureaucratically, and that government regulation forces private firms to adopt bureaucratic methods as well, since their survival comes to depend on officials rather than customers. Later chapters examine the social and political consequences of bureaucratization, including its effects on young people, who come to see careers as positions in a hierarchy rather than opportunities for initiative, and its psychological effects on public attitudes. Mises concludes that the remedy lies not in administrative reform or in appointing businessmen to run agencies, but in limiting the scope of government and in public understanding of economics. The book appeared in the same year as Hayek's The Road to Serfdom and Mises's own Omnipotent Government, and it belongs to the same wartime debate over planning. It has been compared with Max Weber's sociology of bureaucracy, which treats bureaucratic administration as a feature of modern rational organization, and with later public choice theory. It remains one of the most accessible of Mises's books.

Top Lessons

• Two kinds of management

  Mises distinguishes management by profit from management by rules. Students can identify examples of each in institutions they know.

• Rules as accountability

  Mises argues that bureaucratic rules protect the public by limiting officials' discretion. The argument invites a fairer view of rules than complaints about 'red tape' usually allow.

• The scope of government

  Mises locates the problem not in bureaucrats but in how many tasks government takes on. Students can weigh this claim against alternatives.

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