The Difference Between the Market and the Bureaucracy

Thomas White/Reuters

This article is an adapted selection from “Bureaucracy and the Civil Service in the United States.”

In a business firm on the market, the desires and goals of the managers are yoked to the profit-making goals of the owners. As Mises says, the manager of a branch must make sure that his branch contributes to the profit of the firm. But, shorn of the regiment of profit-and-loss, the desires and goals of the managers, limited only by the prescriptions and budget of the central legislature or planning board, necessarily take control. And that goal, guided only by the vague rubric of the “public interest,” amounts to increasing the income and prestige of the manager. In a rule-bound bureaucracy, that income and status inevitably depend on how many sub-bureaucrats report to that manager. Hence, each agency and department of government engage in fierce turf wars, each attempting to add to its functions and the number of its employees, and to grab functions from other agencies. So that while the natural tendency of firms or institutions on the free market is to be as efficient as possible in serving the demands of consumers, the natural tendency of government bureaucracy is to grow, and grow, and grow, at the expense of the fleeced and benighted taxpayers.