ABSTRACT
INTRODUCTION In the literature on quality control, quality assurance, total quality management and so on there is often a discussion of what is called ‘the costs of quality’, or even ‘the economics of quality assur ance’.2 The ‘cost of quality’ approach is essentially one carried out by quality assurance engineers using cost accounting data, rather than one that would be used by economists. There has been a certain am ount of criticism of the approach within the paradigm (for example, Plunkett and Dale 1988, and Fox 1989), partly a criticism of the method itself, and partly an assertion that the results quoted were not realistic. In this chapter, however, a much more fundamental criticism will be presented, from the point of view of an economist. The main thrust of the argument will be that the writers on the subject have used a wide variety of variables as axes to their graphs, more or less interchangeably. They have failed to define what exactly is the variable they are using for their axes, or how they measure the variables. In Figures 12.3 to 12.18, some 48 curves will be plotted, all showing the same cost to an imaginary firm (Table 12.1), but defined according to the dif ferent variables used in the literature (the numbers attached to the curves refer to the corresponding row in Table 12.1). The curves are completely different in shape.3 It follows that the arguments in the literature about typical shapes for the curves are pointless: everybody is plotting different variables, so of course different curves can be expected. It will be argued that this confusion implies a lack of a theoretical basis for the costs of quality. This chapter will also show that there is often a major misinterpretation of the graphs, attempting to draw conclusions that the graphs do
not permit. Finally, it will be asked whether the ‘costs of quality’ approach is asking the right questions.
