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Industrial Seigniorage: The Other Face of Competition

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  • Jordan Melmiès

Abstract

This paper presents a novel perspective on industrial practices in modern competitive capitalist economies, questioning, in particular, the link between prices, competition, and the quality of goods and services. It tries to characterize a business practice that consists in reducing prices and maintaining (or increasing) profit margins by reducing the quality of goods and services while still presenting them as the same as before . The paper is primarily concerned with the practice of producing inferior quality goods by reducing the quantity of inputs used in the production process, or mixing inputs with cheaper constituents. The proposed term for this practice, “industrial seigniorage,†is based on the historical privilege of feudal lords (from Old French seigneur ), who—possessing the right to mint gold coins—made a profit by adding cheaper base metals to the bullion. The present, essentially exploratory investigation attempts to delineate the widespread existence of such practices in various industrial sectors. It strives to explain the fundamental elements of consumer behavior that enable this practice to exist and discusses the effects of industrial seigniorage on several social issues. The attempt of the paper is finally to show that contrary to the ideology of capitalism, competition does not necessary lead to benefits for consumers or to an increase in product quality.

Suggested Citation

  • Jordan Melmiès, 2017. "Industrial Seigniorage: The Other Face of Competition," Review of Radical Political Economics, Union for Radical Political Economics, vol. 49(2), pages 286-302, June.
  • Handle: RePEc:sae:reorpe:v:49:y:2017:i:2:p:286-302
    DOI: 10.1177/0486613415623258
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    References listed on IDEAS

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    1. Marc Lavoie, 1994. "A Post Keynesian Approach to Consumer Choice," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 16(4), pages 539-562, July.
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    5. Marc Lavoie, 1992. "Foundations of Post-Keynesian Economic Analysis," Books, Edward Elgar Publishing, number 275.
    6. Satoshi Imai & Tsutomu Watanabe, 2013. "Product Downsizing and Hidden Price Increases: Evidence from Japan's Deflationary Period," CARF F-Series CARF-F-320, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
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    More about this item

    Keywords

    input substitution; fraud; consumer behavior; mass production;
    All these keywords.

    JEL classification:

    • B50 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - General
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D20 - Microeconomics - - Production and Organizations - - - General

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