The Institutional Foundations of Public Policy: A Transactions Approach with Application to Argentina

Public policies are the outcomes of complex intertemporal exchanges among politicians. The basic institutional characteristics of a country constitute the framework within which those transactions are accomplished. We develop a transactions theory to understand the ways in which political institutions affect the transactions that political actors are able to undertake, and hence the policies that emerge. We argue that Argentina is a case in which the functioning of political institutions has been such that it prevented the capacity to undertake efficient intertemporal political exchanges. We use positive political theory and transaction cost economics to explain the workings of Argentine political institutions, and to show how that maps into low-quality policies.