Deconstructing the MonolithThe Microeconomics of the National Industrial Recovery Act

Deconstructing the MonolithThe Microeconomics of the National Industrial Recovery Act

Jason E. Taylor

Print publication date: 2019

ISBN: 9780226603308

Publisher: University of Chicago Press

Abstract

The National Industrial Recovery Act (NIRA) of 1933 is generally viewed as a monolithic negative supply shock that evenly affected firms across the industrial economy during the Great Depression. Under the NIRA more than 500 industry-specific codes of fair competition were implemented. These codes legally bound firms to follow strict wage and hours regulations. In addition, industry codes generally contained a plethora of cartel-oriented trade practice rules that constrained firms’ production and pricing behavior. However, the NIRA industry codes were like snowflakes in that no two were alike. Some industries’ codes were over 50 pages long and dramatically restricted economic behavior in ways consistent with a profit-maximizing cartel. Other industries had 3 or 4 page codes that did very little to constrain firm behavior. There was also wide heterogeneity with respect to when industry codes were passed. Some industries were covered by their code as early as July 1933 while many other industries’ codes were not in place until mid-1934 or early 1935. This book challenges the view of the NIRA as a monolithic, one-size-fits-all shackle. By employing industry-level panel data it better captures the vastly heterogeneous effects of the NIRA than do macroeconomic-oriented studies which generally employ more aggregated data. Viewing the NIRA through a microeconomic lens, this book provides a better understanding of how the program affected the behavior and well-being of workers and firms during the twenty-three and a half months that it existed. In fact, the NIRA’s effects varied dramatically by industry and by time period.