Sunday, March 21, 2010

The Post Office and Status Quo Bias

The United States Postal Service is expecting to lose a quarter of a trillion dollars over the next decade (see this Washington Post story for more background). One of the perennially proposed solutions has been to cut delivery service to five days a week.

Our demand for postal delivery has plummeted as the economy has become increasingly digital, so cutting service to five days probably makes sense. After all, there is no postal delivery on Sundays, and the world still goes 'round.

The status quo bias is a major barrier to adopting such a schedule. Because six-day service has been the norm for decades, a small portion of our population can show the rest of us concrete personal examples of how a reduction in service would hurt them. This makes the reduction politically difficult to implement, even if the sixth day of service comes at great cost to our society as a whole and only benefits a handful of people.

Imagine instead that five-day service had been the norm all along and that six-day service was in fact optimal. Academics and economists could present compelling logical and statistical arguments for why a sixth day of service would be worthwhile, yet these arguments would only be hypothetical and thus not as strong as the personal appeals in the previous scenario.

The few people who urgently need items delivered on Saturdays could rely on UPS, FedEx, or courier services. Mail sent at the end of the week could arrive at its destination one day later. This would inconvenience some people, sure, but wouldn't it be worth it if it saves taxpayers billions of dollars?