ABSTRACT
This chapter seeks to address whether Denzau and North’s shared mental models framework can successfully explain different periods in Latin American economic history (Denzau and North, 1994). We take as our guideposts for evaluation four key points from their article. First, that individual rationality alone can not explain Latin American economic policy choices (p. 3). Second, that in situations of uncertainty, ideas, dogmas, tacit knowledge, and ideologies inform both policy reactions and normative evaluations (3, 15–16, 20–21). Third, however, that learning is possible (13–15), and that it tends to follow a pattern of “punctuated equilibiria,” due to the “stickiness” of shared mental models (22–26). Punctuated equilibria suggests slow evolutionary change or stagnation, followed by moments of revolutionary change. Overall, we would expect a trajectory of steady but periodic change. Change could result from incoherence, “surprise,” “contradictions,” and/or as the result of the efforts of “ideological entrepreneurs. Fourth, applying this model can explain the reasons for suboptimal performance of Latin American nations over long periods of time (3, 27). Through a perusal of Latin American economic history, we shall demonstrate the usefulness of the shared mental models framework to explain simultaneous learning, stickiness, and punctuated equilibria in the fit between ideas and interests, as well as its limitations, principally the neglect of political variables, including discount rates. Our conclusion is that the shared mental models framework can be modified to accommodate these limitations.
