Mises’s Bureaucracy is a rather short text and is a hidden gem in Mises’s collection. He takes his famous theory of the impossibility of socialist economic calculation and grafts it onto bureaucracies. To understand this we first should ask ourselves what are bureaucracies and what aren’t bureaucracies?

Mises addresses this problem quickly. “Bureaucracy”—even in 1944 when Mises wrote this book—was used arbitrarily as a slur against general inefficiency. Corporate affairs? They were dubbed “bureaucracy” by progressives. Governments? Well, conservatives called those “bureaucracies” too. Mises clarifies that businesses—unlike the mentality of the progressives—cannot be “bureaucratic” in the sense it is popularly used. Businesses are naturally efficient. Led by entrepreneurs with a vested interest through ownership, businesses pursue profit. Profit isn’t an aberration of exploitation but rather a demonstration that the use of resources creates value for others…….

Exchange only occurs (short of violence) when the actors in the exchange have a double inequality of valuation—both sides of the exchange believe they are receiving more value from the object they are obtaining than what they give up. Through this process—alongside the help of a medium of exchange (money)—we get market prices and economic calculation…….

Without profit, a bureaucracy cannot be efficient. This gets to the core of Mises’s socialist calculation problem. Mises concedes—for the sake of the argument—that so-called central planners could be benevolent and be imbued with knowledge of technological possibilities with the resources at hand. But, without the ability to engage in economic calculation of factors of production, they will have no idea whether they have engaged in malinvestment or waste. Are they producing too much or too little? Are they going to the right place? Is X method more efficient than Y method? These questions cannot be answered without economic calculation.