The Development of Rates of Postage Part 24

_Total cost_, 811,767.

As between parcels and other packets respectively, this amount is a.s.signed on the unit basis, reckoning one parcel equivalent to twelve other packets (Table D).

As between the various cla.s.ses of packets other than parcels, the amount is a.s.signed on the basis of simple numbers.

Ordinary Letter Packets-- (a) Not exceeding 1 oz 328,857 (b) Over 1 oz., not exceeding 4 oz 37,251 (c) Over 4 oz 14,779 Postcards 100,904 Halfpenny Packets 132,254 Newspaper Packets 22,610 Parcels 175,112 -------- Total 811,767 ========

This method gives an advantage to the heavy packets.

TABLE Q

TOTAL COST.

--------------------+---------+-----------+----------+-------+---------+------ Cost Description of Staff. Conveyance. Buildings. Stores, per Packet etc. Total. Packet --------------------+---------+-----------+----------+-------+---------+------ Ordinary Letter Packets-- d.

(a) Not exceeding 3,887,931 437,734 141,066 328,857 4,795,588 0.382 1 oz (b) Over 1oz., not exceeding 4 oz. 665,845 271,600 87,536 37,251 1,062,232 0.747 (c) Over 4 oz. 311,823 351,700 113,356 14,779 791,658 1.404 --------- All Letter Packets ... ... ... ... 6,649,478 0.457 ========= Postcards 1,189,707 53,450 17,220 100,904 1,361,281 0.353 Halfpenny Packets 1,721,781 245,600 79,150 132,254 2,178,785 0.432 Newspaper Packets 419,731 359,450 115,858 22,610 917,649 1.063 Parcels 2,066,642 1,555,302 152,428 175,112 3,949,484 7.091 --------------------+---------+-----------+----------+-------+---------+------

VIII

CONCLUSION

In relation to the rate of postage, the traffic of the Post Office falls into two main groups: on the one hand light letters and packets approximating to that type, and on the other the heavier packets and parcels. This division corresponds with an important difference in the practical working of the Post Office service, the task of providing for the transmission of ordinary letters, hundreds of which can be conveyed by foot-messenger without difficulty, being one entirely different from that of providing for the transmission of larger packets, a few scores of which would render necessary the use of a vehicle.

As to the transmission of letters, Sir Rowland Hill first perceived the significance of the fact that with objects of light weight the cost of conveyance, even over great distances, is small, and in his scheme of reform he consciously applied this fact to the determination of the rate of letter postage. This consideration remains; and as regards the ordinary letters of business or private communication--the average weight of which is less than half an ounce--the principle of uniformity of rate irrespective of distance, which is now the characteristic of letter postage, is well founded. Of the whole expense of conducting the postal services, the expense of the actual conveyance of a letter from place to place is not only small as compared with the cost of the terminal services of collection and delivery, but is actually so small in amount that no monetary system provides a coin of sufficiently small value to make its collection a practical possibility. The uniform rate, by making practicable the system of prepayment of postage by means of adhesive labels, has, moreover, effected great economy in the working of the service, and its simplicity is a boon to the public, the more so as it has been possible to fit the common rate to a popular coin. A low uniform rate is, however, only made possible from the financial standpoint by the Post Office monopoly of the carriage of letters, although that monopoly is justified on other grounds. With a uniform rate, owing to the varying conditions under which the service is conducted in different districts, there is inevitably a variation in the amount of profit. In certain cases, the rate is actually unprofitable; and were private undertakings permitted to compete for the more profitable traffic, such as the local traffic in large centres of population, the profits of the Post Office would be reduced to vanis.h.i.+ng-point.

Improvements in the means of communication have naturally had considerable effect on the development of the Post Office. The introduction of the stage-coach in the eighteenth century, and of railways and steamboats in the nineteenth, in turn revolutionized the methods of general transportation. By these improvements the capacity of the Post Office was largely increased, and regularity, rapidity, and increased frequency of service made possible. But such general improvements, while of the utmost importance as regards the capacity and character of the Post Office service, can affect the rates of postage only so far as they affect the cost of transportation of the mails, or, by largely increasing traffic, enable economies of business on a large scale to be secured. The stage-coach cheapened the cost of transportation, but, in England, had no effect on the rates of postage, because at the time of its introduction the charges were of a purely fiscal character, and the benefit of cheaper transportation was not pa.s.sed on to the users of the Post Office. The effect of the introduction of the railway has, at any rate as regards letter postage, not been much greater. Sir Rowland Hill's reform, which standardized letter postage, was based on the ascertained cost of conveyance of mails by stage-coach.[634] He found the cost of such conveyance too small to be taken into account; and the introduction of the railway could not, of course, improve such a situation.[635]

The ordinary light letter, weighing on the average considerably less than an ounce, comprises the overwhelming bulk of Post Office traffic, and the heavier letters occupy a quite subsidiary place. With the growth of Post Office traffic, and the consequent economies resulting from business on a large scale, the profits of the Post Office have gradually increased, but not to such an extent as to admit of the reduction of Sir Rowland Hill's penny rate without destroying the net revenue. Any reduction has been limited to the heavier letters.

The penny rate for the ordinary letter, though so moderate, is considerably in excess of the average cost even of long-distance letters.[636] Its maintenance, therefore, depends not on economic, but on general political and financial considerations. The question is, what general considerations shall be allowed to govern the rate? Shall it be fixed on the simple basis of cost and revenue, or shall it be fixed at such a level as to yield a surplus revenue? In other words, is it thought that the general public advantages which would result from a reduction of postage to the cost basis would counterbalance the disadvantages which would result from the loss of public revenue? This question will, of course, be answered in accordance with the varying circ.u.mstances in the different countries and at different times.[637]

An important consideration in relation to any proposal for reduction or increase of the letter rate, or, indeed, of any rate of postage, is, of course, the probable effect on the volume of traffic. Sir Rowland Hill, when he put forward his plan, laid stress on the increase in the number of letters which he antic.i.p.ated would follow the adoption of his proposal. Since that time it has become almost an axiom that a reduction of rate will naturally and inevitably be followed by an increase of the traffic, more or less considerable, according as the reduction is large or small. Indeed, some writers have thought that the new postal system was based on a law of fixed relative proportions between a reduction of rate and the corresponding result on traffic. In point of fact, Sir Rowland Hill's estimates were based only partially on the probable effect of the reduction in stimulating traffic, and rather on the antic.i.p.ation that, with a rate reasonably low, all that vast letter traffic which it was well known was being unlawfully dealt with outside the Post Office would be attracted to the lawful service. It is probable that a point of approximate satiety can be reached in the reduction of postage rates no less than in the reduction of the price of other commodities. A reduction would then result in only slightly increased consumption of the commodity--that is, in the case of letters, increase of the number posted. _Per contra_, a moderate increase of rate would result in a comparatively small reduction of the number of letters.[638]

But moderate variations of postage on ordinary letters are difficult to make, since popular charges, such as a penny or halfpenny, while they offer obvious advantages from many points of view, are not susceptible of slight modifications.

The variation of rate according to the weight of the packet is a point which has received insufficient attention. There can be no doubt that the cost to the Post Office of performing the service it affords in respect of packets of any kind entrusted to it increases with the increase of the weight and size. But it does not increase proportionately. A letter of 8 ounces does not cost twice as much to collect, transmit, and deliver as a letter of 4 ounces. The operations of stamping, sorting, and making up for despatch occupy more time and cause more inconvenience in the case of the larger packet, but the difference is slight when compared with the difference in size and weight. Nor does the cost of conveyance vary directly with the weight.

In any system of rates, therefore, which are accurately adjusted to the cost of the service, the rate of charge must increase considerably less rapidly than the increase in weight, that is to say, the rate would be degressive. Of modern postage rates very few are constructed on this principle, and to that extent they are uneconomic. In the case of letters, since the weight of the packet is normally unimportant, and simplicity of charge very important, this factor has been for the most part ignored.[639]

The same consideration which makes the uniform rate irrespective of distance economically just in the case of ordinary letters, takes away any ground on the score of cost of service for a special rate for local letters lower than the general uniform rate. On the other hand, the considerations which make for monopoly and unified control in the case of a general service, do not apply with the same force in the case of a service limited to a small area. In the latter case, compet.i.tion can much more easily be set up; and as the uniform penny rate is much higher than the cost of service even in the case of long-distance letters, competing agencies, which can leave aside unprofitable districts, such as the rural districts, can secure a profit on a local service while charging much lower rates. The maintenance of a local rate for letters side by side with a uniform rate 100 per cent. greater for all distances outside the local area, as in Canada, is nevertheless inconsistent from the economic standpoint.

The postcard, which may be regarded as a development of the letter post, is, in effect, an admission that the letter rate is much higher than the cost of service. The difference in cost of service in the case respectively of a light letter and a postcard is negligible. Indeed, in some respects light letters are more easily and more rapidly handled than postcards. From that standpoint, therefore, there is nothing to justify the difference of 100 per cent. in the rate of charge, and the lower rate is an arbitrary concession. The logical ground for its existence is rather to be looked for in the familiar and generally accepted principle applied to the determination of transportation rates by railway, by road, or by sea, viz. charging "what the traffic will bear," or the variation of the rates according to the intrinsic value of the goods transported.[640] Many messages are sent on postcards which otherwise would be sent as closed letters. But, at the same time, many messages are sent on postcards which otherwise would not be sent at all.

This has been especially the case since the introduction of the picture postcard.

These remarks apply equally to the lower rate which has been conceded to circular letters. Both rates represent a great concession relatively to the letter rate, and under them a large traffic has grown up.[641] They closely approximate to the actual cost of service, and probably yield a small profit. They are of great importance in the general scheme of rates, because they provide a cheap means for the transmission of a very large proportion of ordinary personal and commercial messages, and thus indirectly strengthen the position of the profitable penny rate for ordinary letters.

The picture postcard has strengthened the position of the letter rate in another way, viz. by raising the cost of sending a postcard, so that in many cases it is now greater than that of a letter. A common charge for a picture postcard is a penny; the cost of sending a communication on such a card by post is then three-halfpence, whereas the cost of a letter is only a penny plus the very slight cost of the paper and envelope.

The newspaper rate involves some new considerations. The original aim of the posts was the distribution of a certain form of intelligence. They had by the seventeenth century developed into an instrument whose main function was the distribution of letters. The first postal traffic in packets which were not letters was that in newspapers. The early newspapers were, however, in fact as well as in some cases in name also, merely news "letters," and it would have been surprising, therefore, had the posts not been made use of for their distribution. For newspapers, however, the charges have from the first been of a fundamentally different character from those for letters, and the traffic in newspapers, so far from being a source of profit, has in general resulted in heavy loss. There are certain general considerations which render the application of the rates of postage charged on letters inappropriate. The bulk and weight of a single newspaper is usually much greater than the bulk of a single letter; and if the newspaper were charged at the same rate and on the same basis as the letter, viz. by weight, it must in general be charged several times the rate for an ordinary letter. Such a charge would be unjust, because, as already pointed out, the cost of performing the services of transportation and delivery does not increase in direct proportion, or anything approaching direct proportion, to the increase of weight. If a newspaper is regarded as a very heavy letter, the importance of the factor of weight is at once perceived. Weight charges levied on newspapers should at least be on a degressive scale. But any system of charge by weight proportioned to letter postage must lead to a higher charge than that for a single letter. How much higher is of little consequence, because even the rate for single letters would be almost prohibitive for ordinary newspapers.

The papers would either be excluded from the mails and despatched by private agencies, where such agencies exist, or, in countries where the Post Office holds the monopoly of the carriage of newspapers, the traffic would be greatly restricted.

A lower rate for newspapers is also justified on the principle of charging "what the traffic will bear." But the chief reason is that it has usually been considered desirable to encourage the distribution of newspapers for the benefit of the public; and in its origin, the special rate for newspapers seems to rest rather on the two general considerations of the expediency of providing for the easy distribution of intelligence, and the impossibility of charging newspapers with the same rate as letters.

Merchants' and manufacturers' samples are not, of course, strictly speaking, of the nature of correspondence, and their conveyance by post represents in some aspects an expansion of function. The main function of the Post Office is the distribution of letters, or, as it may be expressed generally, the distribution of any species of communication between persons, reduced to material form, whether as ma.n.u.script letters, postcards or circular letters, printed or written, or even in the form of newspapers. For samples of merchandise some relations.h.i.+p to ordinary communications may perhaps be claimed. They are themselves often the necessary complement of letters of business and are forwarded in order to convey a precise notion of the commodities with which the business is concerned, a purpose served much more effectively by the small sample than by the descriptive letter, which would be the only alternative. So far, then, as the Post Office is intended to a.s.sist the transmission of information of whatever sort, the carriage of merchants'

samples is perhaps a legitimate part of its function, especially as the encouragement of trade is no small part of its main function. The transmission of small packets not inconvenient to handle and transport, although essentially different in make-up from letters, was therefore a natural development when advantage to commerce would result.

The impracticability of charging the ordinary letter rate, since such a charge would have been prohibitory, which has influenced the newspaper rate, is equally applicable to samples. The case for a lower rate was strengthened by the consideration that commerce would benefit, and the general considerations of the justice of a lower weight-rate for moderately heavy packets and for packets of less intrinsic value, applied to sample packets, no less than to newspapers, although this point of view was not perhaps consciously adopted. Based on these considerations, a special rate was given to samples, fixed more or less arbitrarily, and without examination into the question of what rate would be the lowest profitable rate for the business.

The basis of the book rate is only to a slight degree economic, that is to say, related to the cost of providing the service. The justification for a low rate rests for the most part on the same considerations as the privileged rate for newspapers: the desirability of a.s.sisting the education of the people and the utility of books for the purpose, the comparatively low intrinsic value, and the impossibility of charging the scale of rates applied to letters--even less possible in the case of books than in the case of newspapers.

The exceptionally low rate for printed matter for the blind has been given as a measure of philanthropy. By its means, although at some loss to postal revenue, the effect of the disadvantage of bulk and weight in such printed matter, which results from the affliction, is in a large degree removed.[642]

The question of the rate to be applied to parcels is one of considerable difficulty. While considerations of public utility would probably make it undesirable for the State to derive a profit from the business, they would hardly extend to the point of conducting a large transportation business at a loss, and the results in England and Germany show how important and difficult is the problem of fixing remunerative rates. The rates for newspapers, samples, ordinary printed matter, etc., have been accorded not solely with reference to the cost of the service, but on grounds more or less political and social as regards the fact of granting a privileged rate, and more or less empirical as regards the fixing of the actual amount of the charge. For the most part this method has answered sufficiently well, the reason being that the cost per packet is comparatively small, and the privileged traffic has not generally a.s.sumed large proportions relative to the letter traffic. These empirical methods cannot, however, be applied in the case of parcels. The expense of the service performed by the Post Office is not, as with a letter, actually small, and confined to that of collection at one end and delivery at the other end of the journey, with a negligible cost (per packet) for transmission between the points of origin and destination. Cost of transportation itself becomes an appreciable item in respect of every parcel. For this transportation the Post Office is in the main dependent on the railways, and in the determination of its cost the principles determining ordinary railway rates must necessarily apply.

Those principles are complex and to a large degree indeterminate. On the problem of railway and other transport rates many volumes have been written, and many more will yet be written before a solution is arrived at.[643] Railways, like the Post Office, are unable to allocate the actual working costs with any degree of precision between the various kinds of service they perform. Like the Post Office, they have one general set of expenses, although they have diverse sources of revenue.[644] Even if the cost of service could in each case be definitely ascertained, its adoption as the sole basis of the rates would prove unsatisfactory.[645] For the most part the principles on which the rates are actually fixed resolve themselves into a consideration of "what the traffic will bear," that is to say, the test by actual observation and computation, strengthened, if need be, by actual experiment, of the rates which will yield the maximum advantage to the railway company.

The advantage to the railway conducted under private management may be defined to be the excess of receipts from the traffic over the out-of-pocket expenses actually incurred in handling the traffic. To obtain this maximum it has been found necessary to vary the charge according to the nature of the goods. Elaborate, detailed cla.s.sifications of goods have been arranged with distinct scales of rates for each cla.s.s, devised on the basis of charging each kind of goods with the rate likely to yield to the railway the maximum of advantage as defined above.[646] Although somewhat crude and a little empirical, certainly largely arbitrary, this method has been almost universally adopted for the determination of railway charges.[647]

A characteristic feature of such charges is that account is invariably taken of the distance over which the goods are transported. In contrast with this, the principle of uniformity of rate irrespective of distance has been universally adopted in regard to all postal packets other than parcels, and to some extent for parcels. The application of the principle to parcels rests, however, on other grounds than its application to letters. Sir Rowland Hill himself never contemplated that the principle was necessarily applicable to all matter which might be sent by post.[648] The circ.u.mstances under which he made his discovery, and the facts on which he relied, make it plain that, in the absence of other overpowering considerations, the grounds advanced in the case of light letters will not justify uniformity of rate irrespective of distance for packets of considerable weight, which necessarily involve appreciable cost for transportation. From the financial point of view, the uniform rate is, moreover, inapplicable to any cla.s.s of traffic not secured to the Post Office by monopoly, since private undertakings will always step in and take away the profitable sections.

For heavy parcels a uniform rate cannot be justified. There are, however, certain considerations not purely economic which may be held to justify a uniform rate for small parcels, especially if it be held that the State may conduct such a business for the advantage of the public, and abandon to some extent ordinary commercial balancing of cost and revenue.

Simplicity, afforded in a high degree by the uniform rate, facilitates the administration and practical conduct of Post Office business, and is, therefore, desirable, even if a little unjust. Complicated rates are an unfailing source of irritation to the public as well as a source of embarra.s.sment to the staff, and there is not much doubt that one feature of the parcel post which commends it to the public favour is the simplicity of its rates.[649] There is, moreover, to be considered the view that it is no part of the duty of the Post Office to provide services in towns or districts for which private industry gives adequate services, but rather to cover the whole country, so that the public may always have ready to hand a means of forwarding small packages of goods to friends or relatives, or traders to customers, in other parts of the country. Such a service has many features which distinguish it from business undertakings of the ordinary type. In this way uniform rates may prove justified; since if in regard to any local service, or the service between any two points, the uniform rate, which must necessarily in certain cases yield considerable profit, is found burdensome, it is in all such cases open to private industry to provide the remedy. In the case of light parcels the cost of the services of collection and delivery is much greater than that of conveyance; and the variation of the total cost with distance of transmission is small proportionately.

The uniform rate can therefore be fixed near the level of the cost. But even for such parcels it is economically unsound. It cannot be fixed at a really low level, because it is to be applicable to a parcel sent across the whole territory of a postal administration; and with such a parcel, even if weighing only 1 pound, the cost of transportation is an appreciable item.

The uniform rate for parcels is an expedient for smooth working rather than a scientific rate, and against the acceptance of uniformity of rate as a principle must be placed the fact that railway companies have not adopted it. The actual results of the uniform rate have not been altogether satisfactory. The small use of the post for the transmission of the heavier parcels appears to indicate that the rate for such parcels is, in general, too high.[650] For local traffic in small towns, where cost of conveyance is negligible, it is almost prohibitive,[651]

and is much higher than the rates charged by competing agencies.