A case study, a formal model, and an anaLysis of Census of Manufactures data support a conclusion that cost heterogeneity was a major source of the “compliance crisis” affecting a number of National Recovery Administration “codes of fair competition.” Key elements of the argument are assumptions that progressives at the NRA allowed majority coalitions of small, high-cost finns to impose codes in heterogeneous industries, and that these codes were designed by the high-cost firms under an ultimately erroneous belief that they would be enforced by the NRA.

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