Charles Wheelan, Ph.D. The Naked Economist

The United States Postal Service has announced that the price of a First Class stamp will rise to 41 cents this month.

I don't have a problem with that. My complaint is much bigger. I don't understand why the post office still exists.

First-Class Incompetence

Forty-one cents to send a letter anywhere in the country doesn't strike me as extreme.

I'm much more bothered by the long lines at the post office, the clerks who snarl at me, and the letter carrier who brings me Greg Albion's mail about every third day.

Who is Greg Albion? And if I'm getting his mail every third day, who's getting mine?

Community-Building USPS Style

I'll admit that I have an axe to grind on this one. My mail delivery is the worst in the country. That's not a throwaway exaggeration -- I mean that when the post office did an internal audit, service in my ZIP code was the very worst.

Our mail delivery is so bad that novelist Jonathan Franzen, author of "The Corrections" (though most famous for saying that he didn't want to be in Oprah's Book Club), wrote an entire essay in The New Yorker on what's gone wrong in the 60614 ZIP code.

How bad is bad? I live in one of those places where a letter carrier's house catches on fire and after the blaze has been put out, the firefighters find 11 years' worth of undelivered mail smoldering in the attic. Our letter carrier frequently gets "one house off," meaning that everyone on the block gets the mail that should've gone one home to the east or west.

This is actually a nice community-building exercise, as it requires lots of neighbors to speak to each other at the end of the day in order to retrieve their bills and magazines. It does, however, get old after awhile -- particularly if your neighbor goes away for the summer and you have to contact his ex-wife to unlock the house to retrieve your paycheck.

No Public Good

But that's not even my primary complaint. The key frustration -- and herein lies the larger point -- is that we can't do anything about it. That's what's so rotten to the core about any unnecessary government monopoly.

I once went to the manager of my local post office to complain. She dutifully explained how I could send a letter to someone somewhere to file a formal grievance. As I was leaving, I asked, "Is this going to make any difference?"

She replied, "Probably not." While I admire the candor, I can't stand the system. Can you imagine someone at FedEx saying that?

That's the fundamental economic problem. A government monopoly means that the law precludes anyone else from doing your job. (In the United States, no private firm is allowed to deliver First Class mail.)

I don't have a problem with the government running the army, printing the currency, operating the courts, protecting the borders, or even installing stoplights. A basic economics text would explain why the private sector can't provide those kinds of "public goods" as efficiently as government.

A Dated Concept

But delivering mail?

A hundred years ago there were legitimate reasons for the government to deliver the mail. The costs of reaching every address were so high that it would've been prohibitive for private firms to build competing national mail delivery infrastructures. We know that's changed; private firms now routinely compete to deliver overnight mail around the globe.

But the government monopoly on First Class mail persists, and it creates terrible incentives. What would your day look like if 1) You were virtually impossible to fire, and 2) A large segment of the population had to use your services by law?

If I were in that position, I'd be at the driving range instead of worrying about whether every sentence in this column has a subject and a verb.

What Governments Should Deliver

I'll admit that shoddy mail delivery isn't at the top of the list of society's key problems at the moment. I don't expect it to come up in the presidential debates. But the lessons from the post office monopoly do offer lessons for much more significant social issues.

First, we should avoid government monopolies whenever we can. If you put good, motivated, smart people in a system with rotten incentives, you usually get rotten outcomes. (And over time, the good, motivated, smart people prefer not to work in that system.) Do our public schools operate more like the post office or FedEx?

And when we do a health care overhaul, let's not be allured by the supposed efficiencies of a single government provider. (Though there's no reason why government can't fund health care, or broaden insurance coverage, as long as citizens are allowed to choose their own health care providers.)

Second, it obscures the larger point of what government should and shouldn't be doing, particularly as we (rightfully) urge countries around the world to end wasteful subsidies, purge unnecessary regulation, and sell off their inefficient state run monopolies. There's no reason for governments to run airlines, pay farmers not to grow things, license businesses that aren't dangerous -- or deliver mail. Here's a good chance to practice what we preach.

Market Wisdom Short-Circuited

How much would a stamp cost if we had a competitive market for First Class mail? I have no idea. In fact, the price of postage might go up and down. The current monopoly forces some postal customers to subsidize others. Logically, it should cost less than 41 cents to send a letter from downtown Chicago to downtown New York, and more than 41 cents to send a letter from Big Swamp, Fla., to Igloo, Alaska.

Having a single price for postage doesn't make any more sense than United Airlines charging $300 for every flight from and to anywhere within the country. Of course, if it's easier for consumers to pay a flat rate for stamps rather than dealing with variable rates, a private firm would find a way to accommodate that desire instead.

The lovely thing about markets is that they give you an option for exit if you don't get what you want -- which is what makes it more likely that you'll actually get what you want.

There's a profound difference between FedEx (in which I own stock) and the post office (which I supposedly own as a taxpayer). At FedEx, and most other such enterprises, there are lots of people with an incentive to make me happy. And if they don't, I can go somewhere else.

Going Postal

So forget about raising the price of stamps; that's small change, literally and figuratively. We should go much further: Eliminate the monopoly on First Class mail and sell off the post office to one or more private bidders. The U.S. government could clearly use the revenue. Think of it as a big government yard sale.

Will it happen? Probably not. Politicians would get an earful from the huge number of postal workers who would be threatened by the shake-up. But I feel better for having offered my analysis. Of course, with it and 41 cents you can mail a letter.