Economic Calculation Under Capitalist Central Planning

Abstract

Ludwig von Mises tried, in Bureaucracy (2007 [1944]), to make the bureaucratic or entrepreneurial character of an organization a simple matter of its organizational goals rather than its function. He argued that the corporate hierarchy as such was not a bureaucracy. He defined bureaucracy as rules-based management, with processes set on Weberian lines, rather than profit-based management, because it produced no marketable product and its output had no market price. The large business enterprise, on the other hand, was—thanks to the miracle of double-entry bookkeeping—an extension of the entrepreneur’s will. The entrepreneur could track the profits and losses of each subdivision, and accordingly shift investment between subdivisions and discipline or replace managers. The motivation of all corporate employees would be profit seeking, their wills in harmony with those of the shareholders, because they belonged to the shareholders’ organization. By treating the firm as permeated by the entrepreneur’s will, Mises, like the neoclassicals, essentially treated it as a unitary actor in the marketplace and its internal workings as a black box. Although at one point he explicitly denied that the entrepreneur was omnipresent, in practice Mises viewed his entrepreneur as a brooding omnipresence whose influence guided the action of every employee from CEO to janitor.