What determines the quality of public policies? This general question is addressed in the context of Latin America using a common theoretical framework developed in Part I of The Institutional Foundations of Policymaking in Argentina (henceforth, Institutional Foundations) and the first two chapters of Policymaking in Latin America. In its general form, this framework posits that a country's history and institutions determine the functioning of political institutions, which in turn define the rules of the policymaking game. These rules, along with specific policy features, will define the setting in which relevant players make strategic policy choices. This approach, characterized by the authors as a general equilibrium analysis of institutional configurations, is to be contrasted with more conventional partial equilibrium policy studies that attempt to isolate the impact of just one institutional dimension.

The analytical approach espoused in these books is similar to other political economy studies of policymaking (see, for instance, Avinash Dixit, The Making of Economic Policy: A Transaction-Cost Politics Perspective, 1996). Unlike previous studies that emphasize processes, however, the authors here focus on a distinctive set of outputs. Indeed, the dependent variable for both books is a set of “outer properties,” or quality of public policies (as opposed to “inner properties,” or the content of policies). The outer properties include stability, adaptability, coordination and coherence, investment-related qualities or capacities, and implementation and enforcement. Despite the explicit concern with outer properties, however, there is an underlying assumption throughout the two books that outer and inner properties are closely linked because high-quality policies have the “potential … to deliver better outcomes” (Policymaking in Latin America, p. 2).

The relevance of outer properties stems from the premise that political transactions surrounding policy decisions entail intertemporal exchanges among policymakers. Drawing on the theory of repeated games, the authors characterize good policymaking environments that encourage long-term cooperative exchanges in terms of a small number of decision makers who engage in repeated interaction and are embedded in institutional configurations with low immediate payoffs for deviation, institutionalized policymaking arenas, and availability of delegation and enforcement technologies. In a nutshell, the underlying theory is that policymaking environments that facilitate agreements and cooperation will lead to high-quality policies.

The theoretical framework is first applied in Institutional Foundations to the case of Argentina in order to understand how, despite so much promise, the country's recent economic development and governance record is rather poor even by Latin American standards. A recurrent theme throughout the book is the lack of adequate incentives for relevant political actors to engage in long-term cooperation. The authors first establish in Chapter 3 that legislative careers are driven by the concurrent interests of local provincial bosses and future career prospects in provincial, rather than national, settings, thus providing no incentives to establish a competent, professional legislature that could check executive authority.

Chapter 4 is the core chapter insofar as it addresses one of the most important features of the Argentine political system: the influence of powerful provincial governors. As Congress is relatively unimportant, the real action in Argentine politics occurs between the president and the provincial governors. This interaction is analyzed in the context of fiscal federalism, but the scope of provincial power extends beyond fiscal issues. Provincial power is partly derived from the constitutional framework, but it has also evolved over time from recurrent bargaining with executives who have required provincial support. At critical junctures, the provinces have used their leverage to force the president to centralize fiscal policy and assume more fiscal responsibilities on their behalf. Opportunistic intergovernmental relations, in turn, produce two pernicious effects: lack of trust between governors and the president, as well as overexploitation by provinces of a common pool budget, thus exacerbating Argentina's pressing economic problems.

Chapter 5 illustrates the utility of a general equilibrium approach to institutional analysis. To address an ongoing debate about the existence of an independent judiciary, the authors propose a strategic theory and concomitant statistical test of judicial decisions to reverse governmental acts. Despite much judicial instability, their findings indicate, judicial autonomy does occur sometimes but is conditional on particular institutional configurations or favorable political conditions. Chapter 6 provides an overview of the bureaucracy, a sector that suffers from the absence of long-term political principals that would encourage better performance. Although there have been a few isolated reforms efforts, politicians generally lack incentives to improve the quality of civil service. Other notable features include a heavy reliance on a so-called parallel bureaucracy, a significant number of civil servants who are appointed anew by each presidential administration. The book concludes with a brief application of the theoretical framework to various policy arenas, all of which exhibit unstable and uncoordinated policies, even in domains like trade and social policies where there is some common interest in either strengthening Argentina's international position or in poverty reduction.

Overall, Institutional Foundations provides a very comprehensive institutional assessment, and so one would be hard-pressed to ask for more details. Yet there are at least a few topics that would enhance what is already an excellent study. First, the role of the executive is clearly important and apparent throughout the book, but there is no separate chapter that focuses on the executive. In addition to a heavy reliance on a parallel bureaucracy, how exactly do presidents pursue their objectives? If executive power is hampered by capricious provincial behavior, why would anyone want to be president? If recent presidents have come from the same party (and even the same family), what then is the role of parties in selecting the executive and ensuring policy continuity over time? Most importantly, what inhibits political parties from facilitating exchanges between the executive and governors (especially when they share partisan affiliations)?

It would have also been interesting to learn more about subnational politics because the evidence shows that governors do not have the short-term horizons of other actors. Clearly, governors are engaging in some successful intertemporal transactions. Provincial governments do not appear to generate higher-quality policies than those of the national government, but not all provinces are alike. What is the quality of policies across the various provinces? Given their importance and longevity, why do not governors promote provincial policies with investment-related qualities? Also missing from the book was a better discussion of how governors related to one another. What factors enhance or impede collective action among governors as they interact with the executive?

The empirical relevance of the theoretical framework is further examined with a collection of eight country studies in Policymaking in Latin America. It is not feasible here to review each chapter, but for the most part, the cases support the theory. The best policymaking environment corresponding to Chile does exhibit favorable conditions for intertemporal cooperation. In contrast, the worst cases (Argentina, Ecuador, Paraguay, and Venezuela) exhibit unfavorable factors, such as a larger number of participants and incipient delegation and enforcement technologies (the Venezuelan case may be in a class by itself due to the recent deterioration of democratic institutions). The remaining cases (Brazil, Mexico, and Colombia) have policy environments that produce mixed outcomes but in general produce relatively higher-quality policies than the worst cases.

Beyond those generalizations, however, the book does not explain what actually determines the quality of policies across these eight countries. An upside of the theoretical framework is that it can be applied to many different settings, but a downside is that each case can be different in different ways. Both the dependent and independent variables are multivalued quantities, and so without a discussion of the underlying research design and case selection, it is difficult to assess whether these particular cases carry enough information to draw inferences about the importance of proposed explanatory variables (especially in contraposition to some competing hypothesis). As a first step for the framework to attain its goal of enabling “the comparative analysis of the impact of political institutions on public policies” (Institutional Foundations, p. 2), it would be important to address the high dimensionality of the framework variables to identify comparable cases, as well to isolate either particular policy properties or specific features of an institutional configuration that may be more important for comparative purposes.

It should be noted that these two books are part of an ambitious long-term research agenda that links institutional theory with practice under the auspices of the Inter-American Development Bank (IDB) and other institutions. Some of the limitations discussed here have been addressed in other publications or in current research projects. For instance, a related book project includes measurements that perhaps can be used in future research to design more structured comparisons (See data appendix in IDB, The Politics of Policies: Economic and Social Progress in Latin America, 2006.)

The country studies also identify some gaps and suggest interesting questions for further theoretical development. It is interesting that the most pressing theoretical concerns come from the case that appears to best support the theory: Chile. In the corresponding country chapter, Eduardo Aninat and his coauthors note that the enabling conditions for cooperation drawn from the literature on repeated games also admit noncooperative outcomes, and so the framework is missing a mechanism for equilibrium selection that guarantees the good rather than the bad policy outcomes (p. 158). The case of Chile also highlights the importance of inner, not just outer, policy properties because despite the country's having a very good policymaking environment, the quality of policies in Chile is variable and contingent on underlying political consensus. Moreover, these authors also emphasize the relative importance of political organization and claim that the nature of the Chilean party system is the main reason behind high-quality policies—more so than other institutional configurations drawn from the book's underlying theoretical framework.

Along with competing explanations, it also remains for the framework to establish that a cooperative equilibrium exists that concurrently supports all desirable policy properties. It does not identify which bundle of properties is always feasible and desirable. In fact, some of the properties, most notably stability and adaptability, appear to be at odds with one another, and there may be additional trade-offs among other properties. Can one property be favored at the expense of another and still lead to a high-quality policy environment? Finally, there is also the question of scope and duration of cooperative environments. As Francisco Monaldi and colleagues note in the context of Venezuela, countries can sustain cooperative policymaking coupled with good performance for long periods of time, albeit in regimes with limited political competition (p. 417). It also appears possible for countries to produce high-quality policies in some domains, but not in all. Are there institutional configurations that create policymaking environments that invariably lead to good outer properties across distinct policy domains?

Notwithstanding the authors' admission that there is no simple way for Argentina to improve its situation (p. 209), it would still have been helpful to see what kinds of reform prescriptions can be generated by the novel theoretical framework for this particular country. Clearly, individual incentives must always be taken into account, but at issue is how to change institutional systems, which requires more careful guidance. What reforms are feasible, if any, in the context of interactive political institutions?

If systemic changes are not feasible, is it possible to make incremental improvements, and if so, what would be the best sequence? Answering these types of questions would be well served by comparative studies that exploit the richness of the theoretical framework, but this remains a subject for future work as the country studies in Policymaking in Latin America were commissioned separately as self-contained studies for a different purpose.

Overall, students of contemporary Latin American politics will be served by reading these two books with their pioneering concern for the quality of public policies. Institutional Foundations will be especially useful for replicating the detailed analysis in other countries. Policymaking in Latin America is more accessible to a broader audience and could also be used in upper-level undergraduate and graduate courses. Readers will especially benefit from a chapter by Carlos Scartascini (pp. 29–68) that provides an excellent review of modern political economy and institutional analysis. Coupled with a companion volume on social policies (IDB, The Politics of Policies, 2006), these books set forth a very promising research program with much potential to prescribe better approaches for improving the lives of people in Argentina and Latin America.