Friday, December 28, 2018

The US Postal Service in a Parallel Universe

Imagine that, instead of the dinosaur of a postal service we have today—the product, among other things, of congressional insistence that no government outfit can compete with private business in lucrative new markets—we had an entrepreneurial, innovative public dynamo.  In this other universe, the USPS was always on the lookout for new opportunities to build on its postal infrastructure, providing better services to the public while broadening its revenue stream.

USPSʹ, this better but hypothetical twin, greeted the arrival of the internet a generation ago with anticipation.  Yes, it was obvious that email would be a threat to its core business of moving mail, but there would also be new possibilities for people to shop and do other business remotely.  If a postal customer goes online to find a new product to clean his bamboo floor and decides to buy it, somehow that product has to find its way to its new owner.  This is a job for the post office!

Driven by the urge to leverage its vast delivery infrastructure, USPSʹ years ago set up a website for remote shopping.  They encouraged producers to list their goods by making it free; the postal service stood to profit from providing the logistics for any transaction, so there was no need to cream any revenue from the site itself, meaning no need to sell advertising.  Of course, they hired top programming talent to make the site as searchable as possible and improve the online shopping experience for simplicity and transparency.  The idea of allowing users to review and rate products was imported from other sites and found to be reasonably effective.

Over time, our hypothetical USPSʹ became something like Amazon, but Amazon wedded to the delivery infrastructure of the traditional postal service.  No Jeff Bezos got to be a gazillionaire out of it, there was no crass commercialism and as a public institution it was amenable to democratic input.  The health information and products site, co-managed with the National Institutes of Health, was a big hit.

Of course, it never happened this way.  Instead we have a private octopus of an online shopping site called Amazon and a hobbled, money-losing public postal service that’s prohibited from even thinking about entering a new market—but provides crucial, subsidized logistics for its Amazonian overlord.  That’s the world of today.  But tomorrow?  Why not think about acquiring Amazon as a public utility, or even setting up a public competitor to it?  Where’s the road that takes from where we are now to the alternative universe we’d rather be in?

8 comments:

Peter said...

Excellent Post. Nationalize Amazon. Merge it with Post Office.

Calgacus said...

But the USPS isn't really a money-losing entity. It only appears to because of ridiculous congressional laws on USPS pensions. Not that there is anything wrong with that. It's part of the government, why on earth should it make money? The government's job is to lose (print, create) money. Makes more sense to just keep the prices of postage fixed.

In any case, the USPS is more like the USPS' than this suggests. It certainly has welcomed and "profited" from online shopping.

Of course it would be nice if it did more along these lines. Would also be nice if Post Office Banking were restored; it was abolished in the 1960s. Would help a lot of unbanked people nowadays the prey of loan sharks, payday lenders and most predatory of all, Wall Street, the financial sector.

rosserjb@jmu.edu said...

OK, so nobody here has got it at all what the situation of the USPS is. For starters, it is technically not a part of the US government, except when it is. Supposedly it was privatized. But then the Congress stepped in and decided to mess it up by imposing on it a rule that it fully fund the pension fund of it s workers, something not imposed on either fully public or fully private entities. Without this mandate the USPS would be financially solvwnt, but this mandate, imposed by GOP Congrsspeoplw out to destroy it.

Calgacus said...

The post office is authorized in the Constitution. So the Supreme Court has decided unanimously that the USPS is part of the US government.

"The Postal Service is not subject to antitrust liability. In both form and function, it is not a separate antitrust person from the United States but is part of the Government, and so is not controlled by the antitrust laws."

Postal Service v. Flamingo Industries (USA) Ltd., 540 U.S. 736 (2004)

marcel proust said...

My earlier comment was deleted, apparently because it was interpreted as gaslighting (it wasn't spam). That was not my intent (I thought my tone was mildly humorous) and I regret my role in contributing to that misunderstanding. I will take more care in the future. The comment included a link, repeated below, that I think was relevant to the post, about amazon's (abuse of its) market power with respect to sellers on its platform:

https://www.theverge.com/2018/12/19/18140799/amazon-marketplace-scams-seller-court-appeal-reinstatement

Calgacus said...

Marcel Proust: Thought it was a relevant and very interesting link, hadn't even noticed the comment was (imho wrongly) deleted.

rosserjb@jmu.edu said...

I stand corrected. USPS is a federal government entity, although "independent" of the rest of the government. However, my point about it being saddled with having to pre-cover all its retirement obligatins and this creating a fiscal disaster for it holds. It would be making money if it did not have this mandate imposed on it by a hostil Congress.

Peter Dorman said...

The issue of USPS profitability is interesting, something I mostly skirted in the OP. Agreed that USPS is hobbled by Congress; I did make that point. There is another issue involving parcels in particular, very germane to the fantasy I described. USPS faces competition from UPS in this market. USPS is competitively hobbled in two respects: its employees are federal workers and it pays them higher wages and benefits than UPS pays its underlings, and there's the matter of subadditivity (as analyzed by Baumol et al.). UPS can cherry-pick its markets; USPS can't. By law USPS has to deliver a universal service, and politically it is forced to cross-subsidize. UPS faces neither of those constraints. To permit the postal service to profit appropriately from the services it provides, I think it would be necessary to either constrain allowable competition in some respects or subsidize USPS services to offset competitive disadvantages stemming from their mission.