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Source link: http://archive.mises.org/11136/the-heartbeat-of-the-state/

The Heartbeat of the State

December 2, 2009 by

The objective of Mises’s book is to investigate the contrast between bureaucratic and business management. It is an invaluable contribution to the great historical debate between individualism and collectivism. FULL ARTICLE by Hans F. Sennholz


Morgan Stanford December 2, 2009 at 12:00 pm

Concerning CFL’s and their disposal problems, here’s what I suggest.

When your mandated CFL bulb fails, crush it into pieces and put it in a box and mail it to your favorite congressman.

After all, they forced us to buy unwanted bulbs, so they should be forced to pick up the trash.

Allen Weingarten December 2, 2009 at 12:19 pm

I respect the views of von Mises & Hans Sennholz, and acknowledge that bureaucratic management lacks a profit motive. Yet I do not see why there cannot be a sound political motive (such as winning a war for the military, or containing crime for the police). It is clear that a governmental organization has conflicting political aims. But that does not preclude operations dedicated to the stated objective, rather than arbitrary bureaucracy.

Ken Zahringer December 2, 2009 at 1:08 pm


Your statement is correct, and I don’t think Mises or Sennholz would disagree. In fact, I think Sennholz made a similar point in the article. One point here is that even in the cases of the police or military, the government can’t be sure that it is accomplishing the goal in the most cost effective way, since there is no profit and loss test.
The big point is that if the government expands its operation into the business world, for example owning banks or auto manufacturers, it still can’t calculate. There is still no profit and loss test, so there is still no way that the government firm can provide the good people want at an economical price. The unavoidable result is waste, and lots of it. In the case of the military or police, we may be willing to put up with a certain amount of waste as part of the cost of accomplishing the goal. In government owned firms, it’s a dead loss.

Ohhh Henry December 2, 2009 at 2:54 pm

Monopoly organizations do not screw up simply because they lack the means to determine whether they are effective or not. They screw up because it is the only way that a monopoly can increase its revenues. In other words, the personal profit motive of the individual participants in the monopoly must ensure that the monopoly provides inefficient and ineffective services in order to cause more money and resources to be allocated to them, leading to personal gain.

Efficiency in non-monopoly organizations leads to gain for the participants because they can take market share from their competitors. And if they are inefficient or ineffective then they will have no customers and will be out of business.

But a coercive monopoly has no competitors and therefore to work efficiently and effectively is to diminish the need for one’s services and therefore reduce the amount of work and the amount of money and power that one can claim. There is no percentage in working hard or working smart.

The theory of democracy says that the top-level managers of coercive monopolies can be made to compete with each other for the job, but in practice it has been found to be very easy to organize legislatures and elections in such a way that no serious competition is possible and no coercive monopoly will ever be made more efficient, that is, made less effective at bringing wealth and power to its managers. The unelected managers of the monopolies, having so much power and money at their disposal, simply arrange contests between fake political parties so that no matter what the polls return, the same policies will be followed. Anyone who followed Ron Paul’s most recent campaign should understand this.

The Law of Unintended Consequences as applied to government activities is therefore merely an extension of the Laws of Human Action. Government monopolies do not cause the opposite effect of their stated purpose by accident. They do so because they must.

Allen Weingarten December 2, 2009 at 8:23 pm

Ken, a political objective should include cost minimization, even if it is difficult to obtain accurate estimates. Thus, military planning involves the use of limited resources, as part of the strategy. As you say, when government enters the business world, it cannot calculate, let alone compete, and shouldn’t be in this area to begin with.

I do not think (regarding Ohhh Henry) that a proper government strategy would reward performance for excessive spending. Rather, rewards would be based on reducing costs. It is surely the case today that government growth & rewards are counterproductive, but that is due to the lack of public concern for solvency. Were it the case that reducing the deficit, and becoming a creditor nation was primary, the reward system would be quite different.

Rob Berriman December 2, 2009 at 8:35 pm


Dream on.

You forget, it is the nature of the beast.

Allen Weingarten December 3, 2009 at 5:00 am

Rob, the issue is not the way that the government operates, but the cause. The ideology of the public places immediate benefits over solvency. This has not always been the case, and is the cause, rather than the effect of increased bureaucracy.

Would an Austrian economist say “It is in the nature of the beast that the economy is sinking”?

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