Regulation Theory

Regulation theory is a distinctive paradigm in critical political economy. It originated in Europe and North America in the 1970s in response to the emerging crisis of the postwar economy and its mode of regulation, and it has since been applied to many other periods, regions, and contexts. Its name derives from its French originators, who describe it as la théorie de régulation (the theory of regulation) or l'approche en termes de régulation(the approach in terms of regulation). Similar ideas were developed by other schools. Their common core concern is the contradictory and conflictual dynamics of contemporary capitalism considered in terms of its extraeconomic as well as economic dimensions. In highlighting the latter, regulationists engage with other social sciences. One such affinity is with work on governance, especially economic governance. Indeed, regulation theory has been seen as the European equivalent of American institutionalist interest in macroeconomic and sectoral governance. This is overstated because there are important theoretical differences rooted in the Marxist background of the regulation approach and its focus on the logic of capitalism rather than the broader issues studied by governance theorists.

The various regulation schools examine the role of extraeconomic as well as economic factors in securing, albeit for limited periods and in specific economic spaces, what they regard as an inherently improbable and crisis-prone process of capital accumulation. Overall, while well aware of the invisible hand of market forces in this regard, they also explore how extraeconomic factors embed profit-oriented, marketmediated capitalist production in the wider society and help to tame, displace, and defer its contradictions and class conflicts. This process is associated with alternating periods of relatively stable expansion and crisisinduced restructuring, rescaling, and reregulation. Capitalism is deemed so contradictory and conflictual that crises will periodically trigger a trial-and-error search to find new ways of regularizing capitalist expansion. This provides the basis for regulationist work on different stages and varieties of capitalism.

Starting from real social relations in specific historical periods rather than from the abstract, transhistorical, rationalist assumptions of orthodox economics, all regulation schools largely share four goals: (1) describe the historically specific institutions and practices of capitalism, (2) explain the various crisis tendencies of modern capitalism and likely sources of crisis-resolution, (3) analyze different periods of capitalism and compare their respective accumulation regimes and modes of regulation, and (4) examine the social embedding and social regularization of economic institutions and conduct through their articulation with extra-economic factors and forces.

These goals provide potential links to research on governance. Governance theorists often distinguish among the invisible hand of the market (exchange), top-down management (command), reflexive dialogue and deliberation among equals with different but complementary interests (networking), and unconditional solidarities based on identification with a (real or imagined) community. Regulationists certainly recognize the importance of exchange mechanisms, but they argue that markets alone cannot secure economic growth or stability because they are inherently prone to market failure, especially in capitalist economies. Regulationists also argue that markets assume different forms and functions in different epochs, economic periods, and economic sectors. They also examine the state's role in providing many of the extraeconomic supports—material, institutional, policy driven, and discursive—that enable markets to operate or that compensate for their inevitable failures. They explore historically specific forms and functions of state intervention and insist that these cannot be reduced to purely technical questions but are always shaped by various kinds of social struggle. Therefore, they study the state's forms and activities in terms of successive patterns of institutionalized compromise. Equally significant are the other extraeconomic forms through which capital accumulation comes to be unevenly and provisionally stabilized. Here regulationists discuss the role of networks, interfirm linkages, norms, values, conventions, and other social forces in regularizing capital accumulation.

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