Cartels or Fair Competition? The Economics of the National Industrial Recovery Act

Abstract

During the heart of the Great Depression, the National Industrial Recovery Act (NIRA) suspended U.S. antitrust laws and helped coordinate government sponsored cartels in most manufacturing industries in the American economy. The potential effect, detrimental or beneficial, of cartels is a topic of debate in the recent theoretical literature of cartels, though few historical examples of large-scale, economy-wide cartels exist. This study uses the NIRA cartel experience to test the competing hypotheses of the effects of cartels on economic variables.