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Bureaucratic management, as distinguished from profit management, is the method applied in the conduct of administrative affairs the result of which has no cash value on the market.

Success or failure of a police department’s activities cannot be ascertained according to the arithmetical procedures of profit- seeking business. No accountant can establish whether or not a police department or one of its subdivisions has succeeded.

Bureaucratic conduct of affairs is conduct bound to comply with detailed rules and regulations fixed by the authority of a superior body. It is the only alternative to profit management. Whenever the operation of a system is not directed by the profit motive it must be directed by bureaucratic rules.

No business, whatever its size or specific task, can ever become bureaucratic so long as it is entirely and solely operated on a profit basis. But as soon as it abandons profit seeking and substitutes for it what is called the service principle—it must substitute bureaucratic methods for those of entrepreneurial management.

Ludwig von Mises
Ludwig von Mises

Ludwig von Mises (1881-1973) taught in Vienna and New York and served as a closes adviser to the Foundation for Economic Education. He is considered the leading theorist of the Austrian School of the 20th century.