Money-Losing Profit Makers

Mar 5 2013 @ 3:00pm

Gopnik identifies the limits of markets:

Not only are there things that the market is not well suited to fixing—the best thing to enable the private market to make a profit is often public services that operate at a loss. Seeing a postal worker trudging through snow with her packages might make us reflect gloomily on the illogic of public policy. The post office lost fifteen billion dollars last year (though a good part of that was due to a disastrous bookkeeping requirement imposed by Congress); eliminating Saturday mail delivery is part of its plan to “return to profitability.” Almost everyone agrees that it can’t sustain losses indefinitely. But are these losses really losses, or are we looking at the wrong unit of analysis? Lots of things are unprofitable if you narrowly consider outlays and income—including most of our roadways. To say that the post office runs at a loss is to say that it subsidizes a system of conveyance and communication. This in turn makes possible trillions of dollars’ worth of enterprise.