11 February 2013

USPS, inflation & innovation: a low bar

Reason: Hit & Run | John J Walters | Postal Service Ends Saturday Delivery, Still Has Big Problems

Largely as a response to the exorbitant cost of postage in the early 1800s, Congress standardized stamp prices in 1845 at 5 cents for a local letter and 10 cents for one addressed more than 300 miles away.

If we had allowed prices to increase with inflation, it would cost $1.19 to send a first-class letter; $2.38 if it were traveling more than 300 miles. Instead, it costs 46 cents flat.
Why should we assume postage increases at the same rate as an arbitrary basket of goods?

Check out these maps and tell me that transportation hasn't gotten far, far easier over two centuries. If anything, I would expect the costs of moving letters and parcels to grow significantly slower than general goods and services since 1800.

(Sourced from Ptak Science Books, "Travel Time in the Young Republic, 1800-1857").

PS This is a coincidence, but if you divide the USPS FY2012 operating expenses ($78.1 billion) by the number of pieces they delivered (177 billion) you get ... 44 cents, just under the cost of a stamp. (Figures here.)

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