To Elon and Vivek: Unless DOGE Learns From History, It Will Fail

“The plain citizen compares the operation of the bureaus with the working of the profit system, which is more familiar to him.. Why not adopt the well-tried methods of private business… It is vain to advocate a bureaucratic reform through the appointment of businessmen as heads of various departments. Such plans stem from a radical misconstruction of the objectives of civil government… [Private businesses are efficient] because the profit-and-loss statement is supreme…The problem of bureaucratic management is precisely the absence of such a method of calculation.” - Ludwig Von Mises, Bureaucracy  

DOGE (the Department of Government Efficiency) seeks to undo the harms of bloated bureaucracy but the rhetoric concerning their strategy is dangerously flawed. The official rhetoric from Elon Musk, Vivek Ramaswamy, and President Trump states that it will, “slash excess regulations, cut wasteful expenditures and restructure Federal Agencies,” “[work] overtime to ensure your tax dollars are spent wisely,” and create “an entrepreneurial approach to government never seen before.” However, as history has shown us, there can be no meaningful “entrepreneurial approach to government,” no “efficient spending of tax dollars” and no “cutting of wasteful spending. 

There can only be a tradeoff between providing services inefficiently through government and providing them efficiently through the private market. Hence, the only way for DOGE to truly succeed in its aims is to dramatically reduce the role and scope of government, not economize it. 

DOGE is not a new idea. Reforming bureaucracies to run like private businesses has been tried many many times in the last century. These reforms however have repeatedly failed. Franklin D. Roosevelt's Brownlow Committee, Herbert Hoover’s ‘scientific management proposals’, Jimmy Carter's performance evaluations,’ Bill Clinton’s "Reinventing Government" Initiative, Jean Chrétien’s ‘Service Canada,’ Margaret Thatcher's “New Public Management," Tony Blair's “Modernizing Government for Key Performance Indicators,” all tried to make the government run as a private business. 

Yet they failed– every country aforementioned has a larger bureaucracy, a larger proportion of GDP spent on government, and a larger regulatory drag on the economy than it had before these programs began. 

All these initiatives failed precisely because they ignored the fact that inefficiency is not a defect of bureaucracy that can be corrected but a necessary element of it. Bureaucracies can never function as private businesses because they do not function in the framework of a private market. 

Private businesses are efficient because the profit-and-loss statement is supreme. The primacy of the profit motive ensures the aim is to reduce costs without impairing the market value of the result. The problem of bureaucratic management is precisely the absence of such a method of calculation. Bureaucracies can both increase costs and impair the market value of the final good provided without any reproach. 

No customer may switch to an alternative provider and no bureaucrat goes out of business.  For example, government bureaucrats develop environmental rules that have no price on the market. Even if we wanted to put a market price on the services provided we could not. It is thus a necessary property of bureaucracies that they are not chastened by the profit motive. Unfortunately, these necessary properties also include spending $400,000 on a bike shelter, $2 million on a printer and $75 million on an unused airport. 

While all these historical initiatives made successful decisions to economize in the short run. These short term economies all proved irrelevant in the long run. Once governments lost their reforming zeal, bureaucracies reverted back to their natural state. Elon and Vivek will be able to immediately cut wasteful projects that spend “$100,000 to study if tequila or gin makes sunfish more aggressive or $1M to study if cocaine makes Japanese quail more sexually promiscuous.” 

However, if they are unable to limit the competencies that are allocated to bureaucracies, these bureaucracies will once again revert to this level of waste. 

Instead, bureaucrats have strong incentives to expand administrative control and to support more spending. It is through no fault of personal character that these bureaucrats engage in egregious waste. Everyone wants a bigger budget to enact their priorities and solve regulatory issues. Bureaucrats never directly see the stagnating effects that depriving citizens of their income leads to, only experiencing the impact they make on their regulatory domain, fundamentally biasing them towards overconsumption. Not only that, those who choose to become bureaucrats are also the ones most likely to be philosophically aligned with big-government. 

In essence, these bureaucrats operate outside a market framework so they can get away with low-quality work and have no incentive to allocate resources efficiently. They also have strong structural incentives to persistently seek larger budgets and more active regulation. DOGE will be well placed to solve economizing problems like $5.3 billion of payments to recipients who may have been ineligible for federal support. However, if they adopt this policy of economizing they will fail to recognize both history and Mises’s warning: a necessary quality of bureaucracy is inefficiency. We can only reduce its size by reducing its role in society.

Thus, the only method that prevents an active reversion to bloat and waste, involves deciding what roles the federal government should no longer assume and removing these competencies from bureaucracies. Javier Milei’s policy of “Afuera!” (get out) where the Argentine’s government competencies were significantly reduced is the model that should be mirrored. It will involve evaluating the likes of entitlements, labor regulations and licensing requirements, to end or reduce their scope significantly.  

Economizing is an easy job comparatively. These tradeoffs between intervention and non-interventionism will produce the deepest resistance but they will also be the most fruitful in achieving DOGE’s mission. In doing this, DOGE can halt the continued expansion of bureaucracy, reclaim taxpayer dollars that would have been otherwise inefficiently spent, and give Americans freedom from the government’s yoke.

The human possibility that free markets enable has brought us everything from our technology to our voting rights. An America unconstrained by an overzealous bureaucracy will produce a multi-planetary species, genetically tailored healthcare, and innovations that continue to propel humanity to ever greater heights. The only way to constrain bureaucracy is to reduce its competencies, not make it more efficient. An efficient bureaucracy is a precarious utopian fantasy. 

Afuera!