From Wisconsin Institutionalism to American Macroeconomics: The Issue behind Unemployment Insurance (1910-1940) in the United States

Social policy has been a field of analytical and political debates during the New Deal. While historians of economic thought have studied this period in depth, the field of social policy has been somehow neglected. This paper focuses on the quarrel (as it was named by US American historians) which occurred during the genesis of unemployment insurance in the United-States during the 1930's. This historical debate opposes Wisconsin's Institutionalism led by John R. Commons and a diffuse group composed of reformers and economists developing some "Keynesian elements" in American thought. The paper argues that, while there is clearly a link between Commons and Keynes's thinking, the fact is that on the specific subject of employment, Commons charts his own course and advocates a "structural supply-side policy" centered on institutional reform in the implementation of unemployment insurance in the United-States. We highlight the lessons from this debate that took place among advocates of social security, revealing two conceptions of the social control of capitalism and two institutional designs for unemployment assurance. By completing the historiography of this period, the paper challenges the conventional wisdom by arguing that the New Deal in social policy does not really embody Commons' specific philosophy and economics.