By Matias Chomali '15
Being a "Chicago Boy” means something in Chile. In the 80s, a group of University of Chicago Chilean economists influenced by Milton Friedman’s free market ideas the “Chicago Boys” deployed a successful set of transformational reforms in the country. Chile went from seventhhighest per capita income in Latin America in 1980 to the highest of the region today. When I came to Booth, I expected to be infused with the capitalist spirit I assumed the university would exude. However, several classes showed me a more pluralistic view of the school.
Competitive Strategy taught me how to beat or avoid competition. My view of “good” capitalism was based on competition, which is at the center of the creative destruction process. If capitalism is not competition, then what is it? In his book A Capitalism for the People, Prof. Zingales explains the difference between being pro-business and pro-market, or promoting the interests of existing businesses instead of fostering truly free and open competition. So, can you be a businessman while still being pro-market? It’s difficult to think that way after Pricing Strategies taught me to selectively price each customer to maximize company profits. As Prof. Dubé says, "this class is not about creating value, it's about claiming it.”
Game Theory showed how socially inefficient outcomes can arise from rational people acting in their own self-interest. Prof. Kamenica opened the course with a famous Adam Smith quote: "It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.” However, a simple example like the Prisoner’s Dilemma challenged Smith’s invisible hand concept, showing that fully rational behavior will not lead to optimal outcomes.
Individuals have all sorts of biases and occasional irrational behavioral patterns. Managing in Organizations showed countless examples of how to acknowledge these phenomena and incorporate them into better decision making. Companies could even capitalize on this by “nudging” clients to prefer their products. If consumers are mostly unaware of those biases (are they “fit-to-choose?” as Prof. Barry would ask) and marketers use tactics to increase sales, the “free-trade” concept makes less sense.
As I conclude my Booth experience, I still believe that free markets, the rule of law, and private property are the foundation of a solid economy. However, I return to Chile with a growing doubt. Is it possible to help companies capture value (e.g. as a consultant) and at the same time think that capitalism is the best political-economic construct?
Matias is a graduating Boothie and potential “Chicago Boy.”