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

A review of previous research indicates that people's valuationsof government supplied services are not closely related to theircosts, raising the question of how much people know about thecosts of such goods. Respondents rated the value of governmentand market supplied goods and services and estimated their costsin three studies. The respondents made poor estimates of the percapita costs of supplying government services, and were littlebetter at estimating per capita expenditure on a range of marketsupplied goods (e.g., expenditure on fruit), but they were quiteaccurate at estimating the prices of individual market supplieditems. Rated values of individual market supplied itemscorrelated well with the costs of the items, but rated annualvalues of both government and market supplied goods were moreweakly correlated with their annual per capita costs. The resultssuggests that the inaccuracy in estimating the costs ofgovernment goods might arise because such items do not haveindividual item prices rather than because people generally donot pay for them themselves.