TGIF: Efficient Bureaucracy?

With all the talk about government efficiency, it would be useful to remind ourselves why bureaucracies differ radically from for-profit businesses. Ludwig von Mises devoted a short but enlightening volume to this subject in 1944, Bureaucracy. Elon Musk and Vivek Ramaswamy, who will co-chair the nongovernmental Department of Government Efficiency, should do some homework by reading that book.

Mises, as an advocate of limited government, did not argue that bureaucracy has no place in a free society. In contrast to anarcho-capitalists, he thought government and therefore some bureaucracy was necessary to protect what he valued most: peaceful social cooperation through the division of labor—that is, the market economy. Violence against persons and property was clearly antithetical to the continuing welfare-enhancing collaboration we call the market process. But Mises did not want bureaucracies trying to do what free, private, and competitive enterprises could do better. Moreover, if the government went beyond its mere peacekeeping duties, it would undermine the market process and make us all less well off despite any good intentions.

Mises began by reminding readers (or perhaps teaching them from scratch) what the free market is and what it accomplishes. It's a great primer for those who lack the time to read his longer works. He wrote:

Capitalism or market economy is that system of social cooperation and division of labor that is based on private ownership of the means of production. The material factors of production are owned by individual citizens, the capitalists and the landowners. The plants and the farms are operated by the entrepreneurs and the farmers, that is, by individuals or associations of individuals who either themselves own the capital and the soil or have borrowed or rented them from the owners. Free enterprise is the characteristic feature of capitalism. The objective of every enterpriser—whether businessman or farmer—is to make profit.

The uninitiated might ask who runs things. He replied: "The capitalists, the enterprisers, and the farmers are instrumental in the conduct of economic affairs. They are at the helm and steer the ship."

However, let's not jump to conclusions about who really runs things, Mises advsed:

But [the capitalists, etc.] are not free to shape [the ship's] course. They are not supreme, they are steersmen only, bound to obey unconditionally the captain’s orders. The captain is the consumer.

Neither the capitalists nor the entrepreneurs nor the farmers determine what has to be produced. The consumers do that. The producers do not produce for their own consumption but for the market. They are intent on selling their products. If the consumers do not buy the goods offered to them, the businessman cannot recover the outlays made. He loses his money. If he fails to adjust his procedure to the wishes of the consumers, he will very soon be removed from his eminent position at the helm. Other men who did better in satisfying the demand of the consumers replace him.

All the conventional controversy about bosses and workers overlooks the critical point:

The real bosses, in the capitalist system of market economy, are the consumers. They, by their buying and by their abstention from buying, decide who should own the capital and run the plants. They determine what should be produced and in what quantity and quality. Their attitudes result either in profit or in loss for the enterpriser. They make poor men rich and rich men poor. They are no easy bosses.

Capitalism is not a profit system, Mises taught. It is a profit-and-loss system. If the consumers give thumbs down to a product, the entrepreneur could lose everything. He may have to seek a job from a superior entrepreneur.

The performance of businesses, Mises wrote, can be appraised only because private property in the means of production, free exchange, and the resulting money prices permit economic calculation and thus planning by economizing individuals. This was Mises's pathbreaking demolition of the economic case for central planning—socialism in its national and international forms—over a century ago.

Economic calculation matters when comparing a business to a bureaucracy. As Mises wrote:

The manager of the whole [business] concern hands over an aggregate to the newly appointed branch manager and gives him one directive only: Make profits. This order, the observance of which is continuously checked by the accounts, is sufficient to make the branch a subservient part of the whole concern and to give to its manager’s action the direction aimed at by the central manager....

As success or failure to attain this end can be ascertained by accounting not only for the whole business concern but also for any of its parts, it is feasible to decentralize both management and accountability without jeopardizing the unity of operations and the attainment of their goal. Responsibility can be divided. There is no need to limit the discretion of subordinates by any rules or regulations other than that underlying all business activities, namely, to render their operations profitable.

What about a bureaucracy? The answer is implicit in what has already been stated. By nature a bureaucracy faces no profit-and-loss test. It has money expenses in a market-oriented society: it hires willing workers and buys equipment and supplies from willing vendors. However, it does not offer its output to potential consumers, that is, people who are free to say no and take their money elsewhere. Instead of consumers, a bureaucracy has taxpayers, who must pay whether they want the output or not. This disconnect must have far-ranging consequences. (Government services for which user fees are charged differ in this respect, but the government typically forbids competition.)

Instead of the business directive "Make profits," Mises wrote:

Bureaucratic management is management bound to comply with detailed rules and regulations fixed by the authority of a superior body. The task of the bureaucrat is to perform what these rules and regulations order him to do. His discretion to act according to his own best conviction is seriously restricted by them....

The absence of the seller-buyer relationship makes a big difference:

The objectives of public administration cannot be measured in monetary terms and cannot be checked by accountancy methods.... In public administration there is no connection between revenue and expenditure....

In public administration there is no market price for achievements....

Now we are in a position to provide a definition of bureaucratic management: Bureaucratic management is the method applied in the conduct of administrative affairs the result of which has no cash value on the market. Remember: We do not say that a successful handling of public affairs has no value, but that it has no price on the market, that its value cannot be realized in a market transaction and consequently cannot be expressed in terms of money....

Bureaucratic management is management of affairs which cannot be checked by economic calculation.

This would be a valuable lesson for Musk and Ramaswamy to take to heart. Their task should not be primarily to search for ways to make the bureaucracies more efficient. Rather their task ought to be to identify those current functions the government should not be performing, those that should be turned over to free, private, profit-motivated, and competitive enterprise. We ought to replace coercion with consent.

We must, in other words, revisit the question: what is the proper role of government, if any, in a society that aspires to be free?

No Need for DOGE

We don't need a Department (sic) of Government Efficiency. (It's a nongovernment thing.) We need a "Department" of What the Hell Should the Government Be Doing in the First Place? Efficiency implies that you know the objective of a course of action and want to avoid or minimize waste in achieving it. What is the objective of government? We can't judge its efficiency if we don't know its objective.

Boomerang Argument

Any argument against a totally free society that depends on the dark side of human nature inevitably circles around to hit the one making the argument smack in the back of the head. Hence, it is a boomerang argument. The reason is that if people are so bad that we can't trust them with total freedom, then how can we possibly trust anyone with monopoly political power? The answer is we can't. Statelessness is the ultimate in checks and balances, which liberal devotees of the limited state claim to value.

TGIF: The Fraught World of Second-Bests

When discussion turns to how to make government "better," however any particular person would conceive that condition, libertarians understand that we are in the fraught world of second-bests. In other words, because of the nature of the state, no solution that merely attempts to reform it will be or could be truly satisfying. The system will continue to feature exploitation, rent-seeking, public-choice and knowledge problems, and worse.

We have an example of this in a recent Soho Forum Debate in which political scientist Terry Moe of Stanford University and Gene Healy of the Cato Institute argued over whether Moe's proposal for federal legislative fast-tracking, which is intended to enable presidents to eliminate congressional obstruction, is a good idea. I think Healy, a long-time critic of "the cult of the presidency," won the debate, but that of course doesn't mean that leaving things as they are is a good idea. Healy would agree.

Moe would add a feature to how Washington does things. His constitutional amendment would empower presidents to put legislation on a fast track. Thus within, say, 90 days after introduction, both houses of Congress would have to vote up or down on the president's bill--no committees, no amendments, no filibuster. Legislation could still be handled the old-fashioned way. Members of Congress could introduce bills that would go through the committee process of both houses and would be subject to amendment. Presidents could still veto those bills. Any prevailing filibuster rules would apply. Moe would simply put another arrow in a president's quiver.

Why does Moe want to do this? (It's not unprecedented, as Moe acknowledges: Congress has legislated that trade bills can be fast-tracked in this manner.) Simply put, he thinks the federal government is failing the country and has been doing so for a long time. The system set up by the framers of the Constitution, he says, is obsolete: they were operating under far different conditions from today's, and it's long past the time for change. Specifically, the system has too many "veto points" at which legislation can be derailed, resulting in paralysis and a dire failure to address important matters. (He offers immigration reform as a prime example.) The system all but assures that nothing happens, Moe insists, and we simply can't go on this way any longer.

One can readily acknowledge that things are not good now without embracing Moe's or any other particular reform. After all, it's always possible to make thing worse. 

I guess if your priority is the passage of legislation--any legislation--Moe's proposal would be appealing. But who judges Congress merely by how many bills it passes? (Come to think of it, some newspapers apparently do.) Quality is more important than quantity. Different people will evaluate the difficulty in passing bills differently depending on what they think the government would do with a free hand.

For people who love individual liberty, the first thing to notice is that legislative obstacles are bad only if the likely legislation would reduce government power and expand government respect for freedom. Gridlock, however, is good (with qualifications below) whenever it blocks government interference with peaceful private conduct, whether "personal" or "economic." (I regard this distinction as pernicious. Economic liberty is personal liberty; making and spending money in pursuit of one's life projects are as personal as human activity can get. Dividing liberty into two spheres, an idea endorsed decades ago by the Supreme Court, has been catastrophic. The courts scrutinize limits on freedom of speech and religion far more stringently than they scrutinize limits on the use of property. See my What Social Animals Owe to Each Other.)

The reverse is also the case; libertarians would applaud fast-tracking for bills that would remove restrictions on liberty, but oppose it for liberty violations. The problem is that exclusively pro-liberty fast-tracking is not likely to be adopted by the powers that be. Since bad bills easily outnumber good ones, fast-tracking would be no welcome reform.

This might suggest that gridlock is the best we can hope for in the current world. I have tended to think that is the case, but I things aren't that simple. As Healy points out, the libertarian preference for gridlock must be tempered by the fact that stymied presidents can turn to executive orders to get what Congress refuses to given them. Recent presidents have done this often. So the situation looks bleak. Reformed or not, the government will produce violations of liberty most of the time.

To be sure, Healy scored direct points against Moe's amendment during the debate. For some matters the proposal terrifies him. For example, George W. Bush wanted a much broader authorization for the use of military force after 9/11 than Congress gave him. Had fast-track been the rule, Bush would probably have gotten his way because members of Congress would have been afraid to vote against him after the horrific attacks. Could the government's war record since the start of the century been worse as a result? Maybe.

On the other hand, Healy suggested that Moe's amendment might not change things all that much. With fast-track the houses of Congress could defeat a presidential bill, then introduce something similar in the traditional manner, allowing amendments, etc. It occurs to me that presidents hoping for legislative success might informally negotiate with members of Congress to arrive at a bill that has a good chance of being fast-tracked even through houses in the other party's hands. Thus fast-tracking might accomplish much less than Moe expects.

We should be surprised by none of this. That the state--an irredeemably flawed and predatory organization--cannot be satisfactorily reformed is unremarkable. Conceived in sin and conquest, the state is based on the principle that some people should be empowered to coerce other people simply for living their lives in peaceful yet disapproved ways. Thus the only true reform is abolition.

Now You Know Why

Market competition is the proven best way to keep suppliers honest. Government forbids competition with itself. The dots are so close they connect themselves. Elections are ersatz competition, homage via superficial imitation. The moral/epistemic value of competition is sadly unappreciated unrecognized.

Madison on Government and Force

While we have no evidence that George Washington said, "Government is not reason, it is not eloquence — it is force. Like fire it is a dangerous servant and a fearful master," we can report that James Madison did say this:

[There] never was a Government without force. What is the meaning of Government? An institution to make people do their duty. A Government leaving it to a man to do his duty, or not, as he pleases, would be a new species of Government, or rather no Government at all. 

Quoted in Max M. Edling's A Revolution in Favor of Government, and attributed to the Virginia ratifying convention, Doc. Hist. v. 10, I 302.

Thus Madison would have understood that libertarian minarchism without taxation is incoherent.

What If?

If government played by the same rules as the rest of us, it would cease to be government.

The State Defined

The state is an organization of mere mortals who, by one dubious method or another, have been allowed to don the mantle of political legitimacy and to command obedience on pain of imprisonment even of those who never consented to the preposterous arrangement.

Mandatory Voting: A Bad Idea

President Obama thinks that forcing us to vote might be a good idea. That he could favor punishing people for not voting -- which means taking their money by force and imprisoning or even shooting them if they resist -- is unsurprising. The essence of government is violence -- aggressive, not defensive, force. Government is not usually described in such unrefined terms, but consider its most basic power: taxation. If you can’t refuse the tax collector with impunity, you are a victim of robbery. It doesn’t matter that government claims to render “services” if you don’t want them.

She's Wrong Again

Unsurprisingly, Hillary is wrong: "Don’t do stupid stuff’ is an organizing principle -- for government.

TGIF: Speaking to Nonlibertarians

If libertarians want to change how nonlibertarians’ think about government, they will need to understand how nonlibertarians think about government. By “nonlibertarians,” I mean the majority of people who spend little if any time pondering political theory, or what Murray Rothbard called political ethics. They may focus at times on particular government programs and actions, or on proposals for new programs, but rarely about government as an institution.

Read TGIF here.

The State Defined

The state is an organization of mere mortals who, by one dubious method or another, have been allowed to don the mantle of political legitimacy and to command obedience on pain of imprisonment even of those who never consented to the preposterous arrangement.

To Be Governed . . .

“I sure want to do some governing.” --Barack Obama

"To be governed is to be watched, inspected, spied upon, directed, law-driven, numbered, regulated, enrolled, indoctrinated, preached at, controlled, checked, estimated, valued, censured, commanded, by creatures who have neither the right nor the wisdom nor the virtue to do so. To be governed is to be at every operation, at every transaction noted, registered, counted, taxed, stamped, measured, numbered, assessed, licensed, authorized, admonished, prevented, forbidden, reformed, corrected, punished. It is, under pretext of public utility, and in the name of the general interest, to be place[d] under contribution, drilled, fleeced, exploited, monopolized, extorted from, squeezed, hoaxed, robbed; then, at the slightest resistance, the first word of complaint, to be repressed, fined, vilified, harassed, hunted down, abused, clubbed, disarmed, bound, choked, imprisoned, judged, condemned, shot, deported, sacrificed, sold, betrayed; and to crown all, mocked, ridiculed, derided, outraged, dishonored. That is government; that is its justice; that is its morality." --P.-J. Proudhon

TGIF: Sequestration and the Chimera of the Informed Voter

Sequestration is not a disaster in the making, but how's the average person supposed to know that? I look in this question in my latest TGIF: "Sequestration and the Chimera of the Informed Voter."

The Arrogance of Power

The Purpose of Government

I pause when people write, "The purpose of government is to protect life, liberty, and property." What are those words worth? If we judge by history, it appears that the purpose of government is exploitation of the industrious classes for the benefit of some ruling class. The root of the confusion is that governments traditionally have accorded some measure of protection for life, liberty, and property through police, courts, and defense against invaders. But this is perfectly consistent with the exploitation theory. Why wouldn't the ruling class want the industrious classes to be dependent on government for protection against criminals and for peaceful resolution of disputes? And why wouldn't it want to keep out invaders so that it may have unrivaled access to the revenue extracted from the subjugated population?

So why overlook the fundamental and seek government's purpose in secondary things?

TGIF: "Government Is Force"

Some pundits really don’t understand why libertarians dislike government and therefore want it to do little, if anything at all. Unable to grasp the reason, the pundits assign bad motives to those who disparage government: They don’t like poor people, or workers, or the sick, or education.

But what’s so hard to understand? Government is significantly different from anything else in society. It is the only institution that can legally threaten and initiate violence; that is, under color of law its officers may use physical force, up to and including lethal force — not in defense of innocent life but against individuals who have neither threatened nor aggressed against anyone else. “Government is not reason. It is not eloquence,” George Washington reportedly said. “Government is force; like fire it is a dangerous servant — and a fearful master.”

That’s not a controversial description of the State. Even people enthusiastic about government would agree.

Given this unique feature, then, why isn’t everyone wary of the State?

Read the full TGIF: "Government Is Force" here.

More on the Debt Crisis

A government that is too big to fail is too big.

Ethics 101

No one has the right to bargain with thieves for a bigger share of the loot.

TGIF: There's Got to Be a Better Way

What’s so remarkable about events in the Middle East is that a significant number of people who had felt powerless looked around at what they’d seen every day of their lives and thought for the first time: “It doesn’t have to be this way.”

When will Americans do that?

Read the rest of TGIF here.