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Military Socialism

November 10, 2014 in Economics

By Matt McCaffrey

There’s a long history of comparing market competition to warfare. Game theorists, for example, sometimes use metaphors borrowed from military strategy to talk about competitive decision making, and martial analogies are even more explicit in the popular business literature, where writers often interpret competition using classic strategic manuals like Machiavelli’s The Prince or Sun Tzu’s Art of War. However, while the prose of these writings has dramatic appeal, Mises, Rothbard, and others have clearly shown that entrepreneurial competition couldn’t be more different from military conflict. This point needs to be stressed repeatedly; if we lose sight of it, we run the risk of thinking of entrepreneurial competition as destructive, or worse, of military competition as benign.

In order to understand how military conflicts work, and the destruction they cause, we need to understand their economic organization. The fundamental difference between markets and militaries is that the latter, like socialist economies, have no rational method of allocating resources. Military decision making represents an enormous calculation problem that can’t be solved without recourse to the market. How do military leaders know, for instance, what munitions to produce, or the best methods of producing them? The answer is, they don’t. (Of course, if the process of entrepreneurial calculation were ever applied to the military, we’d quickly discover that the organization itself, and all its works, failed the market test.)

The lack of calculation is one reason the armed forces are bureaucratic and wasteful of both resources and lives: without entrepreneurs’ decisions to guide them, they must resort to management via an arbitrary system of rules. This also explains why, since ancient times, strategists have emphasized the need for a strict hierarchy within the military, along with clearly-defined incentives for all members—in the absence of the price system, motivation through rewards and punishments is basically the only available method of organization. It’s hard to overestimate the impact of the lack of calculation on the military. Instead of increasing consumer welfare (which war as such can never do), commanders try to achieve essentially arbitrary objectives that at best serve the political needs of the ruler.

Yet despite this vital economic difference, military thinkers have often talked about generalship in ways that make it sound like entrepreneurship. The analogy shouldn’t actually come as a surprise, as it’s been around for a long time; in fact, Renaissance military …read more


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