Sunday, January 31, 2010

Ronald Kitching: Bureaucracy by Ludwig von Mises

It is my intention to try and enthuse readers to start reading some of the works of Ludwig von Mises who I believe was the greatest economist and social scientist of the 20th Century commencing with some of his smaller books which I’ll mention in future essays.

Here is an extract from “Bureaucracy” by Ludwig von Mises.



THE CRUX OF BUREAUCRATIC MANAGEMENT

The plain citizen compares the operation of the bureaux with the working of the profit system, which is more familiar to him. Then he discovers that bureaucratic manage- ment is wasteful, inefficient, slow, and rolled up in red tape. He simply cannot understand how reasonable people allow such a mischievous system to endure. Why not adopt the well tried methods of private business?

However, such criticisms are not sensible. They misconstrue the features peculiar to public administration. They are not aware of the fundamental difference between government and profit seeking private enterprise. What they call deficiencies and faults of the management of administrative agencies are necessary properties.

A bureau is not a profit-seeking enterprise; it cannot make use of any economic calculation; it has to solve problems which are unknown to business management. It is out of the question to improve its management by reshaping it according to the pattern of private business. It is a mistake to judge the efficiency of a government department by comparing it with the working of an enterprise subject to the interplay of market factors.

There are, of course, in every country's public administration manifest shortcomings which strike the eye of every observer. People are sometimes shocked by the degree of maladministration. But if one tries to go to their roots, one often learns that they are not simply the result of culpable negligence or lack of competence. They sometimes turn out to be the result of special political and institutional conditions or of an attempt to come to an arrangement with a problem for which a more satisfactory solution could not be found.

A detailed scrutiny of all the difficulties involved may convince an honest investigator that, given the general state of political forces, he himself would not have known how to deal with the matter in a less objectionable way.

It is vain to advocate a bureaucratic reform through the appointment of businessmen as heads of various departments. The quality of being an entrepreneur is not inherent in the personality of the entrepreneur; it is inherent in the position which he occupies in the framework of market society.

A former entrepreneur who is given charge of a government bureau is in this capacity no longer a businessman but a bureaucrat. His objective can no longer be profit, but compliance with the rules and regulations. As head of a bureau he may have the power to alter some minor rules and some matters of internal procedure. But the setting of the bureau's activities is determined by rules and regulations which are beyond his reach.

It is a widespread illusion that the efficiency of government bureaus could be improved by management engineers and their methods of scientific management. However, such plans stem from a radical misconstruction of the objectives of civil government.

Like any kind of engineering, management engineering too is conditioned by the availability of a method of calculation. Such a method exists in profit seeking business. Here the profit and Ioss statement is supreme. The problem of bureaucratic management is precisely the absence of such a method of calculation.

In the field of profit seeking enterprise the objective of the management engineer's activities is clearly determined by the primacy of the profit motive. His task is to reduce costs without impairing the market value of the result or to reduce costs more than the ensuing reduction of the market value of the result or to raise the market value of the result more than the required rise in costs. But in the field of government the result has no price on a market. It can neither be bought nor sold.

Available in Electronic form and as a hard copy at <http://www.mises.org/>

Read : http://mises.org/books/bureaucracy.pdf

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