ACCUMULATING PERIPHERALS


Still not tarrying from their daily rounds by mattsteinglass
January 18, 2009, 10:47 pm
Filed under: Uncategorized

Megan McArdle says the only reason Matthew Yglesias is defending the performance of that socialist bastion, US Post Office, is that he’s not old enough to remember how bad it was before it had to compete with private companies like FedEx.

I’m older than Megan McArdle and I have essentially no idea what she’s talking about. I have a vague sense that it was either impossible or very expensive to get same- or next-day shipping before FedEx came along, but that’s a premium service for business customers, not a standard service for regular citizens. Moreover, UPS has been around since 1907 so Matthew Yglesias would have to be pretty darn old to remember the days before the Postal Service had private competitors. Since FedEx obviously isn’t going to take over low-margin businesses like shipping regular letters and magazines for $0.42 each to people who live in farming villages in Nebraska, it’s pretty obvious that we need a national government-run postal service. And as far as I know the one we have has always done a perfectly good job.

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2 Comments so far
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There was no private competition for any sort of letter service until FedEx–hence the name “United Parcel Service”. Letter service is the most profitable business line because of the weight/price ratio. And FedEx had to negotiate the right to carry urgent letters before it could even operate–air cargo deregulation is the only reason it is the company as we know it. Way back in the dark ages, UPS wasn’t something you’d send a Christmas gift by–it was something that you used because the post office said your package was too big or too heavy for it to carry. (My trunk went off to camp that way.)

Perhaps we’ve just lived in different postal zones, but I remember an era when it was quite reasonable to believe that “the check was in the mail” and hadn’t arrived, because lots of things didn’t–in the early 1990s the Chicago post office was found with a mountain of undelivered mail dating back 11 years. I routinely did not receive letters sent from my parents to various locations from Vermont to Wyoming to Philadelphia–or got them weeks late, all bunched up together. (My father used to write every day when I was away in the summer). These problems have abated, probably not coincidentally, as email, online bill paying, and FedEx have squeezed a very profitable monopoly.

Comment by Megan McArdle

Regular letter service to out-of-the-way rural addresses that is guaranteed at the common universal price is not profitable. Regular letter service in urban areas is profitable. That is why the USPS insists that it needs to maintain the monopoly on regular letter service or it will be unable to fulfill its mission of universal service. Private companies that enter the regular letter delivery market would undersell the USPS for deliveries to urban customers and charge higher rates for rural customers. The USPS would lose its profitable markets and be unable to sustain service to its unprofitable ones. Privatization of that segment of the postal business would do for mail delivery in the US all the same wonderful things that private markets have done for health insurance in the US, and for basically the same reason: cherry-picking. It would of course be possible to mandate that any new entrant into the field charge the same price for delivery to Needles, AZ as for delivery to Adams-Morgan, Washington, DC, but such a rule would be tantamount to barring competition, since no private company could make such an offer and survive.

I’m not saying that postal service hasn’t gotten better under pressure of competition since FedEx came along. What I am saying is that it was never particularly bad, and that the reasons it was bad had a lot to do with life in the pre-IT era. Having a letter go missing was and remains a very rare event; I don’t think it ever happened to me when I was young. In the past 10 years, I have lived in two countries, Togo and Vietnam, which had no ZIP codes, and where post offices kept records in large ledger books. I sent and received mail quite satisfactorily through the national government postal systems in both countries.

Comment by mattsteinglass




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