Going Postal

According to the Washington Post, "The U.S. Postal Service estimates $238 billion in losses in the next 10 years if lawmakers, postal regulators and unions don't give the mail agency more flexibility in setting delivery schedules, price increases and labor costs." The author, Ed O'Keefe, can't quite bring himself to say it, but the post office as we know it is becoming increasingly untenable. What do we do with the wreckage? Small-government types may be disappointed to hear that the answer is not "privatize it"; virtually no one thinks that there is a viable business model trapped inside the aging behemoth. Every time the relative efficiency of government services comes up, some conservative brings up the damn post office, and then some liberal tiredly points out that priority mail is cheaper than any comparable service from the Post Office. It's not exactly surprising that the post office can undercut UPS prices with $23 billion a year in government subsidies. The question is, do we get $23 billion in extra value? Arguably, we used to. Mail, like other forms of communication, has network effects--each node becomes more valuable as you add more nodes to the network. Arguably, it was a natural monopoly with capital costs that were best handled by the government. Futhermore, things like our legal system have become very dependent on the mail system, which allows us to legally serve notice and so forth. But as has been noted elsewhere, mail is largely becoming an anachronism--I barely even get my bills that way any more. Mostly, I get catalogues, Christmas cards, and the occasional invitation to a wedding or baby shower--not $23 billion worth of service. Probably not even worth my per-capita share of the postal service, which if my math is correct, works out to about $75 a year. And then, of course, babies and small children neither receive much mail, nor pay much in taxes. So call it $100. Would you pay $100 a year for the privilege of getting mail? Yeah, me neither. You can't even downsize the thing to the parts that work--the parts that are most valuable are the really expensive, broadly distributed network of post offices and employees. This is the part that Congress won't let die, and which will never be able to pay for themselves. We remain emotionally attached to our post offices, and postal workers remain emotionally attached to their jobs, and congressmen remain emotionally attached to their votes. So the post office will probably hang on for another one or two decades, becoming more and more irrelevant, and sucking up more and more in the way of public funds. Hope you all like those Christmas cards.

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Megan McArdle is a columnist at Bloomberg View and a former senior editor at The Atlantic. Her new book is The Up Side of Down.

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