The Value of Stamps in the Prison Economy - The Forever Stamp

The inmate at a federal prison has a strange relationship with his money. He can legally manage his assets held in bank accounts, investment vehicles, etc. He receives wages for his assigned job at the prison, and can purchase a variety of grocery and sundry items at the prison commissary. Many make a monthly payment towards a court-ordered restitution. And yet he cannot possess so much as a single piece of what he calls "folding money."

The money that the inmate is legitimately entitled to is held in an electronic account, accessible via presentation of his prison ID or the keying of an account and pin number. This is fine for the purchase of a box of oatmeal at the commissary or a few hundred minutes of talk time on the phones, but is of little use should the inmate wish to pay another inmate for a good or service. Examples include: haircuts; laundry and ironing services; meal preparation; hand-crafted goods of paper, wood or leather, and of course smuggled contraband. A medium is also required for gambling on the outcome of poker games, Scrabble ^TM games, and sporting events both on and off the prison campus. For all of these exchanges, the lowly postage stamp serves ably.

An inmate is allowed by Bureau of Prison (BOP) policy to possess no more than three books of first-class letter rate postage stamps (60 stamps.) In reality, an inmate may hold as many as a 100 books or more, storing the excess in caches or in secret pockets on his person. The enforcement of such policies of stamp limits is an infrequent but devastating potentiality for the holder of a multi-book "fortune."

The black market dollars-to-stamps exchange rate is determined by the inmate "store men", those who sell enough of a good or service to obtain a surplus of stamps. They may opt to mail these stamps to a family member and effectively convert them into cash, or obtain the same end by exchanging them, at a discount with inmates who will buy items at the commissary with which they may continue their enterprise. This discount is fairly steep; the prevailing rate is thirty cents per stamp, with a bulk rate of twenty-five cents a stamp for ten books or more. (Compare this to the forty-two cent face value of each stamp.)

Why the disparity between white and black market prices? The buyer of white market stamps at the commissary is effectively paying 40% premium per stamp over black market (non-bulk) rate. What motivates him to do so? The primary factors are ignorance (not knowing a discount supplier), fear (not wanting to get caught profiteering), and a certain amount of convenience and product differentiation (black market stamps may be worn at the edges, soiled, or consist of a variety of different styles mis-matched together). On the supply side, the price of black market stamps is driven down by the substantial surplus: they are continuously entering the system (and being consolidated by customary acts of largesse by an inmate just before his release) and rarely being used or redeemed. Without a strongly incentivized system of exchange the store man would, like Midas, be starved by his own wealth.

An additional complication in recent years is the introduction of the "forever stamp", which has no dollar-and-cent denomination but instead is worth the current price of first-class postage in the United States ("forever".) The forward-thinking, store man realizes that these stamps are potentially lucrative hedge against inflation, as a book of them may fetch four or five dollars or more in the next few years. He responds, not by increasing their exchange rate but by fiscal policy: he discourages his customers from paying with non-forever stamps, and at the same time unloads his own non-forevers on his suppliers, thus funneling these second-tier stamps to use as actual postage and towards a small but growing tertiary black market (e.g. another inmate might begin accepting discount stamps in his version of a "discount store").

It will be interesting to see how long forever stamps remain the preferred currency now that the first post-forever issue of postage stamps has been released. As they continue to circulate, the forevers will grow more worn and damaged - a fate that has never befallen a stamp due to frequent rate increases. Watching what becomes of the forever stamp will allow prison economists to gauge what factors weigh the heaviest in determining black market price disparities.