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Deconstructing the MonolithThe Microeconomics of the National Industrial Recovery Act$
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Jason E. Taylor

Print publication date: 2019

Print ISBN-13: 9780226603308

Published to Chicago Scholarship Online: September 2019

DOI: 10.7208/chicago/9780226603445.001.0001

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The Economics of Compliance and Enforcement and the NRA Compliance Crisis

The Economics of Compliance and Enforcement and the NRA Compliance Crisis

(p.129) 7 The Economics of Compliance and Enforcement and the NRA Compliance Crisis
Deconstructing the Monolith

Jason E. Taylor

University of Chicago Press

The model of compliance and enforcement developed in this chapter highlights the importance of perceptions. Although few violators of the NIRA codes were fined or imprisoned, the government tried to create the illusion that defections would bring significant risk. In fact, during the late summer and early fall of 1933 compliance was very strong as firms broadly believed that violations would result in harsh penalties. But when initial violations were not met with swift punishment, perceptions of enforcement ratcheted downward, thus encouraging more defections. This created a vicious cycle that led to a full-blown compliance crisis in the spring of 1934. Complaints of violations flooded NRA offices in March and April of 1934 at double the rate of February. Regressions show that output, wages, and hours moved significantly stronger in the directions prodded by the NRA codes prior to the compliance crisis than they did after. Rather than throw in the towel, however, the government employed new strategies to try to turn the tide of compliance. The mass compliance drives, whereby whole cities or industries were surveyed by NRA compliance officers, brought some success in returning firms to compliance before the Schechter decision of May 1935 ruled the NIRA unconstitutional.

Keywords:   cartel compliance, cartel enforcement, cartel defection, compliance crisis, mass compliance drive

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