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Monopolistic disruption in the United States Postal Service

February 20, 2013

Were the United States to align itself with common sense, its citizenry would have de-monopolized mail delivery decades ago. With the Postal Service’s shaky future, it might be politically feasible to do so. Finally.

Matt Yglesias summarizes the scenario:

Conservatives often wrongly caricature the United States Postal Service as somehow inefficient or poorly managed, while liberals are very focused on the idea that pension accounting rules make USPS look bad. But the truth about the Postal Service is very simple—it’s supposed to fund its activities out of a lucrative monopoly on daily mail delivery, and that’s getting much less lucrative.

I don’t disagree that the USPS is inefficient or poorly managed, nor that pension accounting rules make it look bad, but both are problems rooted in a monopoly. Governments shield monopolies from market forces that encourage innovation; when a disruption occurs in the market (the internet), inflexible labor costs and unnecessary oversight (Congress) stifle an economic response.

Without facing competition to retain customers or a profit, the USPS had little incentive to cut costs, discover new methods for delivery or sorting, or attempt to increase revenue instead of requesting a bailout from Congress. When the internet made it irrelevant, they had no infrastructure (or, more importantly, culture of innovation) to compete.

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