# seignorage

## Definition

A small duty or charge imposed upon the coinage of both gold and silver, which Smith argues would increase the superiority of those metals in coin above an equal quantity of either of them in bullion. He suggests that seignorage would prevent the melting down of coin and discourage its exportation, as the coin would be worth more than its bullion value due to the added seignorage charge.

## Source Chapter

Book 1, Chapter 5: "OF THE REAL AND NOMINAL PRICE OF COMMODITIES, OR OF THEIR PRICE IN LABOUR, AND THEIR PRICE IN MONEY."

## Context

Smith discusses seignorage while explaining the relationship between coin and bullion values and the mechanisms that can be used to maintain the integrity of the monetary system. He notes that a small seignorage would increase the value of the metal coined in proportion to the extent of this small duty, similar to how fashion increases the value of plate.

## Economic Domain

Regulation

## Smith's Original Wording

"A small seignorage or duty upon the coinage of both gold and silver, would probably increase still more the superiority of those metals in coin above an equal quantity of either of them in bullion."

## Modern Interpretation

Seignorage represents the revenue generated by the difference between the face value of money and its production cost, which in modern terms is a significant source of government revenue. In contemporary economies, seignorage is particularly important for fiat currency systems where the production cost is minimal compared to face value. It relates to modern discussions of monetary policy, government finance, and the economics of currency production.