Risk and the National Industrial Recovery Act: An empirical evaluation

This paper examines the National Industrial Recovery Act of 1933 to see if the law helped "stabilize'' the U.S. economy during the Great Depression. T he test measures sample variances of the rates of return in stock price ind ices for six major U.S. industries as well as the overall stock market and compares those variances across five time periods. The statistics reveal th at the NIRA did not reduce risks faced by these firms. Stocks for NIRA-regu lated industries did not significantly decline in risk during the NIRA peri od, as compared with sample variance changes elsewhere during the Great Dep ression. The paper then interprets the results from a public choice point o f view.