Historical Perspectives

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Historical Perspectives and The Interpretation of UnemploymentAuthor(s): Michael J. PioreSource: Journal of Economic Literature, Vol. 25, No. 4, (Dec., 1987), pp. 1834-1850Published by: American Economic AssociationStable URL: http://www.jstor.org/stable/2726446Accessed: 05/06/2008 20:42

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Journal of Economic Literature Vol. XXV (December 1987), pp. 1834-1850

Historical Perspectives and the

Interpretation of Unemployment*

By Michael J. Piore Massachusetts Institute of Technology

JN THE LAST DECADE, the levels of unemployment in industrialized countries

have risen dramatically. Rates now are typically two, and in some cases, three and four times those prevailing in the 1950s and 1960s. The fact that these new higher levels are widely tolerated suggests that our thinking about the meaning and significance of unemployment has changed enormously over the period. Such a change is certainly present in the thinking among professional economists. In the 1960s the standard view was that the unemployed represented unutilized resources; their existence in an economy where the vast majority of people had unsatisifed wants was seen as a major social paradox and the most important un- solved intellectual puzzle of the capitalist economic system. This fed the rationale for Keynesian countercyclical fiscal policy and government deficit spending: The government could reasonably print money in order to hire the unemployed because the resources absorbed in the process were essentially "free goods."

Today, a good number of professional

economists, certainly in the United States but to a lesser extent throughout the world, have come to view measured unemployment in industrial economies as an artifact in at least three senses. It is a statistical artifact of a measurement process that classifies as unemployed people who are not really available for work. It is an institutional artifact of a system of social insurance and public welfare that encourages an extension of the process of job search. And it is an artifact of the language that uses a term which in everyday parlance means forced idleness for activities that have important productive functions akin to the functions of inventories, information processing, and investment associated with the uti- lization of capital goods. These interpretations to be sure hardly constitute a consensus about the meaning of unemployment. But they are no more diverse than the range of views that un- derlay the older orthodoxy. And for policy makers and economic researchers, they carry a single message: There are many more serious problems toward which to direct attention.

These new views about unemployment were developed out of a set of ideas origi- nally associated with the Chicago School of economics, where the emphasis-at once positive and normative-was placed on the competitive market as the gover-

* A Review of Alexander Keyssar, Out of Work: The First Century of Unemployment in Massachu- setts. Cambridge: Cambridge University Press, 1986 and Robert Salais, Nicolas Baverez, and B6nedicte Reynaud, L'invention du chomage: Histoire et trans- formations d'une categorie en France des annees 1890 aux annees 1980. Paris: Presses Universitaires de France, 1986.

1834

Piore: Historical Perspectives and Unemployment 1835

nor of labor market activity. The mainstream of the economics profession con- tinued for a long time to work from models that presumed the older view, and in the process failed to provide an effective counter to either the empirical evidence or the theorietical propositions that made the new views seem reason- able and increasingly coherent. Analysts who on other issues were quick to criti- cize the prevailing orthodoxy from an institutional, historical, or Marxist perspective followed the main body of the profession in this regard and never developed an independent position. As the old orthodoxy has collapsed therefore, there has been no coherent counterweight to the essential complacency of the new position.

These two books, which appear more or less coincidentally, constitute the first really original effort of scholars working from a critical perspective to confront and come to terms with the new orthodoxy. They start from the presumption that the economy must be understood as the product of a continuing historical evolution and as embedded in social processes. In this they stand in contrast to mainstream economics, and particularly the theoretical ideas out of which the new understanding of unemployment is built, in the sense that the analytical approach of the latter is ahistorical and makes a radical separation between the economy and society. In addition, both books share the preoccupation, prominent today in anthropology and sociology and common to much of contemporary Marx- ist thought, with the working out of the precise relationship between the realm of ideas and the productive structure itself, a relationship that orthodox Marxists took for granted and in which mainstream economics is basically not interested at all. Despite these common intellectual roots, however, the two books suggest almost diametrically opposite conclusions

about the meaning of unemployment in modern times and the validity of the newly dominant interpretations.

I. Salais et al., L'invention du chomage

Salais and his colleagues are directly concerned with the emergence of the new high unemployment levels in France in the 1970s. They approach this problem through a complex and sophisticated blend of quantitative statistical and qualitative historical analysis.

The statistical analysis focuses on the pattern of variation in unemployment rates across French departments, basic geographic units ofthe French administration roughly comparable to U.S. states. They look at this pattern in four separate years (1896, 1936, 1970, and 1980) and are thus able to see how it has changed over time. For each department, they collected a large and disparate group of variables. These include the demo- graphic composition of the population and the distribution of the labor force between industry and agriculture and by urban size and size of establishment.

A standard approach would be to use these data to estimate demand and supply curves for labor in each of the periods. The variables, however, are highly intercorrelated, and it would be difficult to identify the two curves. Salais et al. take the position that a set of more fundamental forces are operating simulta- neously on both sides of the labor market, and it is these forces, not supply and demand, that are of analytical interest. To uncover these forces, they turn to principal component analysis. This technique constructs out of a series of highly intercorrelated variables a new and smaller set of measures: the principal components. The principal components are lin- ear combinations of the original variables and have the property of being those combinations that account for most of the variation in the original set. The principal

1836 Journal of Economic Literature, Vol. XXV (December 1987)

components are also orthogonal to (that is, uncorrelated with) each other. They can thus be interpreted as "purer" variables, measures of the underlying processes at work. The dispersion of the effects of these "underlying processes" over the original set of variables is interpreted as accounting for the intercorrela- tion that principal components analysis as a statistical techniques is designed to eliminate.

This approach is widely used in psy- chology and sociology but economists are uncomfortable with it, especially where the original set of variables have direct interpretations in terms of conventional theory and the principal components do not. Salais et al. circumvent this problem by building the interpretation of the principal components out of their qualitative analysis. Here their evidence is drawn from what might be termed case studies of the employment relationship and the way in which the evaluation -of that relationship is connected to the changing social structures within the enterprise, the profession, and the residential community. Interestingly, much of this evidence was generated as part of the debate among statisticians going back to the nineteenth century about the meaning of unemployment and how it should be measured.

The story which emerges in this process is that the modern concept of unemployment derives from one particular employment relationship, that of the large, permanent manufacturing establishment. Employment in such institutions involves a radical separation in time and in space from family and leisure time activity and was (and is) relatively permanent. When employment ties of this kind are severed, there is an empty space in the worker's life which is sharply defined and that space is what is meant by unemployment. In early twentieth-century France, there were, however, a number

of other types of work structures in which the terms employment and unemployment had rather different connotations. In agriculture and in a variety of different family enterprises in industry and com- merce, market and household activities were so intermingled that the line between them was difficult to draw and ad- justments to variations in economic conditions were made through changes in the distribution of time between various tasks. These changes were not registered by measures of unemployment at all. In rural areas and small towns, workers fre- quently moved back and forth between their own farms and industrial employment in small enterprises with an ease and frequency that also escaped conventional measures of unemployment. When there was not enough work to keep ev- erybody busy, workers were still sup- ported by other family members either on the farm or in the workshop.

In large urban areas where social ties were weak, forms of public assistance gradually developed to sustain workers from such small enterprises that occa- sionally fell through the net of family relations in which work relationships were typically embedded. Such workers were then formally classified as unemployed. But in this situation, the category unemployment was ambiguous because such workers were not conceptually distinct from similar people who, even in urban areas, and to a much larger extent in small towns and villages, were absorbed into the extended family, sharing family resources and assuming domestic tasks.

Still another type of employment typi- fied the crafts. Craft workers were at- tached to their professions rather than to particular employers and often moved regularly from one employment establishment to another. The level of employment within a craft, moreover, often had a marked seasonal pattern involving pro- longed periods when work was scarce or


nonexistent, but workers anticipated these off-periods and tended to accommodate them through the social and cultural institutions associated with craft work. Typically, craftsmen were organized into associations with mutual insurance funds to sustain their members during the slack season. Early statisticians were confused and divided as to whether craftsmen out of work during the slack season and drawing upon funds of this kind should be counted as unemployed.

The turning point in the emergence of unemployment as we know it today, Salais and his colleagues argue, was the Great Depression of the 1930s. The modern category of unemployment emerged out of two distinct effects of the economic collapse. First, very large numbers of workers were displaced from the large industrial establishments in terms of which unemployment had its clearest meaning. Second, under the pressure of the depression, the variety of social networks, mutual insurance funds, and local public support systems associated with other employment relationships were broken, or so strained that the state was forced to intervene. But while the two effects were conceptually distinct and both proved to be temporary, a single permanent institution was created to deal with them: a general system of unemployment insurance. And the model of the employment relationship upon which that system was built was that of the employment relationship in large industrial enterprises. In the subsequent period of postwar prosperity, workers and employers were induced by the existence of this system increasingly to structure their employment behavior upon the large enterprise model.

These institutional changes appear clearly through the statistical analysis: The principal components that reflect the employment institutions are important in accounting for the interdepartmental var-

iation in unemployment rates in the pre- World War II period, but their impor- tance drops substantially in the postwar years of 1970 and 1980.

There is a certain resemblance between this story and the argument that workers have been induced to behave as unemployed by the fact that they thereby become eligible for unemployment insurance payments. But the argument here is more sophisticated and ultimately very different. First, there is a set of institutions in the economy in terms of which the initial concept of unemployment and the institutional structures which derive from that concept are defined: Unemployment has a clear and unambiguous meaning in terms of these institutions. Second, the category or unemployment is enlarged, not by inducing individuals to alter their behavior, but by changing other institutions so that they come increasingly to resemble the paradigmatic structure in terms of which unemployment is defined.

Finally-and this is perhaps the most intriguing part of the Salais et al. argument-the process of imposing one institutional paradigm upon an initially heter- ogeneous structure is not something that is confined to, or can be understood in terms of, unemployment alone. It ex- tends to the whole social and economic policy of the state. A good part of the book is thus devoted to showing how, in the period extending from the Popular Front through the Liberation, the French came to see the large industrial enterprise as the critical economic institution of the modern industrial state and how the state pushed-not only in labor policies but through financial subsidies, the tax system, and indeed through virtually every instrument of statecraft-to force smaller productive institutions to merge in order to create the paradigmatic structures of the modern French economy. Indeed, they argue that the spread


of Keynesian economics, through which unemployment came to be recognized and understood as an analytical concept, has to be understood as part of the process through which the state imposed the structures of large enterprises upon the system as a whole. Here again, it is easy to confuse this argument with that of American economists who see unemployment as "artificial." For proponents of that view, the institutional structure of the French economy will be seen as the product of artificial state intervention. But Salais and his colleagues see state action in this respect as the product of an intellectual process. And indeed, the ideas upon which it was based were accepted by politicans and policymakers distributed across the political spectrum. Their success in pursuing the policy of institutional transformation was undoubtedly due to the fact that the ideas were ultimately accepted by the custodians of the institutions that had to be trans- formed. In this sense, state action is an expression of underlying social and historical processes, not something separate and exterior to them. State action cannot be artificial in this view of the world in the sense that it can in orthodox theory where the economy on the one hand and the society on the other are modeled as so separate that entrance of the latter in the domain of the former can be termed unnatural.

What conclusions does this argument then suggest about contemporary unemployment? The unemployment of the last decade, like that of the Great Depres- sion, is the product of the unanticipated collapse of a large portion of the older institutional structure. The huge layoffs in heavy manufacturing industries like steel, automobiles, and shipbuilding, which were once thought symbolic of the modern age, are representative of this process. Because the collapse is unanticipated, existing institutions cannot deal

with the problem. Salais and his colleagues take it for granted that the society has an obligation to help those who are suffering in the process. The danger is that in the attempt to do this, we will inadvertently create the structures that determine the emergent economic order. It is the character of that order, and not unemployment per se, that is the critical issue, and it is toward that which the book ultimately directs our attention.

IL Alexander Keyssar, Out of Work

Alexander Keyssar is also concerned with the changing meaning of the term unemployment. His focus is on nineteenth-century Massachusetts. In the early nineteenth century, unemployment as we know it today does not seem to have existed as a category, at least in the modern sense of the term. The word was widely used, but it referred mainly to "those who were simply 'not employed,' who were idle or not working" (p. 3). It thus included small children, who were never engaged in productive labor and grown men who had taken the day off to go fishing. By the end of the century, however, it had come to be understood exclusively in the modern sense of "involuntary idleness," wanting a job but being unable to find one. The central question of the book is thus: What hap- pened in the course of the nineteenth century to produce this linguistic transformation?

Keyssar is a social historian, not an economist, and his answer to the question is based largely upon traditional historical sources: documentary evidence, gathered from the newspapers, government reports, trade union pamphlets, civic organizations, and the casework of charitable organizations and social workers supplemented by case studies by other historians of particular industries,


industrial communities, and businesses, which, for Massachusetts, are numerous. He presents statistical material when it becomes available. For the latter years, it is fairly extensive: the federal census of 1890, 1900, and 1910; Massachusetts census in 1885 and 1895; and a special survey of the Massachusetts Bureau of Statistics of Labor of unemployment among trade unionists, quarterly from 1908 through 1923. There are serious problems of comparability among these different surveys. Keyssar is well aware of these problems, but he is extremely apologetic about burdening the reader with discussion of them. They are confined to footnotes and appendices and even there, from an economist's point of view, are teasingly abbreviated. But because the statistics are used largely to illustrate or amplify the documentary evidence, the data are adequate to bear the weight of the argument they are asked to carry.

The explanation for the emergence of unemployment which Keyssar abstracts from his material is similar to that of Sa- lais and his colleagues, but also different. The similarities lie in the social structures in which work is embedded and which act to cushion the impact of fluctuations in economic activity. At the beginning of the nineteenth century, industrial work in Massachusetts, as in much of early twentieth-century France, was combined in close geographic and institutional proximity to domestic work and agriculture. It tended to be done in small household-based workshops or put out to farmers. Thus, when industrial activity was slack, industrial workers simply shifted to farm tasks or household main- tenance; when demand picked up, they shifted back to industrial activity. In the course of the century, however, work moved off the farms and out of the household into factories that were separated socially, geographically, and institution-

ally. When factory work fell off, workers could not therefore easily shift. They were without a job and finding something else to do involved a distinct effort, a recognizable period of time and social space. That space came to be referred to as unemployment. Keyssar does not make the distinctions between large and small enterprises or more or less urban- ized environments that loom so large in Salais et al., but otherwise the notions of social space and its emergence through structural change in the two books are coincident. Keyssar's book is different from that of Salais et al. in the sense that Keyssar does not really explain why or how this structural change occurred. In- stead he concentrates on documenting the change, the amount of unemployment (in the modern sense of the term) to which it gave rise, and the impact of the unemployment on workers' lives. As a result, he leaves the impression that the changes are the natural and inevitable product of industrial, or as Keyssar himself would probably term it, capitalist development. There is no choice or act of will. The result is an extremely effective reply to the new economic orthodoxy. Keyssar shows us what the world looks like in which unemployment means leisure activity. He documents the disap- pearance of that world and makes clear that it is not the world we live in today. He also shows that contemporary institutional structures such as unemployment insurance and layoff by seniority, which analysts now tend to view as a "cause" of unemployment, actually emerged in response to unemployment, and asserts that while they may, in fact, have changed its distribution, they have done little to alter the level.'

The book also addresses a number of

1 His quantitative analysis is not enough actually to sustain this last point, but the much more sophisticated statistical work by Christina Romer (1986a, 1986b, 1986c) in the last year makes it plausible.


issues that have emerged as a by-product of the new orthodoxy. For example, Keyssar shows that in the nineteenth century, before there were any of the institutional restraints such as unemployment insurance or recall rights which modern analysts have argued distort de- cisions, workers tried to shift geographically in response to variations in the distribution of demand, but demand was so erratic even across firms in the same industry that it was impossible for even an extremely mobile labor force to keep up with its variations. But the book leaves us at a complete loss as to what to do about unemployment. Keyssar does not seem to believe that we can go back to the early nineteenth-century economic structures; indeed, he leaves the impression that this would cost us dearly in terms of our standard of living. And, yet, he seems to see little that we might do to reduce unemployment within the existing economic structures and he offers us no vision of an alternative structure toward which we might move in the future. Somewhat paradoxically, therefore, Keyssar leaves us with a certain nos- talgia for the position he seems to have destroyed. It, at least, offered the posibil- ity of measures we might take to improve the world.

III

How does one explain the difference between the perspectives of these two books?

To a great extent, that difference re- flects the differences in the intellectual traditions out of which they have developed. Salais et al. are the product of contemporary French labor economics and industrial relations, a tradition of thought whose major preoccupation has been the attempt to understand the historical evolution of institutional structures. It has been driven by what is, especially for

France, unusually rich case-study material of actual business practices that scholars have tried to understand by an eclec- tic theoretical approach, borrowing freely from Marxist and orthodox economic theories as well as American industrial relations, labor market segmen- tation, and radical economic theory.

Three developments growing out of this tradition seem particularly important for the understanding and interpretation of the Salais book. The first is the work of Laboratoire d'economie et de sociolo- gie du travail (LEST) in Aix-en-Provence comparing the organization of industrial work in France and Germany (Marc Maurice et al. 1982, 1986). The LEST studies started with the observation that the distribution of wage and salary income is much wider in France than it is in Germany. They tried unsuccessfully to explain this difference through succes- sively finer disaggregations of the data until ultimately in the early 1970s they were able to reduce the problem to the plant level. They formed 12 pairs of plants, each pair composed of a plant in France matched on the basis of size, product, and production technology with another in Germany. At this level, they were able to trace the difference in the two distributions to a series of lower-level managerial employees that were found in the French plants but not in the Ger- man ones. In order to fit these employees into the wage hierarchy, its range was widened. The LEST researchers then conducted further studies designed to explain what these "extra" managerial employees did in France and why. The essential result is that the same work in France is organized completely differently from that in Germany: To simplify, the French make a much more radical separation between the tasks of concep- tualization and execution than do the Germans, and French lower-level managerial workers carry a range of design


and planning functions that German rank-and-file workers perform themselves. This difference is in turn related to profound differences in the structure of the educational systems (there is more formal education in France, more on-the- job training in Germany), in industrial relations (adversarial in France, coopera- tive in Germany), and in the nature of day-to-day social interaction in the two countries (French social relations are structured to avoid personal confronta- tion). It is reflected not only in differences in the distribution of wage and salary income, but also in the nature of career paths and in the degree of worker autonomy, on the one hand, and respon- sibility on the other. Indeed, the differences in the two countries extend to so many aspects of economic and social organization that it is impossible to isolate a clear chain of causality.

The LEST studies leave a lot of loose enls, and in themselves have not been fully successful in generating a theoretical explanation for the structures of the two societies. But they have fundamentally changed the type of theoretical explanation of economic and social structures that is acceptable to French scholars. Prior to these studies, most French social scientists (and probably those in the Anglo-Saxon world as well) tended to subscribe to some form of industrial or technological convergence. They believed that competitive pressures would drive all industrial societies sooner or later to adopt the one best set of industrial techniques and that those techniques would determine the key aspects of work organization and related income, education, and industrial relations structures. Given that France and Germany are at more or less equal stages in their industrial development, more or less equally successful given conventional in- dicators of social welfare and economic performance-and indeed the pairs of

enterprises competed directly in the Common Market-these hypotheses can no longer be sustained. The LEST studies thus open a whole new space for spec- ulation about the origins and impact of the key structures of modern society, and it is within that space that Salais and his colleagues are working.

A second range of studies that feeds directly into the "invention of unemployment" is the on-going research at IN- SEE, the French national statistics institute, into the history of statistical categories. This research was pioneered by A. Desrosieres (1977). Among the most important contributors are F. Ey- mard-Duvernay (1983, 1984), Eymard- Duvernay et al. (1983), Eymard-Duver- nay and L. Thevenot (1979), Thevenot (1984), and Salais himself. All of these scholars worked and studied under Ed- mond Malinvaud (1974; Carre et al. 1972) but their work has been heavily influ- enced by the French sociologist Pierre Bourdieu (1977, 1980). Most of this research focuses upon statistical categories that, individually at least, are much less critical to our interpretation of industrial society than unemployment, and the findings are considerably more modest in scope and import than those that Salais and his colleagues reach in their book on unemployment. But together the studies develop the notion that statistical categories ranging from those used by the census to collect data on professional employment to the job evaluation grid in which the French collect wage data, are a social and political creation; they emerge in a definite historical process in response to particular political and economic pressures and once they emerge they affect in important ways the structure of the economic system and its subsequent evolution. Statistical categories are in other words themselves instru- ments and institutions that are invented and then propagated through "invest-


ments" in the same way that technologies embodied in physical capital are invented and propagated. We cannot say whether we train doctors and nurses sep- arately because they are distinct categories in our occupational statistics or whether doctor and nurse are distinct categories because they are educated and trained through distinct processes and institutions.

Because statistical categories are important, but historically contingent structures, these categories and the processes through which they are generated could explain such critical differences in the nature and direction of the economic system as those that the LEST studies uncovered in France and Germany. American business organizations today will understand this lesson in terms of their attempt to copy what they perceive as the more efficient Japanese organiza- tional forms: The Japanese eschew a whole set of professional categories- ranging from secretaries to accountants, and industrial engineers-that are critical to the way in which Americans do business. But U.S. companies feel unable to abandon these categories: Instead they have been forced to invent functional equivalents to the Japanese organiza- tional forms that retain these categories even as they have sought to imitate Japa- nese practice (William Ouchi 1981).

The last of the major intellectual cur- rents reflected in L'invention du chA- mage is the "theorie de la regulation" (Michel Aglietta 1976; Robert Boyer 1979, 1986a, 1986b). This theory was developed by a group of economists trained at INSEE in neoclassical economics but with a strong Marxist intellectual background. In many ways, it can be understood as a way of combining a Marxian framework with the basic analytical insights of orthodox economics, although the features of the two schools that the theory tends to highlight are not those

generally attributed to either school in the United States.

From orthodox economics, the Regula- tion theorists have taken the idea of a coherent, self-regulating economic system. From Marxian economics, they have taken the notion that the economy is embedded in a series of social and institutional structures and that analytical models must explicitly recognize these structures and the political processes through which they are generated and sustained. They have also taken from Marx the idea of a developmental process in which the society passes through a series of distinct economic systems that succeed each other in history. But they have transposed this notion from the metatransition from feudalism through capitalism to socialism, upon which classical Marxism focuses, to a sequence of systems that are encompassed within capitalism itself. One focus of the theory is upon the nature of these systems, each of which it defines in terms of a set of characteristic institutions that together form a self-equilibrating economic system (in the sense that a competitive neoclassical economy is self-equilibrating, although not necessarily of the neoclassical form). These regimes are separated from each other by periods of crisis, in which the system loses its self-equilibrating ca- pacity, and in which stability can be re- stored only by the generation of a new set of social and institutional structures. These crisis periods and the social and institutional regeneration that occurs within them constitute a second focus of the theory. It is in the analysis of these crises that social and political, as opposed to orthodox economic analysis comes into play. Regulation theorists view both the Great Depression and the current period, beginning in the early seventies, as periods of economic crisis. And it is in this sense that Salais et al. argue that unemployment was created in France as


a social construct in the period of the 1930s as part of the process which generated the post-World War II regulatory regime and that that social construct must be altered in the current crisis in order for a new regulatory structure to emerge.

Keyssar is a product of the new labor history, which emanated in England from the work of Edward P. Thompson (1963) and is represented in the United States by David Brody (1980), David Montgomery (1949), Herbert Gutman (1975), and Eugene Genovesi (1969, 1974). Most of these people are Marxists and like the French labor economists have been interested in developing the relationship between the economy and the social structure, or what orthodox Marxists would call the base and the su- perstructure. They thus reject the traditional view that until the revolutionary moment when the capitalist system comes to an end, the working class plays an essentially passive role in economic history. The central theme of this research is that workers play an important and active part in developing their own culture and that that culture then medi- ates the impact of the system upon their daily lives.

The interest of the new labor historians in working-class culture can be likened to the interest of the French labor economists in institutions, but the role that the historians ascribe to culture never goes nearly so far. The historians preserve the orthodox Marxist determinism running from the base to the superstruc- ture: working-class culture may mediate the impact of the economic base upon workers' lives but the culture cannot "transform" those lives, nor can it transform the economic system itself. The work of the historians thus tends to presume an independent historical thrust for the economic system. In this respect, it is fundamentally at odds with the findings

of the LEST studies, the INSEE studies of the history of statistical categories, and the theory of regulation, all of which ren- der problematic the very base that the labor historians assume.

But it is probably a mistake to try to understand the difference between these two books and their interpretations of unemployment within the terms of Marx- ist scholarship alone. In many ways, the differences transcend Marxism and distinguish continental and Anglo-Saxon thought in all domains of social science. Keyssar, despite his Marxian orientation, writes from a Lockean tradition in which there is a natural world, separate from human beings and independent of their actions. One can thus distinguish, at least conceptually, between "true" ideas which are associated with that world and "other" ideas which are the product of human efforts to alter that external reality. His argument is distin- guished substantively by the fact that he works from a Marxist model of capitalist reality in which "unemployment" is a real category. But it is structurally not so different from the Chicago notion of a "natural" rate of unemployment, something which, as the term implies, is beyond the reach of human action. In the continental tradition of social thought, this notion of an external reality is problematic.

The distinguishing cast of recent An- glo-Saxon thought in this regard is illus- trated by the evolving debate about the relative stability of the U.S. economy in the post-World War II period. The old orthodoxy in which the postwar view of unemployment was embedded held that the institutional reforms of the depression and the emergence of Keynesian- based demand management after the war had significantly reduced instability. In the new orthodoxy, these claims are highly suspect. They are nonetheless difficult to evaluate because most postwar statistical series are not comparable to


their prewar counterparts. In particular, postwar series are based upon much more comprehensive surveys. This should reduce random variance, or noise, and that alone could make for the greater stability we observe.

A new page in this debate has been opened recently by Romer (1986a, 1986b, 1986c). Her work is based on the insight that although it is not possible to go back in history and collect prewar statistics to conform to postwar stan- dards, it is possible to edit postwar data so that they are essentially comparable to those of the earlier period. The results of this exercise tend to confirm that a good deal of the observed stability in the postwar period is spurious. These results have been interpreted as supporting the view that the fundamental economic processes were unaffected by the postwar reforms, and thus have greatly intensi- fied the debate about Keynesian countercyclical policy. The renewed debate, however, has focused almost entirely upon the accuracy of Romer's corrections of the postwar series (Stanley Lebergott 1986; David Weir 1986). But these series were introduced to support the more active policies that Keynesian economists sought to pursue and are really part of the same package of institutional reforms as the policies themselves. Romer's work raises therefore, not only a statistical question but also a profound theoretical question as well: How is it possible to change so fundamentally the institutions that serve as the eyes and ears through which we experience economic activity without significantly changing the way in which we behave? Or, to put the matter differently, why are our data-gathering institutions so much more malleable than those that produce and distribute goods and services? Indeed, is it really plausible that we could have succeeded so easily in changing the one after the end of the war and yet fail, despite much more

determined efforts, in changing other institutional structures in the same period? These are the questions the French scholars would naturally ask.

IV

The difference between the Keyssar and Salais interpretations of unemployment can probably not, however, be understood exclusively in terms of the intellectual traditions in which they are working. To some extent, they are exam- ining two different realities. For one thing, the book focus upon different sec- tors of the economy in different historical periods. The Keyssar study is of the ad- vanced industrial sector of a much larger national economy in a relatively early period of industrial history. Salais and his colleagues examine the whole of an economy whose industrial spurt occurred much later, at a very different moment in the evolution of the world economic system. To evaluate these influences, given the material provided by these two books, almost requires the reader to take a position on the arguments outlined in the previous section.

The orthodox Marxist position is that the inevitable thrust of industrial development is toward productive units which are increasingly large, employing pro- gressively less skilled labor in more and more narrowly defined jobs, performed in factories whose physical and social existence is increasingly remote from other aspects of social life. Under this supposi- tion, the large productive enterprises and urban conglomerates that Salais and company found to be associated with unemployment are the avant garde of industrial development in twentieth-century France. And Massachusetts, as the most industrialized sector of one of the pioneer industrial economies, is likely to have developed these characteristics in the course of the nineteenth century, as


Keyssar's study shows. Indeed, in this view, French postwar policy, in imposing this model on the national economy, was simply serving as the vehicle for the expression of the forces of capitalist economic development. This conception of the nature of industrial development was very widely shared in postwar France- across the political spectrum-and was one of the major factors in state policy.

On the other hand, when these studies are read against the background of contemporary institutional research on unemployment, one arrives at a somewhat different position about the two studies. The LEST study of France and Germany suggests that perhaps France and the United States were developing fundamentally different employment systems that were basically independent of their technological development. The plausibility of this hypothesis is strengthened by the concern in the last several years with labor market flexibility in the U.S. and Western Europe. The research that has responded to that concern suggests that the American employment system is dis- tinguished not only from the French system but also from that of most other industrial economies by the degree to which employers are free to lay off and discharge workers in response to variations in economic conditions (Piore 1986b).

One would be unlikely to arrive at this conclusion from these two books alone, but if one comes to them with such an idea about the difference between Amer- ican and European institutions already well formulated, the books begin to suggest how that difference emerged. And one sees it in both the large enterprises to which Salais et al. link modern notions of unemployment, and in the smaller ones, to which they see modern unemployment as initially foreign.

The picture that emerges from the comparison of the history of unemploy-

ment in France and the U.S. is thus different from the one that Salais et al. abstract from French history taken in isolation. Even the large enterprises in France, it becomes apparent, operated on a familial model: They tried to repro- duce a social structure within the enterprise that was analogous to that of the household, the workshop, or the farm. That structure involved an obligation of permanent, continuing employment. It has been only when companies are unable to fulfill these obligations, as was the case in the Great Depression of the 1930s, that open unemployment ap- peared. In other periods France, even in areas dominated by large companies, has had virtually no open unemployment at all.

Keyssar identifies a similar development in early nineteenth-century Massa- chusetts. The most prominent example is well known: the recruitment of young women for textile employment into factories that combined industrial work with educational and cultural activities in a college campus-like environment. These efforts were abandoned, however, in the course of the nineteenth century for a much more casual employment commit- ment. Moreover, that move toward a casual employment relationship does not appear to have been peculiar to relatively large enterprises. It seems to pervade the whole of the Massachusetts labor market. Perhaps most striking is the fact that the kinds of mutual aid societies among craftsmen that Keyssar describes in Massachusetts were much too weak to provoke the debate so salient among French statisticians about whether or not out-of-work craftsmen should be classified as unemployed. The critical factor in this development of a casual labor market in the story which Keyssar tells was large-scale foreign immigration. The suggestion that immigration is the critical factor in the development of the peculiar


casualness of the U. S. employment relationship fits well with the fact that in the 1920s, after free foreign immigration was curtailed, America's industrial employers began to introduce more permanent employment commitments comparable to those in Europe and Japan. But for the depression of the 1930s, which inter- rupted these experiments in a brutal and definitive way, they might have evolved into a very different institutional structure.

V

What do these books ultimately suggest for an understanding of unemployment? Either book alone, and certainly the two taken together, should be enough to forestall the emergence of a consensus among economists about the interpretation of unemployment. Keys- sar's argument, however, is essentially a reassertion of the standard view dominant in the 1950s and 1960s: Unemploy- ment is real-it is a serious disruption in workers' lives. It is not the result of productive job search or relocation: The location of jobs in nineteenth-century Massachusetts shifts too rapidly for workers to find them. But while workers cannot move fast enough to keep up with the pace of job change, they seem to move too fast to serve as an effective in- ventory of labor for jobs that have tempo- rarily disappeared. There is in Keyssar, moreover, a strong suggestion-although the evidence is incomplete-that the world has changed little in these respects since the beginning of the twentieth century. This suggestion feeds the growing scepticism about the effectiveness of Keynesian demand management. With- out demand management, or the pros- pect of a Marxian revolution, the differences between older views about unemployment and newer ones lose much of their force. Keyssar's analysis suggests a

good deal of moral indignation, which the position originating in Chicago lacks, but it implies a similar resignation.

Salais and his colleagues suggest a fundamental revision of the traditional interpretation of unemployment, one that rec- ognizes and validates many of the insights of recent scholarship, but that leads to very different conclusions. The French argument rejects the premise of mainstream economics, that economic behavior can be usefully modeled by abstract- ing from the social context in which it occurs. Instead, the argument implies that human beings always attempt to em- bed their activities in stable social structures. Governmental activities and institutions must be understood as part of those structures (ust as, incidentally, must statistical concepts and measures). When government institutions exist, the relevent social structures will be built around them; when they are not present, alternate structures will be created in their place. It is inconceivable, in this view, that such structures will fail to respond to such a fundamental aspect of the human environment as the discontin- uity in economic activity or the instability of work, which is reflected in our measures of unemployment.

All of this makes it very doubtful that, under normal circumstances, unemployment is the catastrophic event that Keys- sar pictures it to be. When interruptions in work activity are a frequent occurrence, some kind of social structures must be developed to handle it. When that unemployment exhibits a fairly regu- lar seasonal and/or cyclical pattern, those structures must anticipate these patterns and predicate responses upon their existence. This suggests a distinction between normal periods, when the unemployment experienced is anticipated and the social structures that respond to it are stable, and abnormal periods (or, to use the language of the French theorie


de la regulation, "crises"), when the nature and extent of unemployment are unanticipated and the social structures with which people have traditionally accom- modated that unemployment break down.

In this perspective, the depression of the 1930s was a critical moment, at least in the U.S. and in France. But it had two separate and distinct effects. First, it was a crisis in the above sense of the term. The existing social structures were unable to accommodate the unemployment of the depression and the government intervened to supplement them. This first effect was probably an inevitable part of the depression experience. But the second effect was not inevitable. The government might have created only temporary structures designed to handle the crisis but destined to disappear with the economic recovery. Some, like the Works Progress Administration in the U.S., were eliminated. But many of the new institutions either became permanent or were replaced by permanent institutions of similar design. As a stable social structure was regenerated in the postwar period, it presumed those new types of governmental institutions and was built around them.

This undoubtedly changed the statistical manifestations of unemployment and the response of the workforce to it. But the nature of this effect is not obvious. For example, government unemployment insurance might prolong the job search and inhibit labor mobility. But if it substitutes for more local systems of support such as the family or craft mutual aid societies, it could just as well increase labor mobility. The unemployed could well have been relieved by the new system from pressure to stay close to family support networks, reject job offers that undermine the family's social status, or remain in the craft from which they draw their aid. Thus, to know what the impact

of the unemployment insurance systems has been, one would have to examine in detail the nature of the social system which it replaced. And to evaluate pro- posed reforms, now, one would have to anticipate the social support networks that will arise in their absence.

The most important point suggested by the Salais argument, however, is that whatever the relevance of the arguments about unemployment as an artifact, they seem almost completely confined to periods of "normal" unemployment, not periods of "crisis." And the current period appears most appropriately characterized as one of "crisis." It is a crisis in the sense that the extent and magnitude of the unemployment we are experiencing was not anticipated either by the labor market participants or by government policymakers.

In the United States and Western Eu- rope it is clearly straining systems of social support, both public and private, forcing them toward bankruptcy. This effect is less apparent now than in the 1930s because few of the unemployed have actually been denied some form of social assistance. But unemployment insurance systems in both countries would not have been able to provide this assistance had they not been supplied with general revenue. In France, employers who never laid off were forced to do so. In the U.S., too, employers have laid off managerial workers who had been previously thought to have permanent jobs, and even for blue-collar jobs never considered permanent the magnitude of the layoffs has required the ad hoc rene- gotiation of collective agreements, in some cases more than once. The issue today is, as it was in the 1930s: What kind of new social systems will we create to replace the structures that are falling apart?

Here a final insight of the French research becomes important: The social


structures that mediate the impact of economic flux and uncertainty upon our lives-and hence determine whether or not these manifest themselves as unemployment-are not freestanding. They are part of much broader constellations of practices, institutions, and relationships. They cannot be understood inde- pendently of managerial philosophy and technique, the way in which economic and family relationships are intertwined (or separated), the size and structure of enterprises and the relationship between them, and-following the logic of the LEST comparison of France and Ger- many-the educational system, industrial relations, and the structure and organization of productive forces themselves. Because these things are bound up together, unemployment cannot be meaningfully evaluated in isolation. Both scholarship and policy must focus instead on these much broader constellations, on the nature of their internal coherence, on their origin, and on the way in which they evolve-or can be made to evolve- in time.

This way of looking at the world, and the research agenda that it implies, is not quite as distant from that of mainstream economics as it sounds. One branch of contemporary theory is increasingly focused upon the phenome- non of long-term contracts that govern economic relationships over a range of contingent events. One could think of such long-term contracts as institutions, and one could understand a "regulatory regime" as an interdependent constellation of such contracts-interdependent in the sense that the validity of the distribution of contingencies assumed by any one such contract depends on the actions mandated by other contracts in the same constellation. A crisis of a regulatory system defined in this way can then be thought of as occasioned by the fact that the parties come to doubt the validity

of the distribution of contingencies that the institutions presume. The resolution of such a crisis would be seen as a process in which the contracting parties come to believe in an alternative distribution and build new contractual relationships on that basis.

To the extent that the current crisis revolves around unemployment it can be given quite precise meaning in these terms. The institutions sustaining the unemployed, in both the United States and Western Europe, have been designed to be self-supporting insurance systems. Their financial structures thus explicitly embody a set of assumptions about the distributions of unemployment levels over time. The fact that these systems are threatened with bankruptcy means that the actual levels of unemployment lie outside the assumed distribution. This fact is in turn attributable to the failure of assumptions upon which the structure of employing institutions are built, assumptions about the distribution of the levels of product demand upon which the practices of individual enterprises in employment and lay-off are predicated.

Phrased in this way, a theory of long- term contracts would be precisely the theory of regulation that Salais and his colleagues are attempting to develop. But it is here in fact that the real difference between mainstream economics and the approaches of the theory of regulation emerges most clearly. Mainstream theory has been attempting to understand the nature of long-term contracts and the process through which they are generated by focusing on two classes of problems: one in which the underlying distribution of contingent events is known and the other in which stable belief structures about the nature of that distribution can be generated by the interaction of the contracting parties (Rob- ert Anderson 1985).

There are inherent difficulties with this


approach. These include the fact that log- ically no series of events will necessarily lead one to abandon a given set of beliefs about the distribution of events like the level of unemployment: The occurrence of any particular level of unemployment could simply be attributed to an extremely unlucky roll of the dice. Even a very long string of high levels might be interpreted as an exceptional run of bad luck, a range of experience so unlikely to recur that one would not want to design an institutional structure to accommodate it. This was more or less the rationale for financing the expenses of unemployment throughout the seventies through "loans" to the unemployment insurance system from general government revenue without a basic revision in the tax and benefit structures. When one is led by events to abandon the old beliefs about the underlying distribution a further problem emerges. Given the number of interrelated contracts and hence the number of different belief systems at stake in a modern economy, it seems very unlikely that a stable set will ever be generated by discrete interactions of the kind on which mainstream theory is focusing. If this is so, then belief systems must be imposed in some other way. The other way might be through some kind of social contract, through a political com- promise engineered by a coherent ruling class, or a sociocultural process through which some limited set of institutional structures is given salience.

It is a concern with these alternatives that distinguishes the research agenda of the French school and of those of us in the Anglo-Saxon world who share, in one way or another, its perspective. Under- stood in this way, the relevant literature is not necessarily that on unemployment per se; it is the literature that tries to understand the broader institutional structures of which unemployment is a by-product. In the U.S., work along

these lines includes the studies of Harry Katz (1985) and Tom Kochan et al. (1986) in industrial relations, Paul Osterman's work on employment and training systems (forthcoming), Mel Horwitch's work on what he calls "post-modern management" (forthcoming), Ouchi's study of the ways in which American management has sought to adapt Japanese business practice (1981), and Piore and Charles Sabel's book about the evolution from mass production toward flexible specialization (1984). The popular press, and indeed much of the community of academic economists (Norton 1986), has assimilated this work to the debate about industrial policy. But in fact it should really be understood as cousin to the French school. The basic research strategy is the "levered" case study. Its es- sence is to use the variation in institutional arrangements across industries, countries, and historical periods to en- large the repertoire of arrangements that we know to be possible; to use the contrast between those possibilities and the arrangements that are actually realized in a given industry at a particular time and place to suggest the operative constraints; and finally to seek to envisage ways of circumventing those constraints by combining the arrangements drawn from the enlarged repertoire in novel ways. L'invention du chomage provides us with a model of how to approach one particular policy problem in this way.

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