By: Carlos Pérez
April 10, 2026 – Chile has a special relationship with the University of Chicago. In the 1960s, a group of Chilean economists trained here (the so-called Chicago Boys) returned home and reshaped the country’s economy along free-market lines. The experiment was controversial, inseparable as it was from Pinochet’s dictatorship. But the economic results were hard to ignore: Chile became the most prosperous country in Latin America, a rare developing-world success story built on openness and private enterprise.
Yet the debate those economists thought they had settled never really closed.
In October 2019, Chile erupted. Weeks of protests, the estallido social, shook a country that looked stable from the outside but felt, to many of its citizens, profoundly unjust. A constituent process followed, aimed at replacing the Pinochet-era constitution with something new. Gabriel Boric, a young left-wing president elected in 2021, declared that Chile would be “the graveyard of neoliberalism.” His Communist Party minister Jeannette Jara ran to succeed him. The proposed constitution was rejected twice: first a left-wing draft, then a right-wing one. This suggests that Chileans were not so much choosing sides as refusing both. And in December 2025, Jara lost the presidential runoff to José Antonio Kast, a candidate on the other side of the political spectrum.
I am a Spanish economist who has lived in Chile for over twelve years, and I have colleagues and friends across that divide. I tell this story not to take sides but because it illustrates something important: the question of markets versus central planning is not an abstraction in Chile. It is lived, argued, and voted on. It is exactly the question I want students to think clearly about when I teach Economía para Todos, a Spanish-language adaptation of UChicago’s Economics for Everyone university course that Universidad Andrés Bello is creating with E4E for our students.
So let me start where I start in class: with a cappuccino.
Valentina walks into her favorite café in Providencia, orders a cappuccino, and has it in her hands three minutes later. Nobody asked her how much she was willing to pay for the milk. Nobody coordinated the dairy farmers in Osorno with the roasters in Ñuñoa. Nobody planned that on that particular Tuesday there would be exactly enough beans to satisfy every customer in every café in Santiago. And yet, the cappuccino arrived.
This is what Friedrich Hayek, who taught at UChicago for over a decade, called the “miracle of the market”: not a supernatural miracle, but something almost more surprising—the spontaneous order that emerges from millions of individual decisions without anyone in charge. The price of milk rose this week because rain in the south affected production. Valentina doesn’t know that. The café owner doesn’t either. But the price adjusted, the café recalibrated its margins, and the system rebalanced itself, without anyone sending a memo.
Now imagine the Chilean government decided to plan cappuccino production centrally. To do it well, a planner would need to know how many cappuccinos Valentina wants this week, and next week, and whether she’ll change her mind on Thursday. The same for every coffee drinker in the country. And the capacity of every dairy farmer, the state of every coffee plantation in Colombia and Brazil, transportation costs, weather conditions, the preferences of every barista. That information exists—but it is scattered across millions of minds and changes constantly. No planner can gather it, process it, and act on it in time. The price does it automatically, instantaneously, without being asked.
This is Hayek’s deepest argument against central planning, and it has never been convincingly refuted. The problem is not just incentives, political will, or computing power. The problem is that the knowledge required to plan a national economy is dispersed, local, and tacit. It cannot be fully extracted from the people who hold it and fed into any central system, however sophisticated.
But here is something Valentina probably hasn’t noticed: the café where she bought her cappuccino is itself a small, planned economy.
Inside that café, there is no market. The owner doesn’t ask the barista to compete on price with another barista every morning. He doesn’t negotiate a new contract each time someone needs to clean the machine or work the register. There is a boss, there are employees, there are instructions. There is, in a word, authority. The UChicago economist Ronald Coase was the first to notice the paradox: if markets are so efficient, why do firms exist at all? Why not contract everything through prices?
His answer was that using markets has costs. Negotiating, drafting contracts, verifying compliance, resolving disputes—all of that takes time and money. When those costs are low, the market wins. When they are high, it is more efficient to bring activity inside an organization and coordinate it through authority. The firm is not an alternative to the market. It is the result of comparing, at the margin, which mechanism works better.
That is why the café owner buys milk on the market but employs his barista rather than calling a different one each morning. And if he ever decides to use a coffee variety so specific that only one supplier in Colombia can provide it, he might end up buying the plantation outright. Not out of ideology, but because when two parties depend so heavily on each other, the market between them starts to break down. Each can hold the other hostage, and sometimes it is more efficient to merge than to keep negotiating.
The economist Oliver Williamson spent his career studying exactly that: when mutual dependence makes hierarchy cheaper than markets. And Oliver Hart added another piece: no contract can anticipate everything. When the unexpected arrives, a pandemic, a drought, a regulatory change, someone has to decide what to do. That someone is almost always whoever owns the assets. Property is not just a legal title. It is decision-making power over everything the contract failed to cover.
So where does this leave the market-versus-authority debate?
The honest answer is that the question itself is poorly posed. Every real economy is a combination of both. The relevant question is not which system but when and why each mechanism works best, and what determines the boundary between them?
Markets excel when information is dispersed, assets are generic, and contracts are simple. Planning wins when transaction costs are high, assets are highly specific, or contracts are too incomplete to govern a relationship. There is no universal winner. The question is always comparative and contextual.
What the historical record does tell us is that central planning at the scale of a national economy has failed wherever it has been tried, for precisely the reasons Hayek identified. That is not ideology. It is evidence. But it does not mean markets are always superior in every context. Coase proved they are not. And it does not mean the distributional outcomes of markets are automatically just or politically sustainable, as Chile’s estallido reminded the world in 2019.
This is what I want the students of law, engineering, medicine, journalism, and every other discipline who will take Economía para Todos at Universidad Andrés Bello to learn. Not a defense of any one system, but the analytical and economic reasoning tools to ask the right question: not markets or central planning, but when, why, and at what cost.