The logic behind Argentina’s heterodoxy

By Paul Segal and Ingrid Bleynat, King’s College London

Argentina’s macro-economic policy has been accused of being incoherent, inconsistent, and out of control. Analysts blame ‘populist handouts’ for President Cristina Fernández de Kirchner’s popularity. Yet that cannot explain approval ratings around 50 per cent after nearly 8 years in power. There is a logic, and a history, behind Argentina’s policy that observers are overlooking.

Consider the challenge facing the government. They were elected to support domestic industry, and to redistribute income in favour of middle and lower class workers. What to do? Enter the economic theory of the second best, also known as (heavily) constrained optimisation.