Estimation of the Value and Cost of Government and Market Supplied Goods

A review of previous research indicates that people's valuations of government supplied services are not closely related to their costs, raising the question of how much people know about the costs of such goods. Respondents rated the value of government and market supplied goods and services and estimated their costs in three studies. The respondents made poor estimates of the per capita costs of supplying government services, and were little better at estimating per capita expenditure on a range of market supplied goods (e.g., expenditure on fruit), but they were quite accurate at estimating the prices of individual market supplied items. Rated values of individual market supplied items correlated well with the costs of the items, but rated annual values of both government and market supplied goods were more weakly correlated with their annual per capita costs. The results suggests that the inaccuracy in estimating the costs of government goods might arise because such items do not have individual item prices rather than because people generally do not pay for them themselves. Copyright 2001 by Kluwer Academic Publishers