Liberty Bell "Forever" Stamp

The new USPS Stamp will cost 41 cents.

The stamp, which will carry the word "Forever" instead of a price, will remain valid for sending a letter, no matter how much rates go up in the future.

Does the USPS think that raising the price of stamps will net them more money? That's how it works, right? You have a set number of customers buying your product, and when you raise the price, you will get that much more from each of them. But consider what happens when you raise your price. Some of your customers will stop buying your product altogether, and many will curtail their purchases. Potential new customers may balk more easily. Alternative providers may win those new customers and some switching from your product.

Unfortunately, politicians think in terms of closed systems. Raise taxes, they think, and revenues will go up. They have no inkling that the higher 'price' on production will change the behavior of those doing the producing.

In the case of the Post Office there are already many alternatives in place. We have FedEx, UPS, DHL, etc. which have already carved out a large chunk of the parcel market. How is it that a federally subsidized service could not compete and win against private sector providers?

Between fax machines, email, cell phones, IMing and the like, the age of posting a letter is quickly becoming obsolete. By raising its prices, the USPS is making its services even more unattractive, and will nudge itself even closer to the brink of extinction.

Does anyone remember the cartoon where the mouse from the country visits the city mouse? The cat chases them throughout, while the city mouse educates the country mouse. One lesson that is taught involves pricing and profit margins. One mouse explains to the other that when you raise prices you increase your profit margin per sale but you get fewer purchases, lowering your profits. When you lower prices, your profit per item is lower, but you get more purchases thereby raising your total profits.

Wal-Mart knows this and practices it. Why is Wal-Mart simultaneously popular and hated? Because people who instinctively understand low prices enjoy a bargain. While on the other hand those who are for government enforced socialism see Wal-Mart as an example of capitalism in action and therefore an enemy.