Cost Accounting in Postal Policymaking

Citation

 

Richard B. Kielbowicz, "Cost Accounting in the Service of Policy Reform: Postal Ratemaking, 1875-1926," Social Science Quarterly 75 (June 1994): 284-99.

 

Abstract and Keywords

 

Long the nation’s largest public utility, the Post Office Department lacked a regular means of ascertaining the costs of providing different mail services until 1926.  The paucity of cost data, however, did not deter Congress from setting postage rates down to a fraction of a cent or from devising sweeping policies governing the nation’s postal system.  In setting rates, Congress had at best vague pricing theories in mind: value of service (mainly for letter mail), public service (the social utility of disseminating public information), and cost of service (advertising and parcels).  Pressure to accurately gauge postal costs grew as the Post Office became a channel for different—and often competing—business services.  In Lowi’s typology of policy arenas, setting postage became a regulatory function.  The best way for one mail class to obtain or retain low rates by the late 1800s was to see that postage was raised for another.

Applied to postal policy, cost accounting revealed who benefited, and to what extent, from the federal government’s largest enterprise.  Rival parties seized on cost accounting for the added leverage it gave them in postal policymaking.  Mailers other than publishers insisted that their postage cross-subsidized the dissemination of newspapers and magazines.  These mailers and their allies in Congress had grown weary of publishers’ repeated claims that cheap postage for periodicals was justified by the intangible benefits accruing to society; postal reformers now insisted on knowing the policy’s tangible costs.  Almost all players in policymaking found some benefit in cost accounting.  Postal administrators, long blamed for the Department’s deficits, saw cost ascertainment as a means to rebut critics and to improve their management of a far-flung bureaucracy.  Private-sector accountants welcomed the opportunity to demonstrate their expertise in a public arena at a time when they were seeking popular support to extend their professional roles.  The executive branch also encouraged cost accounting at the Post Office as part of its grander plans to overhaul the federal budgetary process.  Some Progressive Era lawmakers hoped that the data adduced through cost accounting, a tool for the scientific management of public enterprises, would prompt reform of the postal subsidy long enjoyed by the press.  Limitations in assigning joint costs, however, hindered reformers’ efforts, which left a sizable realm for political judgments.

 

Keywords: cost accounting, cross-subsidies, network economics, policy history, postal service, rate making

Article PDF

 
Adobe Acrobat file icon Cost_Accounting_in_Postal_P...pdf1.6M Download View
Send questions about this workspace to Richard Kielbowicz​.