Keynes, the National Industrial Recovery Act and the Demise of Nascent Real Business Cycle Analysis
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The National Industrial Recovery Act (NIRA) of 1933 called for a radical reorganization of U.S. industry, substantial wage increases, workers’ right to bargain collectively as well as unprecedented government works projects. In a letter to President Roosevelt, British economist John Maynard Keynes denounced the NIRA on a number of grounds, not the least of which was the fact that, in his view, it would hinder economic recovery. This paper offers an alternative interpretation of this crucial episode in New Deal history. More specifically, it will be argued that despite his openmindedness, Keynes failed to understand, let alone appreciate, both the underlying structural issues in the U.S and the underlying logic behind the NIRA as an instrument of economic recovery. This owed, in part if not in whole, to what appears to be his inability to appreciate and/or understand structural/technological issues and their role in economic downturns, including Great Britain’s post-WWI depression.