- Cafe Hayek - https://cafehayek.com -

Rating Postal Rates

Tweet [1]

One of my students at George Mason University recently asked about my thoughts on the U.S. Postal Service’s government-granted monopoly on the delivery of first-class mail.  I told him that I see no justification for that monopoly privilege — that, if I could, I would eliminate it immediately.

"But postal rates aren’t outrageous," he challenged (in good and appropriately skeptical spirit, I add).  "Wouldn’t a true monopoly charge much higher rates?"

This question recalled to mind the very first letter that I published in the New York Times [2], back in 1994.  (It is co-authored with my good friend, the University of Georgia’s George Selgin [3].)

It has been suggested that, because the nominal price of first-class
postage is about where it was in the late 18th century, Americans who
complain about the proposal to increase postal rates are merely whining
wimps who are lacking in historical perspective.

However, the
real price of transportation (a key input in postal service) has
plummeted over the last 200 years. In 1799 it took 53 days for an Army
courier to travel from Detroit to Pittsburgh.

Today the same
trip can conveniently be made in minutes. Likewise, the productive
efficiency of the United States is vastly greater now than it was even
a few decades ago.

Given the plunge in transportation costs,
joined with other technological improvements and a large increase in
the scale of postal activity, the price of postage should have fallen
dramatically.

Americans do not oppose postal-rate increases because of their ignorance of history. 

Rather,
opposition to these increases grows from the correct perception that a
legally protected monopolist such as the United States Postal Service
can keep prices higher, and service inferior, to what these would be
under competition.

Regardless of how today’s postal rates
compare with rates in the past, opening the delivery of first-class
mail to competition would lower rates still further while improving
service.

DONALD J. BOUDREAUX
G. A. SELGIN
Clemson, S.C., March 24,
1994

The writers are, respectively, an associate professor of legal
studies at Clemson University and an assistant professor of economics
at the University of Georgia, Athens.

Comments