regulation case study: the post office

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Why is the government involved in the post office at all? Aren’t the plethora of private delivery services out there evidence that our postal system could be run as a private enterprise? The answer is “no” and the reason is simple.

Let’s take a look at the critical Title 39, Section 101.1 of the United States Code, which defines the core requirements of the Postal Service:

The United States Postal Service shall be operated as a basic and fundamental service provided to the people by the Government of the United States, authorized by the Constitution, created by Act of Congress, and supported by the people. The Postal Service shall have as its basic function the obligation to provide postal services to bind the Nation together through the personal, educational, literary, and business correspondence of the people. It shall provide prompt, reliable, and efficient services to patrons in all areas and shall render postal services to all communities. The costs of establishing and maintaining the Postal Service shall not be apportioned to impair the overall value of such service to the people. […] Postal rates shall be established to apportion the costs of all postal operations to all users of the mail on a fair and equitable basis.

There is a really important take-home message in that paragraph: the postal service MUST provide service everywhere, by law, and they can’t make it more expensive to deliver to some places than others.

As it turns out, the most expensive thing that the Postal Service does is deliver to rural addresses: small towns, farms, country homes, and so on. Delivering to these addresses costs many, many of times more than delivering to central, urban locations. It costs more in gasoline, it costs more in vehicle maintenance, it costs more in man-hours.

How do private companies do it? They add surcharges to delivery to out-of-the way areas. This comes in the form of multiple stacked sucharges, actually: a “residential” surcharge, an “extended area” surcharge, and a fuel surcharge.

Post Office Pricing

(from endicia.com)

The United States Postal Service is not allowed to do this, by law.

What is the other way to handle these costs? They could simply not deliverĀ to certain addresses.

Although private carriers always advertise that they will deliver anywhere, the fact of the matter is, they are not required to. You just have to check out some of the comments people make when discussing private carriers and their delivery to rural areas, and you will see how the system really works. My favorite comment that I found from that link:

They are not obligated to deliver unless there is someone physically present. They are not required to go off the main thoroughfare. There are many things they don’t actually have to do, so if you are pretty far out in the country, as I am, be prepared for the occasional fight and keep track of the person(s) who drives your route most of the time. Be aware of substitute drivers and, as with any business associate with whom you work closely, learn a bit about their families, their interests, etc and remember them on holidays. Everyone responds to genteel bribes.

So to all private enterprise enthusiasts, I would like you to take the time to really envision the kind of world you want to live in. When talking about mail delivery, a world without government regulation is a world where poor people can’t afford to send letters to their families that live in the deep country. It is a world where the delivery person better like you or they can simply not deliver to your address (because, as private company employees, nothing requires them to). It is a world where, in the interest of profits, anybody not living in the city might have to pay ten times the normal amount for delivery or may not have delivery at all. It is a world where you better make sure you are friends with your local delivery service, and be prepared to bribe them.

This is just one more example of the point I made in a previous article: not everything that is worthwhile is profitable.

Making sure that everyone has equal and affordable access to a postal system is one of those worthwhile things.



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