The Dual Revolution of Kuznets and Keynes: National Income Accounting and Its Role in Economic Imagination, 1930s–50s

Simon Kuznets, Nobel laureate economist and pioneer of Gross Domestic Product estimates, once remarked that empirical, quantitative research in economics “is not merely putting flesh on the skeleton of economic theory; it is, to continue the medical analogy, knowing the approximate length, shape, and hardness of the bones of the skeleton itself.” This paper examines the tools economists built to envision the skeletal structure of “the economy” as this phrase was entering the public lexicon for the first time, and the relationship between these processes. I show that attempts to see where the economy was and what it looked like were ultimately articulations of competing visions of what the economy is for. In particular, I focus on the political and philosophical debates about the “production boundary,” the line that determined what counted as part of the economy for the purpose of computing the national product account. My paper traces these strands of economic thought from the innovative 1930s, through the crucible of World War II, and into the postwar era when they were enshrined as orthodoxy in Economics departments and governmental halls of power alike, emphasizing the continuity and development across the chasm of war. This narrative challenges the dominant view that the “Keynesian revolution” was the primary locus of innovation in interwar economic thought, arguing that the statistical work carried out by Kuznets and others at the National Bureau of Economic Research to “get a better picture of” the economy was an essential element of the development of economic theory from the Depression to the postwar era. The challenge of rendering a complete statistical portrait, first undertaken by Kuznets in 1932, transformed what was once thought of as a gradient between economic and social life into a binary categorization, firming up the borders of the object called “the economy.”