The Distributive and Institutional Context
Chapter 2: The Political Economy of Macroeconomic Policy Making in Latin America
2. The political economy of macroeconomic policy making in Latin America Rational self-interested individuals will not act to achieve their common interest . . . unless some separate incentive is oﬀered. Mancur Olson (1965, p. 2) This chapter reviews the institutional and political economy context of macroeconomic policy making in Latin America. Its objective is to identify and examine the political economy explanations that may be behind actual macroeconomic policies. It frames the analysis around the evolution and origins of the ‘right’ institutions and on how they are mainly the result of endogenous political and equity conditions and perceptions of how public and private markets serve, or not, the general interest and welfare. After the core of generally accepted macroeconomic principles is summarized, a perspective on Latin America’s macroeconomic and equity performance is presented and placed in the context of the strength or weakness of the political demand for macroeconomic stability and for attendant ﬁscal and ﬁnancial reforms. The general conclusion is that short term political interests and incentives, under asymmetric information restrictions, often have a stronger capacity to inﬂuence public policies than long term considerations of policy consistency. To mitigate these ‘collective actions problems’ there seems to be a need for externally enforced rules (Ostrom, 2000, p. 137). It ends oﬀering an information based strategy for policy reform and for institutional transformation. I. THE PRIMACY OF INSTITUTIONS AND INCENTIVES The emerging paradigm in the political economy of development and in the economics of politics is that institutions as constraints...
You are not authenticated to view the full text of this chapter or article.
Elgaronline requires a subscription or purchase to access the full text of books or journals. Please login through your library system or with your personal username and password on the homepage.
Non-subscribers can freely search the site, view abstracts/ extracts and download selected front matter and introductory chapters for personal use.
Your library may not have purchased all subject areas. If you are authenticated and think you should have access to this title, please contact your librarian.