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The Making of Policy: Institutionalized or Not?
Carlos Scartascini & Mariano Tommasi
Source of the information:
Inter-American Development Bank
Formal analysis of policy-making within the realm of political institutions has deepened the understanding of how political institutions shape economic policies. Other than voting, forming political parties, bargaining in the legislature, and the like, there are a number of alternative political technologies (APTs), like threats of violence and of disruption of economic activity, that individuals or groups could utilize in order to influence collective decisions.
This paper moves towards incorporating alternative political technologies into models of institutions and policies.The paper develops a framework for analyzing different policy-making styles, their causes and their consequences in Latin America. It introduces the general logic of studying institutions and policy-making in the presence of APTs.
The paper also investigates the way in which the presence of APTs, in interaction with formal political institutions and underlying socioeconomic structures, influences the workings of institutions, policy outcomes, and the use of such technologies in equilibrium. The premise is, since institutions are an equilibrium phenomena, they reflect past investments, summarize information, beliefs and expectations.
The authors present a number of results including:
Different countries have different degrees of institutionalization in their policymaking process.
There is multiplicity of equilibria allowing similar countries to be stuck at different levels of institutionalization, self-reinforcing dynamics, and the possibility of equilibrium switches.
The possibility of institutionalized policymaking increases as the cost of APTs increases, as the damage they cause decreases, and as the economy becomes wealthier.
Where the distribution of de jure political power is very asymmetric, there is more likelihood of APT use and lower degrees of institutionalization.
High costs or inefficiencies in the use of formal political institutions can lead to the use of APTs and lower degrees of institutionalization.