Gilles Saint-Paul has written an intriguing chapter on the political economy of labour market policies. The chapter is full of new ideas, breaking new ground in political economy, an exciting field with potentially valuable insights into the interaction of economics and politics. Since unemployment policy is an area where political calculations are clearly very important, the chapter addresses a very relevant issue from a useful viewpoint. In my discussion, I will make a couple of general remarks and then go on to more detailed points.

My first remark has to do with labour market rigidities as the culprits for high European unemployment. We should realise that, apart from what one may believe on this issue, the evidence produced by economists concerning the blame that can be put on these rigidities is weak. For example, in his 1994 survey on the research about European unemployment in the Journal of Economic Literature, Charles Bean (p. 614) states: ‘So what have we learned from this decade-long research effort? A cynic might reply: not much.’ More to the point, referring to flexibility-enhancing measures (p. 615) he adds: ‘The UK has probably gone furthest in enacting such structural policies, although so far with rather little beneficial effect on unemployment.’ The chapters and discussions in the present volume also reflect, in my opinion, the deep controversy on the causes of European unemployment, which translates into conflicting views on the best policies to reduce it.