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May 15, 2007
Eliminate the USPS's Monopoly Privilege
Don Boudreaux
In today's edition of the Baltimore Sun J. H. Huebert says that it's time to stamp out the U.S. Postal Service's monopoly. Given that this inexcusable monopoly privilege wasn't eliminated long ago, he's correct: no time like the present to do what ought to be done. Here are the final few paragraph's of this fine op-ed:
Sure, the post office can go on pretending it's a business. Postmaster General Potter can talk about the dynamics of the "communications market" and dealing with "competition."
But none of that make-believe will change the fact that the post office is an outrageously inefficient government monopoly, which exists only because the law protects it from real competition or even the consequences of its perpetually poor management.
Strip the post office of its special privileges. Then we would see what kind of "business" it's capable of. In all likelihood, under those circumstances, it would quickly become extinct.
Nothing, not even the "forever" stamp, is really forever. If it can't function as a truly private business, then it's time for the post office to step aside and let the private sector take over.
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Considering that anyone who depends on timely delivery uses FedEx, DHL, or UPS, the writing has been on the wall for some time - actually going back to a certain Lysander Spooner who initially challenged the USPS in the courts, and lost, putting an end to his mildly successful private post.
Posted by: David Z | May 15, 2007 8:15:34 AM
What's comical is that the government requires businesses providing overnight delivery to charge more than the postal service, and people still use the competitors.
Imagine if the government mandated that Burger King to charge $1.00 more then McDonalds on all menu items, and still most people went to Burger King. We'd be mocking McDonalds mercilessly.
Posted by: tarran | May 15, 2007 9:07:51 AM
Alas, Heubert is treating this as if it were a intellectual issue rather than a muscle issue, and he misses the core intellectual issue.
The core intellectual issue is the Post Office's claim that its monopoly is necessary to cross-subsidize rural delivery, the kind of high-cost service that FedEx and UPS could legally ignore. This "mission" provides their excuse as to why they perpetually lose money; despite the nominal protection of the express mail statutes, their competitors cleverly cherry-pick the least costly destinations to serve, undermining USPS's ability to economically cross-subsidize their universal service.
The answer to the intellectual argument is simple--get rid of the express mail statutes for rural areas first.
The answer to the muscle argument, the only one that counts in Congress, is a little more difficult--there are nearly 700,000 postal employees, and, like, 20 people who would actually spend scarce political capital fighting them over this issue. For the rest of us, even the prospect of free first-class mail would not be enough to move on this issue versus a tiny reduction in taxes or regulation.
Posted by: M. Hodak | May 15, 2007 9:46:30 AM
The USPS has spent billions of dollars on automation and their costs didn't go down. If that doesn't prove how incompetent and corrupt they are nothing does.
Posted by: Bob Smith | May 15, 2007 2:16:48 PM
Unfortunately, I don't see public opinion in the USA moving in the direction of privatization in any area. Quite the contrary, actually.
Posted by: The Dirty Mac | May 15, 2007 2:31:14 PM
A lot of people are unaware of the USPS 1st class monopoly.
Posted by: Sam Grove | May 15, 2007 2:38:44 PM
M. Hodak: "their competitors cleverly cherry-pick the least costly destinations to serve, undermining USPS's ability to economically cross-subsidize their universal service."
Mr. Hodak, I've heard this rural service argument before from USPS defenders - which you are not one, of course. But there is little truth to that argument. Eighteen years ago, Fedex industrial engineers - I was one - were asked for plans to expand service to all U.S. zip codes. Even back then, very few zip codes were not already served.
According to FedEx's website, overnight service is available to all locations in the 48 states and in most zip codes in Alaska and Hawaii. 2-day service is now available to all U.S. zip codes.
Why did CEO Fred Smith ask us to add service to all these sparsely populated zip codes? Becuase UPS advertised it served more zips than we did. What USPS was doing was totally irrelevant to the decision.
Posted by: JohnDewey | May 15, 2007 3:32:25 PM
The USPS was, until a few decades ago, an arm of the government. It was spun off as a quasi-private corporation.
The usual privatization arguments were advanced about how that would improve matters - efficiency, removal of political appointments, accurate cost accounting, etc.
But private companies have competition. Since the USPS still was (and retains) a monopoly on much information exchange the privatization merely relieved it of government oversight and control.
So what should we expect when a market monopoly is protected by law but the monopoly is relieved of responsibility?
The miracle is that the USPS works as well as it does.
Posted by: K | May 15, 2007 3:44:20 PM
Don and I agree on something - the end times are near! :))
Posted by: save_the_rustbelt | May 15, 2007 4:14:06 PM
Does anyone remember when the USPS ran an ad campaign telling people that junk mail wasn't junk? I'm thinking mid-90s maybe. It wasn't even an honest campaign, pointing out that (at least at the time) junk mail subsidized first class delivery, especially the "daily" characteristic of it. Would be great to immortalize that brilliance on YouTube!
Posted by: Brad | May 15, 2007 4:15:38 PM
The USPS monopoly is also fortified by the it's usage in the acceptance of contracts and usage in mail for legal issues.
According to US law, a contract that is accepted by mail is actually considered to be accepted on the day that a letter is post-marked, not when the letter is received.
Also when mailing legal documents to federal courts and such USPS is exclusively used because of the aforementioned laws.
Can anyone confirm if tax returns must be sent USPS unless they are filed electronically?
Posted by: Adam Malone | May 15, 2007 4:36:25 PM
UPS and FedEx both compete with and partner with USPS in delivery of express letters and packages. FedEx earns about $1 billion revenue by hauling USPS bags around the country. In 2006, UPS joined the game and now receives about $100 million for moving USPS express bags.
I don't think UPS or FedEx or DHL would ever consider contracting with a competitor for air movement - the service that most determines express shipment reliability. I just cannot envision FedEx CEO Fred Smith ever paying one of his competitors $1 billion a year.
Posted by: JohnDewey | May 15, 2007 5:11:43 PM
The real fraud is in the flat rate-per-ounce of 1st class delivery, regardless of the expense. Don't tell me that delivery to my gov't-mandated urban cluster mailbox costs as much as RFD (Rural Free Delivery, lest we forget).
If a person chooses to live in the sticks, that's fine with me; but don't ask me to cross-subsidize his mail delivery.
Posted by: True_Liberal | May 15, 2007 5:25:08 PM
Perhaps USPS charges a flat rate for 1st class delivery to avoid transaction costs. The cost to implement and police zoned pricing for a 41 cent product might be significant.
Posted by: JohnDewey | May 15, 2007 6:05:40 PM
You can use private delivery services for your tax returns. The IRS even recognizes the "mailbox rule" if you use DHL, FedEx, or UPS.
Posted by: steve | May 15, 2007 6:39:28 PM
The convention of the sender paying the postage (and indeed the postage stamp itself) is a relatively recent invention. Historically the recipient paid the postage, and that resulted in a lot of undelivered mail.
Seems to me the added cost of rural delivery could be legitimately, and efficiently, proportioned. A rural recipient might even specify "first class only" deliveries - which would certainly tick off the bulk mailers.
Posted by: True_Liberal | May 15, 2007 8:11:53 PM
What's the old saying? If you love the post office, you'll love government-run health care.
Posted by: Mace | May 15, 2007 8:18:08 PM
Is there any other country with a private postal system?
This one seems to work fine for me.
Posted by: muirgeo | May 16, 2007 3:03:46 AM
True liberal, I appreciate your suggestion about attaching a surcharge onto rural deliveries. In an ideal world everyone would pay the real cost for a delivery.
The costs to deliver rural routes is an insignificant portion of overall USPS costs. There just aren't many people living outside of incorporated cities and towns. Furthermore, the end delivery portion of a letter's trip does not make up even half the total expense. If the truly rural folks paid their true delivery costs, the savings passed on to urban residents would be minimal.
For what it's worth, bulk mailers such as my business do enjoy a form of zoned pricing. If I presort my mailings, those going to nearby zips are a little cheaper than those going out of my city. I also get a break if I mail a certain minimum to a single zip anywhere - which nakes it cost-effective to ignore rural addresses ad concentrate on urban ones.
Posted by: JohnDewey | May 16, 2007 7:58:09 AM
JohnDewey says: "The costs to deliver rural routes is an insignificant portion of overall USPS costs. There just aren't many people living outside of incorporated cities and towns. Furthermore, the end delivery portion of a letter's trip does not make up even half the total expense. If the truly rural folks paid their true delivery costs, the savings passed on to urban residents would be minimal."
I don't doubt for a minute the truth of what you say. But it's what you don't say that is more revealing: The number of rural recipients is small and declining, so of course their portion of total costs is fairly small. But the COST PER CUSTOMER or PER DELIVERY is certainly higher in sparsely-populated zones.
And the bulk pricing seems to take this into account, reflected in the incentive you have to economize by bypassing certain ZIPs. Thanks for making my point.
I'm merely asking the same distinction for first class.
Posted by: True_Liberal | May 16, 2007 9:27:29 PM
More needs to be said about the absurdity of junk mail. It wastes energy, wastes trees and cannot possibly be making the post office any money. Then we waste more energy hauling to the dump or the recycling center.
Posted by: Will C. | May 16, 2007 11:04:18 PM
True liberal,
Sorry if I misunderstood your point. I thought you were arguing that urban folks would get a break if rural folks paid the full cost of their deliveries. My counter was that the additional cost to deliver to rural recipients is so low in total that it is insignificant. Furthermore, the complexity of making an exception in pricing for those tiny number of customers would impose significant costs to USPS. IMO, those costs would far outweigh any additional revenue the USPS could gain.
Posted by: JohnRDewey | May 18, 2007 6:45:40 AM
Rural delivery costs are not nearly so high as one might suspect. USPS does not deliver to every rural home, just as they do not deliver to every apartment building in a complex. Have you ever seen clusters of mailboxes on the side of a rural highway? Rural customers often must drive several miles to reach their mail.
Which customers have the highest delivery costs? It is likely the old urban locations - the ones which have no streetside mailboxes. USPS employees must walk from yard to yard and up sidewalks to reach their mailboxes. If USPS wanted to significantly reduce delivery costs, they could require urban neighborhoods to be refitted with clustered mail boxes.
Posted by: JohnRDewey | May 18, 2007 6:49:19 AM
Cluster mailboxes are a reality in new urban construction. And they have some genuinely governmental features: The door through which I retrieve my mail is smaller than the opening in back through which the deliveryperson loads my box. Thus, it's not unusual to find a parcel inside that I cannot retrieve, unless I cut open and disassemble the parcel first.
Further, when the wind is blowing, and I try to retrieve one of those unstapled loose-leaf flyers, it takes a "flyer" all over my lawn.
It's the government here "helping" me again...
Posted by: True_Liberal | May 18, 2007 8:22:50 AM
Whose side are the bureaucrats on, anyhow?
http://findarticles.com/p/articles/mi_qa4441/is_200412/ai_n16065178
Posted by: True_Liberal | May 18, 2007 8:57:49 AM
We'll try this again:
http://findarticles.com/p/articles/
mi_qa4441/is_200412/ai_n16065178
Posted by: True_Liberal | May 18, 2007 8:59:44 AM
Will C.,
I think you are correct that direct mail advertising has negative externalities. Waste disposal costs must certainly be one.
I disagree with your point that printed advertising wastes trees. In fact, I would argue that printed advertising motivates tree farmers to plant more trees.
Paper consumed in the U.S. is produced from two sources: pulp wood produced on tree farms and harvested to thin tree plantations; and scrap wood fiber from lumber production processing.
If U.S. consumers suddenly eliminated 50% of paper usage, the number of trees in the U.S. would certainly decline.
Does anyone know if an economist has exposed the myth that reducing paper usage will save trees?
Posted by: JohnRDewey | May 19, 2007 8:34:18 PM
http://pornxdance.info x
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