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Small caps have many uses, but are primarily used for initials in body copy, such as NASA, NATO or the UN. The aim of this use is to diminish the visual awkwardness of capital letters hindering the flow of a paragraph. (Text figures are also used for better flow in body text versus lining figures.)
From Nick Shinn:
Here are some differing strategies for “Caps with Small Caps” titling.
I don’t think any of them are ideal for this typeface.
In the designated small cap font the small cap is, as I said earlier, too wide.
You get better matched letter proportions by “faking” the display small cap with a downsized “normal” cap, but the stem widths don’t quite match.
My preference for the best match is the Regular with SemiBold, although it might be a bit heavy overall.
To demonstrate that the situation is not a fault of any particular typefaces, but rather the outcome of the general habit of creating small caps primarily in relation to lower case, I’ve created an alternate small cap for Goudy, matched to the capital.
There may be other genres of type where the caps and small caps are better matched, and some typefaces where the small cap is matched to the cap rather than the lower case, but it is my opinion that in general, old style faces are configured like Minion and Goudy, making the use of caps/small caps in titling problematic, and requiring quite discriminating typography.
Using small caps
Designing small caps
About small caps