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Quotation of the Day…

… is from page 120 of the 1935 translation – titled “Economic Calculation in the Socialist Commonwealth” – of Ludwig von Mises’s 1920 paper “Die Wirtschaftsrechnung im sozialistischen Gemeinwesen,” as this translation appears in F.A. Hayek, ed., Collectivist Economic Planning (1935):

A popular slogan affirms that if we think less bureaucratically and more commercially in communal enterprises, they will work just as well as private enterprises. The leading positions must be occupied by merchants, and then income will grow apace. Unfortunately “commercial-mindedness” is not something external, which can be arbitrarily transferred. A merchant’s qualities are not the property of a person depending on inborn aptitude, nor are they acquired by studies in a commercial school or by working in a commercial house, or even by having been a business man oneself for some period of time. The entrepreneur’s commercial attitude and activity arises from his position in the economic process and is lost with its disappearance. When a successful business man is appointed the manager of a public enterprise, he may still bring with him certain experiences from his previous occupation, and be able to turn them to good account in a routine fashion for some time. Still, with his entry into communal activity he ceases to be a merchant and becomes as much a bureaucrat as any other placeman in the public employ.

DBx: Government is not a private business. It is not subject to the kinds of competitive challenges confronted daily by private businesses. Also unlike private businesses, government does not earn its revenues through sales of outputs that customers are free not to purchase. Government gets its revenues through taxation – an activity that, whatever your opinion of it, cannot reasonably be described as being “voluntary” in the same manner as the spending of money by consumers at McDonald’s, at the Apple Store, or at Tiffany’s is voluntary.

It follows that the kinds of knowledge, talents, experience, and mindset that make someone a good business executive are not the same as those that are best suited for exercising executive power in government.

An even more egregious error than supposing that a successful business executive will likely be successful as an official conducting the affairs of the executive branch of government is the supposition that a successful business executive entrusted with a governments’s executive-branch power “runs,” or could possibly “run,” the economy.

The president of the United States, for example, is the president of one of the three branches of one level of government in the United States. This executive isn’t even fully in charge of running the national government in the U.S. And because – contrary to much lazy and uninformed thinking – no government “runs” the U.S. economy, the notion that the U.S. president runs or even manages the U.S. economy is wholly mistaken.

No economy that isn’t largely collectivized is anything remotely akin to a business. Unlike a business, and despite various accounting artifacts that give to the unsuspecting the appearance to the contrary, such an economy has no profit-and-loss statement, no balance sheet, and no purpose. Such an economy is an emergent order that, if it is reasonably free, is a forum in which countless individuals each is better able (although never guaranteed) to achieve his and her own goals without having to share goals with anyone else.

And so to be skilled at running a business is not at all the same as possessing an understanding of the logic of the operation of an economy. To assert, as many people do, that (say) successful businessman Trump knows more about the operation of an economy than do professional economists makes no more sense than to assert that a gold-medal-bedecked Olympic swimmer is an expert in fluid dynamics and, therefore, should be put in charge of a company that manufactures hydraulic machinery.


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