11/23/2004

The Story About Postal Rates

If you believe this article stamps should cost around 24 cents right now. But the price of stamps keeps rising faster than overall inflation. That is partly because the post office has to support itself with its own revenue, without any additional funding from the government. (Even if the government provided funding consumers would still have to pay through taxes). In a lot of ways the post office operates like a private business, and has to deal with heavy competition from companies like UPS and FedEx as well as e-mail. Recent terrorism threats have increased costs as well. Continuously raising prices might drive away customers, and create a need to raise prices still higher.

The U.S. postal service is getting faster though. 15 years ago sending a letter from the U.S. to Europe took around 2 weeks, whereas now it takes 5 days. While e-mail seems more practical for writing to friends in Europe, it is still sometimes necessary to send tangible letters or cards. But how much will postal prices rise? International friends are becomming more and more expensive.

11 comments:

Janet said...

The price of postage stamps had increased in 2002, but for the past couple years the price has stayed the same. Eventually they may increase again, but for now nothing is expected. When the living standards increase, so does the cost of the postage stamp. Back in 1962 stamps only cost 4 cents. Think of how much a house cost back then. The standard of living has increased.

Maudi said...

The U.S. Postal service I feel, is one of the most unefficienty run businesses in all of the world. This being the case it's no wonder the stamp price continues to rise. The only way that we can decrease the price of stamps is to dissolve this monster we call the post office, and contract out mail services to the private sector.

natty said...

The post office is a monopoly and as we have learned, monopolies do not have to be as efficient as a firm in perfect competition. They are price makers, so until something changes we can expect the price of postage to continue to go up.

Jake said...

It is understandable that the costs of stamps have continually increased over the past few years because of the increased competition from UPS, FedEx, and email. The one advantage we gain as consumers is that though the prices will continue to increase, we have other avenues through which we can send our mail. Companies are also making it easier to pay bills online instead of having to send a check in the mail. So though the prices are going up, the use of the postal service is becoming less of a necessity to the consumer.

Jake said...
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Jake said...
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Taber Wolrab said...

Everybody is in business to make money, doesn't matter who they are. It is about the money. Though the postal service is getting faster, there are better ways for people to send items (letters, packages, etc.) to where ever they want around the globe. I think the price of stamps will continue to rise as more people begin to use alternative ways of sending items.

Max said...

If more people used the postal service to send letters, it might decrease the need for an increase in the price of stamps. I try to keep the price of stamps down by returning all the postage paid envelopes I receive with credit card offers. Sometimes the envelopes are empty, or I might send them other junk mail I have received.

pramahaphil said...

If the government wants to maintain the Postal Service than it must be realeased to act a private for profit business. Otherwise it will continue to survive as a drain on the wallet of the American taxpayer just like AMTRAK

pramahaphil said...

If the government wants to maintain the Postal Service than it must be realeased to act a private for profit business. Otherwise it will continue to survive as a drain on the wallet of the American taxpayer just like AMTRAK

Dr. Tufte said...

Typically, industries that are able to raise their prices faster than inflation are offering a higher quality product. I think this is probably the case with the post office - mail gets around faster than it used to.

The problem here is more like the pricing of cable TV. Cable has gotten better too, but there are a lot of people who are not interested in what they are offering for the higher price. Dissatisfactory bundling like this is usually a sign that there is some sort of restriction on selling the different products at appropriate prices. I think it's pretty clear from how FedEx and UPS operate that more ability to price discriminate would probably help the USPS.

As an example, there is a true story that the Federal government wanted to build a building in Nome, Alaska in the 1950s. The low bidder on the project figured out that the cheapest way to get cinder blocks to Nome was to mail them parcel post.

P.S. I've known a lot of people who work for the post office, and the only ones who thought it was easy were the ones who had worked themselves into cushy delivery routes (and were healthy enough to do the work).