As we wrap up this semester, I thought it would be interesting to evaluate one issue using different methods and theories we've discussed over the past few months. Over the course of this semester, the USPS has gotten a lot of attention for its issues with funding and its public status. Despite being a massive bureaucracy (they employ over half a million people), the USPS has a big funding problem, causing some to reconsider its role as a government entity.
The USPS and public choice first crossed my mind when we read Friedman, who argued that the USPS, a government monopoly, should be privatized to stimulate competition. Allowing new entrants into the mail delivery industry in his opinion would result in the industry being "revolutionized." However, I believe Friedman's thinking is narrow, as there are other benefits to the USPS that are very important. For example, having postal services as a public good benefits rural communities, who most likely would lose access to postal services under a private system because of the lack of profitability in those regions.
The next time I though of the USPS was when we were discussing the Niskanen model in class a few weeks ago. Niskanen's model helped explain why USPS faces more budget issues than other government bureaucracy. Consumers elasticity of demand is fairly high for the USPS, as there are many substitutes. Higher elasticity results in less room for the senior bureaucrat to increase the budget. Moreover, during the past few decades, the elasticity of demand has gotten even more elastic, as new substitutes like Amazon, UPS, and e-mail have grown in popularity, making it so the USPS has even less power to expand their budget. This is because there is less sponsors surplus they can try to take when expanding the budget than more inelastic agencies, like Defense or Homeland Security.
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