The poor performance of public enterprises is usually blamed on bureaucratic management. In order to render state, municipal, and other public operations as successful as private enterprise they should be organized and directed along commercial lines. This is why for decades everything has been tried to make such operations more productive through “commercialization.” The problem became all the more important as state and municipal operations expanded. But not by a single step has anyone come closer to the solution.

What has been said here applies to every attempt at transferring private enterprises, especially the banking system, into the hands of the state, which in its effects would amount to all-round nationalization. But in addition, it would create credit problems that must not be overlooked.

Deumer seeks to show that the credit monopoly could not be abused for fiscal reasons. But the dangers of credit nationalization do not lie here; they lie with the purchasing power of money.

Deumer’s book clearly reveals that etatism, socialism, and interventionism have run their course. Deumer is unable to support his proposals with anything but the old etatist and Marxian arguments which have been refuted a hundred times. He simply ignores the critique of these arguments. Nor does he consider the problems that arose from recent socialistic experience. He still takes his stand on the ground of an ideology that welcomes every nationalization as prog­ress, even though it has been shaken to its foundations in recent years.

We explain a phenomenon when we trace it back to general principles. Any other mode of explanation is denied to us. Explanation in this sense in no way means the elucidation of the final cause, the ontological basis, of the being and becoming of a phenomenon. Sooner or later we must always reach a point beyond which we cannot advance.

In German logic and philosophy the term “understanding” (Verstehen) has been adopted to signify the procedure of the sciences of human action, the essence of which lies in grasping the meaning of action.3 To take this term in the sense accepted by the majority of those who have employed it, one must, above all, bear in mind

Sanctioning Controls. We may call those controls “sanctioning” that set prices so close to those the unhampered market would set that only insignificant consequences can ensue. Such controls merely pursue a limited task and do not achieve great economic objectives through interference with market forces. Government may simply accept the market prices and sanction them with its intervention. The case is similar when government imposes price ceilings that lie above the market prices, and minimum prices that lie below them.

The most important theoretical knowledge gained from a basic analysis of the effects of price controls is this: the effect of intervention is the very opposite of what it was meant to achieve. If government is to avoid the undesirable consequences it cannot stop with just market interference. Step by step it must continue until it finally seizes control over production from the entrepreneurs and capitalists. It is unimportant, then, how it regulates the distribution of income, whether or not it grants a preferred income position to entrepreneurs and capitalists.

The knowledge that the constellation of the market determines prices precisely, or at least within narrow limits, is relatively new.1 Some earlier writers may have had a dim notion of it, but only the Physiocrats and the classical economists elaborated a system of exchange and market relations.

Sociology cannot grasp human action in its fullness. It must take the actions of individuals as ultimately given. The predictions it makes about them can be only qualitative, not quantitative. Accordingly, it can say nothing about the magnitude of their effects.