Wednesday, January 28, 2009

Should the U.S. Postal Service have a monopoly?

This little piece in the Atlantic this month is a perfect example at how difficult and complicated public policy can be. This seems like a pretty straight forward issue in the U.S. since we have a capitalist economy and have traditionally been a strong proponent of free markets and trade.

From time to time you'll hear that the U.S. Postal Service should not have a monopoly on mail delivery (packages, on the other hand, can be delivered by private companies, FedEx and UPS being the most famous). When one takes a step back and thinks about it, it is a bit odd that only the Postal Service delivers mail.
By law, the U.S. Postal Service has had a monopoly on delivering mail to mailboxes since 1934. Should private couriers like FedEx be able to compete? That could be a big mistake: the government’s highly trained mailmen work with the FBI and other agencies to weed out suspicious packages, prevent identity theft, and alert the public to consumer fraud—a layer of security that could be compromised by opening our mailboxes to hordes of private carriers.
This is a good case of why public policy decisions can be tough. In theory you want competition so that citizens can get the lowest price possible to send their mail. However, it becomes a security issue because if the U.S. Postal Service holds a monopoly over mail delivery it is easier for the government to gain information about suspicious activities. The downside of course, is that it costs 42 cents to send a letter to anyone in the country (with competition it may even be cheaper).

So what does a policy maker do? What is more important—national security or the economic well being of the American citizen?

Personally, I think this is a case where the cost is already so low (if you look hard enough during the day you'll find the 42 cents to buy a stamp) that allowing the U.S. Postal Service to hold their monopoly makes sense. But in other matters it isn't as cut and dry a case.

An interesting case and a good example of how policy works in the world. And here is more from the Rand Corporation on their findings.

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