by Ludwig von Mises
Preface to the 1962 Edition
There are two methods for the conduct of affairs within the frame of human society, i.e., peaceful cooperation among men. One is bureaucratic management; the other is profit management.
It is well known that profit management is highly unpopular in our age. People are anxious to substitute all-round planning by a central authority—i.e., socialism—for the supremacy of the consumers as operative in the market economy. But at the same time the same people severely blame the shortcomings of bureaucratism. They do not see that in clamoring for the suppression of profit management they themselves are asking for more and more bureaucracy, even for full bureaucratization of every sphere of human affairs.
There are areas of man’s activities in which there cannot be any question of profit management and where bureaucratic management must prevail. A police department cannot be operated according to the methods resorted to in the conduct of a gainful enterprise. A bakery serves a definite number of people—its customers—in selling them piecemeal what it has produced; it is the patronage of its customers that provides the social legitimacy—the profitability—of the bakery’s business. A police department cannot sell its “products”; its achievements, however valuable, even indispensable as they may be, have no price on the market and therefore cannot be contrasted with the total expenditure made in the endeavors to bring them about.
This essay does not condemn or blame bureaucracy. It tries to point out what bureaucratic management of affairs means and in what it differs from profit management. It further shows in which field bureaucratic management is the only possible method for the conduct of affairs. It finally aims at putting into relief the effects which the attempts of contemporary governments and political parties to substitute government action for private business have brought about and are bound to bring about in the future.
The examination of these issues provides the insight required for an adequate appraisal of the two systems of society’s economic organization—the market economy and socialism. It discloses the meaning of Lenin’s program “to organize the whole national economy like the postal system,” to make the whole of society “one office and one factory,” and to transform all citizens “into hired employees of the state.”
This essay was written and first published in 1944. It refers in some points to conditions and persons of that period. The outward appearance of conditions has changed in some ways and some of the idols of 1944 have lost their halos. But the essential characteristics of the political problems involved have not changed. The great historical conflict between individualism and collectivism is dividing mankind into two hostile camps as it did eighteen years ago. Therefore the investigation of the contrast between bureaucratic and business management is still of current importance.
New York City