Wednesday, May 13, 2009

The Price of Freedom and Stamps

I had two of my letters returned yesterday for insufficient postage.
Over the last 90 years, the average retail price of gasoline has increased about 8.5 times, from 25.5 cents per gallon in 1919 to $2.16 per gallon in 2009, according to annual price data from the EIA. Over the same period, the price of a first-class stamp in the U.S. has increased 21X, from 2 cents in 1919 to 44 cents in 2009 (starting tomorrow), according to historical stamp price data available here.-- Carpe Diem


For a small blush of hope, see 3 Ring Binder. The more that youth can understand these issues, the better chance for us all.

2 comments:

Anonymous said...

How much has the government subsidy decreased over the same period? The price of a stamp seems to have tracked the CPI pretty well until about 1960, but the real break occurred around 1970. Several possibilities come to mind. The structure of the USPS and the amount of government subsidy may have changed (I'm pretty sure this has happened, although I don't know the timing). The structure of the industry has changed, with private companies taking market share and possibly reducing the economies of scale previously captured by the USPS (comparison of the prices charged by UPS and FedEx with the stamp price and CPI might shed some light on this). The computation of the CPI probably has changed over the last 90 years, or so, which may make the comparison difficult, at best. Finally, the fact that the final step in letter delivery doesn't benefit from technological improvements (somebody still has to walk to your door and drop the mail in your mail box) may inflate the cost more than the rise in the CPI, which may be depressed by technological improvements.

Buy the "forever stamp" and you won't have mail returned and you won't have to mess with one and two cent stamps to make up the difference!

Anonymous1

Beth said...

Anonymous1,

You are right about the calculation of the CPI. Like all of the major economic statistics (e.g. unemployment rate, CPI, GDP, GNP) how these figures are calculated has under gone a number of revisions during their time of use. That makes it difficult, if not impossible, to make comparisons as attempted above--or to know if all those changes were taken into account in order to construct the posted graph. I need to be more careful in my use of them, so thank you for pointing that out.

The even more important factor in trying to compare prices across time is that we do not have free market prices. The function of a price is to to signal supply in relationship to demand. Current prices are so greatly altered by such things as taxes, subsidies, cost-increasing regulations, restriction of supply through permits, licensing and legal monopolies, that prices no longer reflect simply supply and demand. Instead, prices include a constantly shifting array of politically determined factors. So what was the supply/demand price of stamps or gas between 1925 and today? I am not sure it is even possible to figure out.

I didn't know about "forever stamps." One small hedge against inflation.