Soon before the election that made Javier Milei president, 108 economists around the world (including prominent names like Thomas Piketty, Gabriel Zucman, and Jose Ocampo) signed an open letter warning about the dangers of “non-traditional” economic thinking. Even at the time, the letter was cluttered with flawed thinking.
The letter then bemoans that “the laissez-faire model assumes that markets work perfectly if the government does not intervene.” While there is some truth to the statement, the letter completely ignores the fact that most of Argentina’s problems over the past decades came about from government failure and over-intervention in the market. Later on they say that “Argentines are too familiar with the pain of laissez-faire economics”, as if Argentina has been this beacon of freedom beforehand. According to the Economic Freedom of the World index, Argentina has been in the bottom two quartiles of countries in its “laissez-faire economic polices” since 2005 and ranked 130th or lower every year since 2010.
So how has Argentina done with these “dangerous” policies of Milei? Pretty strikingly well, actually. Noah Smith, who is no free-market zealot, wrote what can essentially be called an apology to free-market supporters for Milei’s recent successes. The outcomes have been stunning, and even faster than I personally expected. Universidad Francisco Marroquin in Guatemala has a “Reform Watch” about Argentina and reveals some of the most impressive trends. Monthly inflation was 25.5%, now it is 1.5%, in part due to the massive austerity measures implemented. Also impressive is that the federal government is now in a budget surplus (pre-interest payments). The construction sector has skyrocketed, and rents have decreased, despite Milei removing rent controls, in large part because now rental housing supply has increased dramatically. Poverty rates have fallen sense his tenure, the country’s bond market has recovered.
So why did these economists get it wrong? In part, because they do not appreciate the knowledge problem. Being experts in their field, they can fall trap into being overly optimistic about their role in perfectly tinkering with the economy, much like what we saw at the Federal Reserve during the Great Recession. But Hayek taught us that millions of individuals actors make up the market, not expert czars. Roger Koppl touched on this key point in his book “Expert Failure.” It’s a fundamental disbelief in the market process, and an overly optimistic ability to fine-tune the economy. Milei’s policies are allowing the millions in individuals that make up “the economy” and “the market” to act voluntarily and purposefully, in a way that is showing real steps to more prosperity for everyday Argentines.
Justin Callais is the Chief Economist with the Archbridge Institute and Co-Editor of Profectus Magazine. He has a Substack on economic prosperity called Debunking Degrowth.
