Regulation Theory

Regulation theory emerged in France during the 1970s as an extension of Marxist political economy. The theory is especially associated with ideas developed in Michel Aglietta's seminal book A Theory of Capitalist Regulation (1976). In its basic form, regulation theory posits that when capitalism changes over time, new institutions develop to support the prevailing economic system. These clusters of economic and political institutions form distinct societal paradigms during separate phases of capitalist development.

The historical background to regulation theory is the tumultuous end of the 1960s, with its social upheavals and growing economic uncertainties—a period when the capitalist economy appeared weaker than at any point since the Great Depression. However, a decade later, it was clear that capitalism would not disintegrate due to its inherent contradictions, as orthodox Marxism suggested. In fact, it proved to be quite resilient. Faced with an economic and political crisis, capitalism was capable of “reinventing” itself by relying on new industrial organization, new global strategies, and a rethinking of state economic policies. This reinvention process, according to regulation theory, involved a change in the regime of accumulation—the transition from Fordism to post-Fordism. A regime of accumulation aims to create a stable relationship between consumption and production. It outlines the basic economic relationships in society, such as the conditions of production, private and public consumption, savings and investment, and the general scope and proper role of government. The specific social and economic institutions, cultural norms, and major government policies that must be in place and work together in a coherent fashion to support the regime are collectively referred to as a mode of regulation. These ideas in regulation theory draw, at least implicitly, on the concept of a “social contract” that emphasizes the idea of underlying informal agreements in society, providing common rules for cooperative behavior between groups and individuals. A mode of regulation is an outcome of collective action, political decisions, and various semi-independent variables, such as technological change; therefore, it involves periodic adjustment of the procedures and institutions.