Maybe When Service Drops to One Day a Week, We Can Eliminate Its Monopoly Protection?

The U.S. Postal Service doesn’t want to deliver mail on Saturday anymore. Facing a large budget gap, the USPS is lobbying Congress to allow the agency to deliver mail only five days per week, a cost-cutting measure it has advanced for more than a year.

As I said back in August, the Postal Service’s decline seems to be inevitable. USPS is subsidized not by tax dollars but by regulatory capture: The Private Express Statutes limit private mail carriers from delivering mail to mailboxes and from charging less than $3 to deliver a letter.

Luckily for the USPS, it doesn’t have to compete in a free market, where its work schedule would be drastically insufficient to compete successfully with others. UPS and FedEx don’t have the same regulatory luxury, and consequently have some locations that are open 24 hours a day and on weekends, because that is what customers want. Private delivery companies also price shipments based on distance traveled, which makes more sense than the flat rate that the USPS levies for first-class letters. Mailing a letter to one’s landlord in the next town over has a lower marginal cost for a postal service than mailing a letter to a cousin across the country, but first-class USPS prices don’t reflect that.

Unlike private delivery services, the USPS does not face direct competitive pressure, and so has found it difficult to adjust to changing technology and market conditions. This has left the agency well past its prime, if that prime ever really existed. James Bovard pointed out in a review of USPS history that government-provided postal services were originally conceived as revenue generators, and that regulators had to actively stamp out competitors who were providing more reliable, trustworthy services at lower prices:

The early colonists inherited the tradition of government postal monopoly from Britain. In sixteenth-century England, the Tudor monarch outlawed private post in order to hinder communication between potentially rebellious subjects. Later, the monopoly was justified as a revenue raiser for the Crown. But even 270 years ago, private carriers were breaking the law and providing the public with better service than the government:

In 1709, Charles Povey used bell ringers to collect letters, which he delivered anywhere in London for a halfpenny. The Post Office prosecuted Povey, who was convicted and fined, and then it adopted his system for the government service.[2]

Since 1709, not much has changed in how governments run their postal monopolies.

In 1789 the Constitution granted the federal government the right to set up a post office, but it did not prohibit competition from private services. However, the first postal act, in 1792, did effectively outlaw private competition.

The first postage rates were extremely high, as Congress tried to force easterners to subsidize the more expensive service to outlying settlements on the western frontier. As the Postal Service’s official history notes, “Until 1851, the cost of sending a single sheet letter 40 miles was either 6› or 8›. When the letter traveled over 400 miles, it cost 25›. These prices doubled, tripled, or quadrupled with each additional sheet.”[3] In 1843, “it cost 18 1/2› to send a letter from New York City to Troy, New York, but only 12 1/2› to send a barrel of flour the same distance.”[4] The government charged 25› to deliver a letter from Philadelphia to New York.

Henry Wells (later of Wells-Fargo fame) entered the market, charged 6› a letter, and delivered faster.[5] In the Boston area alone, over a hundred private express companies carried the mail. Private companies delivered letters directly to addressees’ homes, while the government still required people to pick up their mail at the nearest post office.

As private business flourished, government postal revenues declined. The postmaster general admitted in 1843 that many people thought the government’s monopoly was “odious,” but insisted that it had to be preserved for the good of the country.[6] In 1845, Congress tightened the laws prohibiting competition and increased the penalties for violators. In 1851, Congress lowered postal rates and began providing a direct subsidy for postal operations.

An 1844 competitor, the American Letter Mail Company, was founded and operated by notable proto-libertarian Lysander Spooner. This competition was so effective and efficient that “The end result was that in 1851 Congress again had to lower the postal rates to a uniform 3 cents” from previous prices “of 18 3/4 cents or 25 cents.” Lawmakers simultaneously put Spooner out of business for good by strengthening the USPS monopoly laws.

The notion that government postal services may have been necessary to provide a crucial public service in the absence of trustworthy private alternatives doesn’t stand up to the historical record, and is even less justifiable in today’s electronic information age, in which private companies are the primary means by which most people send and receive sensitive communication.

Missourians — and the United States in general — would greatly benefit if the USPS lost its monopoly protection so that costs could be reduced through the efficiency of competitive pressure, rather than through elimination of services.