Monopoly of the Postal Service



In the United States economy most markets can be classified

into four different markets structures. But, each and every market in

the United States is completely unique from the others. Generally the

best type of market structure for the general public is per-fect

competition because it creates the lowest possible price for the

public. There are some exceptions were perfect competition isn?t the

best choice for the public on account of various reasons. The United

States Postal Service is one of them and since the Postal Service is a

monopoly, it is its own market. This paper will discuss the budget

dilemmas that the postal service has faced for the past twenty years

and if it is in the best interest of the economy for the United States

Postal Service to continue as a monopoly.



The first time there was talk of privatizing the Postal

Service was in 1979 when the Postal Service was losing vast amounts of

money in the long run. But since the Postal Service is a necessity for

America, the government had to subsidize the service in order for it

to continue in operation. In 1979 the United States Postal Service had

a cash flow of $22.5 Billion and was additionally receiving $176

million from investing(#1, Intro). Even with this added revenue the

Postal Service was still greatly under funded on its own (#1, Intro).

During this time it was discussed to privatize the postal service and

introduce competition because of the extreme losses that the service

was experiencing. A positive argument for privatizing the Postal

Service was with numerous competitors in the market there would be

more efficiency and the public would receive lower prices. But this

would also increase the usage of resources, for example airplanes and

cars. One of the problems the Post Office had was its receipts from

consumer purchases that were submitted the next day after the

transaction (#1, i). If the receipts were submitted earlier the postal

service would receive more money because they could invest that money

sooner (#1, i). Another way the Postal Service could increased

profits was by competitively selecting banks that would give them

higher interest rates and such (#1, ii). Probably the most relevant

and final way to improve the budget of the Postal Service is to

improve the bookkeeping poli-cies and banking techniques (#1, ii).



Not only did the Post Service propose to increase profits but

they also proposed to cut costs in a number of ways. There were three

methods that were proposed in 1946 for the protection of salaries that

no longer exists (#2, Intro). These have to do with the rural mail

carriers. Under this antiquated method of delivering mail the Postal

Service was los-ing money to any mail that went to "rural" areas (#2,

i) There are 48,000 mail carriers that deliver mail to millions of

families that are considered to be living in rural settings; this

costs the postal Service 858 million dollars a year (#2, i). This is a

fairly easy problem to fix considering how much money is being lost.

It was proposed that money loss could be significantly cut down if the

Postal Service corrected the following problems. The rural mail

carriers were assigned a certain amount of time to deliver to a

specific rural area, this method was out of date and because of this

the carriers have free time for which they got paid for (#2, ii). The

next problem was that other mail routes based pay on how many miles

the route covered, so the carriers were getting paid by the mile (#2,

iii). With this problem fixed the Postal Service could saved 26.8

million a year (#2, iii). There was also an hourly rate that was in

effect which indirectly promoted inefficient service (#2, iii). A stop

to this could have saved the Postal Service $255,000 a year (#2, iii).

From the num-bers mentioned above, it can be seen why the United

States Postal Service was losing so much money.



These problems did indeed eventually did get solved over the

past fifteen years and now the Postal Service is making record

breaking profits. Now in the first quarter of the fiscal year 1996 the

Postal Service already has a net income of $1.2 billion (#3, 1). Now

not only is the Postal Service just breaking even,