uch 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
circumstances 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 anticipated 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
anticipation 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
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