Rupert Darwall, writing the Telegraph, offers a good summary of Mises’s “economic calculation” argument bureaucracy. Darwall’s piece on British health care bureaucracies is a rare example of an op-ed that actually explains why government services don’t work, even when reformed with targets and goals and other public-sector, good-governnment gizmos.
Once seen as the tool to lever up public sector performance, targets are now recognised as part of the problem. This would have come as no surprise to Ludwig von Mises, the Austrian economist who argued 80 years ago that the fundamental failing of the command economy was the problem of economic calculation. “Where there is no market, there is no price system, and where there is no price system, there can be no economic calculation.” Even when not being fiddled, there is an insoluble problem with targetry.
The implication of this argument is clear enough: there is no way to make the public sector work properly. If government is going to provide anything, prepare for it to be provided in manner that shows no concern for economizing or consumer service. Moreover, without profit and loss, rooted in competition and private property, there is no means available to test whether the service is really serving the public.
Darwall is “director of Reform, a think-tank campaigning for better public services,” but, in light of Mises’s critique, it would seem that the only way sure way to bring this goal about is to make all public services private.
