Summary. There is no need to print the price on stamps. Moreover, doing so generates significant transaction costs.

extended version here

Intoduction. Imagine for a minute if canned peas were sold the way U.S. postage stamps are sold. You walk into the grocery store and buy a can of peas for 30 cents, go home, and stick the can on your shelf. A month passes and the mood to eat canned peas strikes. However, in the meantime, the price of peas had increased to 31 cents a can. Well, of course, you can't just eat that can you paid 30 cents for! First you have to make a trip back to your supermarket and pay the extra penny!

Ridiculous, right? But that is exactly how it works with stamps. So what exactly are you buying when you buy a first-class postage stamp? Under the current system, you have purchased the right to send up to 1 ounce of mail anywhere the Post Office delivers as long as you send it before the next increase in postage rates.

Proposal(i)Drop the implicit provision from the contract (in italic above) by NOT printing the price on stamps. The only thing which needs to be indicated on a stamp is what category of mail delivery service it is good for (e.g. postcard, first-class, second ounce, etc.). Under this system a first-class stamp purchased today will be honored by the post-office no matter how far in the future one actually uses it. (ii) Smooth out rate increases so that postage rates for any given category never increase by more than 1 cent (or perhaps even less) at a time. So, for example, if the price of a first-class stamp is to increase by 4 cents in 2 years, space the increase out in four six-month intervals. (iii) The post-office refunds returned stamps at the previous rate.

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