Estimation of the value and cost of government and market supplied goods

A review of previous research indicates that people's valuations of governm ent supplied services are not closely related to their costs, raising the q uestion of how much people know about the costs of such goods. Respondents rated the value of government and market supplied goods and services and es timated their costs in three studies. The respondents made poor estimates o f the per capita costs of supplying government services, and were little be tter at estimating per capita expenditure on a range of market supplied goo ds (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 rat ed annual values of both government and market supplied goods were more wea kly correlated with their annual per capita costs. The results suggests tha t the inaccuracy in estimating the costs of government goods might arise be cause such items do not have individual item prices rather than because peo ple generally do not pay for them themselves.