How Javier Milei Explains His Economic Philosophy

Patrick Carroll
Patrick Carroll is the Managing Editor at the Foundation for Economic Education.

Javier Milei has garnered significant global attention over the past year, and it’s not hard to see why. The iconoclastic president of Argentina has been making considerable changes to his country’s government, and as an outspoken libertarian he has been introducing many to the freedom philosophy for the first time. In recent weeks, there have even been calls to use Milei’s approach as a model for Trump’s second term.

But what exactly is Milei’s approach, and how has it been going? In a recent interview with Lex Fridman, Milei explained his economic and political philosophy and provided an update on Argentina’s situation.

Three parts of the interview in particular stood out.

1) How Milei Discovered Austrian Economics

In the first part of the interview, Milei explained how he discovered Austrian economics and how that radically changed his thinking about economic theory. The discovery happened around 2014, at which point he had been an economics professor in Argentina for 20 years:

I remember that one of the people who worked on my team suggested I read an article by Murray Newton Rothbard called Monopoly and Competition. [The article was Chapter 10 of Man, Economy, and State, which had been excerpted as a stand-alone piece.] I remember reading it like it was today, and after reading it carefully, I said, “Everything I’ve taught about market structure in the last 20 years in courses on microeconomics is wrong.” This caused a very strong internal commotion in me. So I called this person who used to work with me, and they recommended a place to buy Austrian School of Economics books, and I remember I bought at least 20 or 30 books, which I went to pick up one Saturday afternoon. And when I visited the bookstore, I was fascinated by all the stuff they had there.

…I started to read very intensively, and I remember, for example, the experience of reading Human Action by Mises, and this was a book that I didn’t know about. And I remember that on the following weekend, I started to read this book right from the first page, and I didn’t stop until I finished it, and that was a true revolution in my head. And having the chance to read Austrian authors like Rothbard, Mises, Hayek, Hoppe, and Jesús Huerta de Soto, or others like Juan Ramón Rallo, Philipp Bagus, and Walter Block, for example.

This is a fascinating story that highlights the power of Austrian economics. It is one thing when an economic school of thought becomes popular among lay readers. But when an accomplished economist does a complete about-face upon discovering a new economic philosophy, maybe that’s a philosophy worth taking seriously!

And what, exactly, is Austrian economics? It’s hard to boil it down, but it’s essentially a system of economic laws that – in the Misesian tradition at least – are grounded in praxeology, the science of human action. Austrians take a radically different approach to basic economic theory, emphasizing human choice, subjective value, and the dynamic nature of the market.

Though Austrian economics, like any positive science, is technically value-free, the Austrian view of the economy tends to paint all government intervention in the free market as causing problems rather than solving them. Thus, those who believe the Austrian school is correct are often staunch advocates of laissez-faire policies.

Milei’s reference to Human Action, Mises’s magnum opus published in 1949, is especially heartwarming because of the special role that FEE played in making that book possible. Here’s what Larry Reed, FEE’s president emeritus, wrote about that story in 2016:

Mises occupies a special place in the history of the organization I lead, the Foundation for Economic Education (FEE). Human Action itself was published only when our founder Leonard E Read agreed to buy nearly the entire first print run and distribute it. This is what kicked off the book to become a big seller for many decades.

Suffice it to say, it is tremendously encouraging to see a figure like Milei introducing a new generation of thinkers to the Austrian tradition.

2) Economic Freedom and the Virtuous Cycle

Later in the interview, Milei emphasized that Argentina’s plan for achieving economic prosperity is all about leaning into economic freedom:

To have a sense of magnitude, the reforms that we already have made with the executive order 7023, and with the bases law, we have actually jumped 90 places in terms of economic freedom. What this means is that today, Argentina has institutions similar to those of Germany, France, Italy, and we obviously want this to continue.

When Milei talks about jumping 90 places, he’s referring to global indexes of economic freedom, such as the Fraser Institute’s Economic Freedom of the World report. The EFW index examines a country’s policies to see how much they are conducive to economic freedom, that is, capitalism. Each country is given an overall score based on five key areas: size of government, legal system and property rights, sound money, freedom to trade internationally, and regulation. Countries are then ranked according to their score, with the highest-scoring countries (those having the most economic freedom) at the top. Jumping 90 places would mean jumping from, say, the 140th most economically free country to the 50th.

What is significant about these indexes is that they consistently find that economic freedom is strongly correlated with positive outcomes, such as income per capita, life expectancy, life satisfaction, and environmental stewardship. Put plainly, countries that are more capitalist tend to be wealthier, healthier, and overall better places to live than countries where the government plays a larger role in the economy.

After discussing why he is optimistic about Argentina’s prospects for economic growth, Milei made this interesting comment:

Therefore, if during the worst moment our image didn’t suffer and we stayed strong in our ideas, now that everything is working much better, why should we change? On the contrary, we are ready to redouble the bet.

Though Milei doesn’t quite lay it out this way, the overall plan seems to be creating a positive feedback loop that becomes a virtuous cycle. By establishing a bit more economic freedom, Argentina’s economy can recover and grow. This will bring Milei and his ideas more popularity, which will eventually translate into better electoral outcomes for Milei’s camp. Then, having more power, they can enact even more pro-freedom reforms, which will lead to a better economy, which will lead to more support, which will lead to even more freedom, and so on.

And then, Argentina could become a beacon for the world, a shining city on a hill, an example of what a country can accomplish with free markets. And then it will be undeniable to everyone in the world that our ideas work, and it will only be a matter of time before the rest of the world follows suit.

Is that a pipe dream? Perhaps. Then again, it could also be an accurate description of the next 10–30 years of world history. And wouldn’t that be something!

The hardest part, of course, is getting the feedback loop started. What we need at the outset is the thing Leonard Read continuously stressed: a faith in freedom.

Fortunately, what Milei seems to be saying is that we might already be past the hardest part. The Argentine people have put their faith in freedom, and the first signs of economic momentum, he says, are already showing.

Time will tell if this proves to be true, but surely it’s a good sign.

3) The Most Wonderful Thing about Capitalism

In one of the final sections of the interview, Milei explains why he thinks the market works so well as a guide for humanity:

One must first understand what the market is. Simply put, the market is a process of voluntary exchange, where individuals cooperate through the transfer of property rights, in which private property is upheld. This is the system that drives the allocation of resources.

In essence, socialism – and this is what Mises condemns in his book Socialism – shows that without private property, prices cease to exist and therefore resources are diverted. Why don’t you think it’s the same to make a road of asphalt or gold? Why not make it of gold? Because you have an understanding of economic calculation, you have an idea of prices in your mind. So, in this context, if there is no private property, there are no prices, and as a result, free market capitalism is the best mechanism ever developed by humankind for resource allocation.

This also implies that markets must be free. Free from state intervention, because when the state intervenes, it creates interference. And markets need to allow free entry and exit, what we call competition.

For Mises’ perspective on intervention in the market, see his books A Critique of Interventionism and Interventionism: An Economic Analysis.

Milei continues:

…And also, let’s talk about what pertains to the division of labor and social cooperation. The most wonderful thing about capitalism is that you can only be successful by serving others with better-quality goods at a better price. If you are successful in free-market capitalism, you are a hero, you are a social benefactor, you are a prosperity machine. So the better you do, the better it is for society. This is very important.

Milei’s comments here are spot on. In a free market, entrepreneurs earn profits by serving others. It is by solving problems, by developing inventions – in short, by creating value – that you get ahead in the free market.

And this, fundamentally, is why markets work so well as a guide for humanity. They are a mechanism for systematically meeting human needs – the epitome of social cooperation. As Milton Friedman said, “The essential notion of a capitalist society…is voluntary cooperation, voluntary exchange. The essential notion of a socialist society is fundamentally force.”