Rating the values of government and market supplied goods

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Rating the values of government and market supplied goods Simon Kemp 1 Department of Psychology, University of Canterbury, Christchurch, New Zealand Accepted 28 May 1998 Abstract Three studies are described in which respondents rated the total value of a range of goods and services, some supplied by the government, some by the market. Study 1 found that a similar relationship between the total rated value of a good to a country as a whole and per capita cost was found for government and market items. However, while the total value and value of increasing spending by a small amount (marginal value) of government services were highly correlated, the total and marginal values of market goods were significantly less well correlated. Moreover, while the government and market goods had similar total values, the marginal values of the former were higher. Study 2 found that average dierences between the ratings of the government and privately supplied goods correlated with preferences for dis- tributing scarce goods by regulation or the market system. Study 3 showed little correlation of the average dierences with scores on an economic belief scale. The overall results suggest that people value government goods in a simpler way than they value market goods and that this dierence makes it dicult to compare the two types of goods with each other. Ó 1998 Elsevier Science B.V. All rights reserved. PsycINFO classification: 2229; 3040; 3920 JEL classification: D70; H40 Keywords: Category rating; Marginal utility; Public goods; Value Journal of Economic Psychology 19 (1998) 447–461 1 Fax: 64 3 364 2181; e-mail: [email protected] 0167-4870/98/$19.00 Ó 1998 Elsevier Science B.V. All rights reserved. PII: S 0 1 6 7 - 4 8 7 0 ( 9 8 ) 0 0 0 1 8 - X

Transcript of Rating the values of government and market supplied goods

Page 1: Rating the values of government and market supplied goods

Rating the values of government and market supplied goods

Simon Kemp 1

Department of Psychology, University of Canterbury, Christchurch, New Zealand

Accepted 28 May 1998

Abstract

Three studies are described in which respondents rated the total value of a range of goods

and services, some supplied by the government, some by the market. Study 1 found that a

similar relationship between the total rated value of a good to a country as a whole and per

capita cost was found for government and market items. However, while the total value and

value of increasing spending by a small amount (marginal value) of government services were

highly correlated, the total and marginal values of market goods were signi®cantly less well

correlated. Moreover, while the government and market goods had similar total values, the

marginal values of the former were higher. Study 2 found that average di�erences between the

ratings of the government and privately supplied goods correlated with preferences for dis-

tributing scarce goods by regulation or the market system. Study 3 showed little correlation of

the average di�erences with scores on an economic belief scale. The overall results suggest that

people value government goods in a simpler way than they value market goods and that this

di�erence makes it di�cult to compare the two types of goods with each other. Ó 1998

Elsevier Science B.V. All rights reserved.

PsycINFO classi®cation: 2229; 3040; 3920

JEL classi®cation: D70; H40

Keywords: Category rating; Marginal utility; Public goods; Value

Journal of Economic Psychology 19 (1998) 447±461

1 Fax: 64 3 364 2181; e-mail: [email protected]

0167-4870/98/$19.00 Ó 1998 Elsevier Science B.V. All rights reserved.

PII: S 0 1 6 7 - 4 8 7 0 ( 9 8 ) 0 0 0 1 8 - X

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1. Introduction

The problem motivating the present research is both simple and important.Economic theory usually assumes that households strive to optimise theutility they obtain from the goods and services they purchase in the mar-ketplace. But many of the goods and services we use are provided by agovernment and funded by general taxation. How do we know, or how couldwe ®nd out, whether government supplied goods and services enablehouseholds to optimise, or even increase, their utility when one takes intoaccount the consumption of market goods that must be forgone to pay forthe government goods?

The present approach to this question calls for respondents simply to ratethe values that they believe they or the community as a whole derives fromdi�erent services on a scale from 0 to 10. (Parducci, 1982, p. 89) has claimedthat such category ratings provide ``direct pipelines to the psyche''. Such alarge claim is not easy to substantiate, but certainly the method has beenwidely used in psychology generally, with a number of studies suggesting itsvalidity in a variety of di�erent applications (e.g. Poulton, 1989; Wegener,1982).

There is also evidence indicating it might be a useful means of assessingeconomic value. For example, Kemp et al. (1995) found that simple ratings ofthe value of market goods produced results consistent with the predictions ofmicroeconomic theory. Kemp and Willetts (1995a) found that ratings of thevalue of government supplied goods and services correlated well with con-tingent valuation and multiattribute utility measures. Kemp and Willetts(1995b) examined the pattern of ratings given by a representative sample ofNew Zealanders to a wide range of government-supplied services.

The present studies di�er from this previous research in obtaining ratingsfor a range of government and market supplied goods in the same exercise.This is obviously a critical step if the question posed in the ®rst paragraphabove is to be answered. A focus of the ®rst study reported here was tocompare ratings of the total value to New Zealand to ratings obtained whenpeople were asked to rate either the value of the items to them personally ortheir perceived marginal value to society as a whole (i.e. the value obtainedby a small increase in expenditure on the item). The comparison of marginalwith total values is particularly important because previous research hasshown that these qualities are distinguished for market (Kemp et al., 1995)but not for government-supplied goods (Kemp and Willetts, 1995a). What,then, happens if the two types of goods must be valued side by side?

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2. Study 1

2.1. Method

Study 1 was preceded by a pilot study in which small samples of respon-dents rated the value of 15 government-supplied and 13 market-suppliedgoods and services for which national expenditure could be computed (De-partment of Statistics, 1994, 1995; Estimates of Appropriations for theGovernment of New Zealand, 1995, 1996). The results indicated that rea-sonable and overlapping ranges of values were obtained for the two classes ofgoods. From the pilot study smaller sets of government and market items withroughly comparable values were identi®ed for use in the main experiments.

Two di�erent questionnaires requested respondents to value 16 items, eightof them services currently provided by the New Zealand government, andeight of them goods and services currently purchasable in the market. Theactual items used are listed in Table 1.

In both questionnaires, respondents were asked to value all the items twice.In one questionnaire (total/personal value), respondents were asked to esti-mate both the ``value New Zealand people as a whole'' get from each of theitems in a year, and ``the value you get'' from each of the items in ``yourlifetime''. They were reminded that value and cost were not the same (``Somethings could be costly but in your opinion of little use to New Zealandpeople/you''), to disregard cost, and noti®ed that some of the items youbought yourself while others were provided by the government.

In the other (total/marginal value) questionnaire respondents were asked toestimate the ``value New Zealand people as a whole'' got from each of theitems in a year and to disregard the costs involved (total value). Additionallythey were asked to estimate the value New Zealand people as whole wouldget from an extra dollar spent on each of the items (marginal value). Re-spondents were again reminded that value and cost were not identical, andthat two di�erent types of item were to be valued. Note that the total valu-ations requested were identical for the two questionnaires.

In both questionnaires, all valuations of the same type (e.g. total values ormarginal values) were performed before any of the other type. The type ofvaluation requested ®rst was randomly varied across the questionnaires. Twodi�erent random orderings of the items were used for each type of ques-tionnaire, but the same ordering was used for both sets of valuations re-quested in the same questionnaire. Questionnaires concluded by askingrespondents to indicate their gender and age group.

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Sixty respondents completed total/marginal value questionnaires, and 58completed total/personal value questionnaires. Of the 118 respondents, 55 (29completing total/marginal questionnaires; 26 total/personal questionnaires)were students in a third-year lecture on industrial and organisational psy-chology who completed a questionnaire in lecture time, while 63 (32 com-pleting total/marginal questionnaires; 31 total/personal questionnaires) weremembers of the Christchurch general public, recruited by asking a number ofpaid interviewers to locate non-student acquaintances and asking them tocomplete the questionnaires. None of the interviewers completed question-naires themselves. The di�erent types and orderings of the questionnaireswere distributed randomly.

The student sample contained 12 men and 43 women, with median age inthe range 15±24 years. The general public sample contained 29 men and 34women with median age in the range 35±44 years.

Table 1

Mean ratings of total and marginal value to NZ (total/marginal questionnaires) and total and personal

value (total/personal questionnaires) for each item

Valuation type Questionnaire

Total/Marginal Total/Personal Item cost

Total Marginal Total Personal $ per head

Government items

State schools 8.0 7.8 8.4 8.0 686

The police force 7.9 7.5 8.1 7.3 218

New Zealand universities 7.3 7.0 7.1 7.8 171

Government retirement income 6.8 6.8 6.6 5.3 1425

Unemployment bene®ts 5.7 4.4 6.1 4.0 298

The National Library 5.4 5.2 5.6 4.8 15

Subsidised work for unemployed 5.2 5.3 6.1 3.9 46

Department of women's a�airs 4.8 4.2 4.4 3.4 1

Average government 6.4 6.0 6.7 5.6

Market items

Home heating and electricity 7.6 6.2 7.7 8.2 341

Private housing 7.2 5.0 8.0 7.7 2106

Private transport e.g. cars 7.1 4.5 7.1 8.0 1350

Clothing 6.8 4.2 7.9 6.8 367

Children's shoes 6.1 3.9 6.2 4.0 15

Fruit 6.0 4.5 6.8 7.4 126

NZ holiday accommodation 5.2 3.6 5.7 4.9 67

Carpets and ¯oor covers 5.0 3.4 5.4 5.5 58

Average market 6.4 4.4 6.8 6.5

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2.2. Results and discussion

Table 1 shows the mean rating given to each item under the two valuationsof each questionnaire. We focus ®rst on the total value results.

Averaged over all respondents, total value ratings from the total/marginalquestionnaire correlated 0.93 with the total value ratings from the total/personal questionnaire. Thus, as inspection of the table indicates, the totalvalue ratings were not much in¯uenced by whether they had been paired withthe personal or marginal value ratings.

Pooling the total value results from the two questionnaires, the averageratings given by the student and general public samples also correlated 0.93with each other. A MANOVA analysis with the total value ratings of all 16items as dependent variables found no signi®cant di�erence between the twosamples. Similarly, there were no signi®cant di�erences between the averageratings of the eight government items (General Public� 6.3; Students� 6.7)or the average ratings of the eight market items (Both� 6.6).

Fig. 1 plots the total value ratings of the 16 items against the per capitacost of each item. Note, ®rstly, that the values of the government and marketitems of similar per capita costs are roughly comparable. Secondly, the basic®nding of a slow increase in value with increasing per capita cost of the itemsre¯ects similar previous ®ndings with government items alone (e.g. Kempand Willetts, 1995b).

The average personal value ratings correlated 0.85 with the average totalvalue ratings from the same questionnaire. These correlations were alsocalculated for each of the 58 respondents who completed this questionnaire,yielding a mean correlation of 0.54 with a range from )0.28 to 0.97. Thus,ratings of personal value and ratings of overall value to New Zealand werewell correlated, but not identical. Inspection of Table 1 shows that the big-gest di�erences between the valuations occurred with the two governmentunemployment items and children's shoes.

An analysis of variance was performed on the ratings with one variable thetype of rating (personal; total) and the other the type of item (government;market). This analysis revealed signi®cant e�ects of type of rating(F(1,57)� 15.2, p < 0.01) and type of item (F(1,57)� 16.1, p < 0.01). Moreinterestingly, there was also a signi®cant interaction (F(1,57)� 14.7,p < 0.01). Thus, as Table 1 suggests, the respondents had a signi®cant ten-dency to rate the government items higher on the criterion of value to NewZealand than they did on the personal value criterion. The pattern of resultsobtained here suggests that people's valuations of government-supplied

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goods may be tinged with altruism, and includes an assessment of bene®ts toothers as well as themselves. Such an hypothesis is consistent with boththeorising (e.g. Etzioni, 1988) and previous research (Hudson and Jones,1994).

The average marginal value ratings correlated 0.75 with the average totalvalue ratings from the same questionnaire. The mean correlation of the 60individual respondents was 0.42 with a range from )0.54 to 0.90 (SD� 0.39).When the correlations were calculated only over the eight government items,the mean was 0.51, a value signi®cantly higher (t(59)� 2.83, p < 0.01) thanthat obtained (0.34) when it was calculated only over the eight market items.Thus, the correlation between marginal and total utility was higher for thegovernment than for the market items. This result is consistent with earlier®ndings that respondents do not distinguish the marginal and total utilities ofgovernment-provided services (Kemp and Willetts, 1995a), but they do dis-

Fig. 1. Mean rated total values (averaged over the two questionnaires) of government and market supplied

goods. The least-squares best ®tting regression line has the equation: Average rating� 4.46 +

0.97 log10(Cost per capita), with r2� 0.58.

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tinguish marginal and total utilities of items they purchase themselves (Kempet al., 1995 Expt.2).

Analysis of variance of the total/marginal questionnaires revealed signi®-cant e�ects of type of item (F(1,59)� 15.5, p < 0.01), type of valuation(F(1,59)� 26.1, p < 0.01), and, most critically, the interaction(F(1,59)� 27.3, p < 0.01). As Table 1 shows, marginal and total values weresimilar for the government items, but for the market items marginal valueswere marked lower than the total values. This result clearly resembles thatfrom the correlational analysis in showing that total and marginal utility aredistinguished for market but not government items.

3. Study 2

Studies 2 and 3 address the question of whether the di�erent valuationsindividuals assign to government and market goods relate to other economicopinions. Such results are interesting in themselves, but they also address thevalidity of comparing rated utilities of market and government goods.

Kemp (1996) carried out a series of studies in which respondents werepresented with scenarios featuring shortages (for example, of champagne ormedical drugs) and asked to rate their preference for distributing the scarcegoods via the market system or regulation. These preferences were stronglyrelated to the type of shortage and situational variables such as the expectedduration of the shortage or whether the supplier of the goods was a mo-nopoly, but there was also substantial variation between individuals. Study 2investigated whether this variation was related to individual di�erences in thevalues assigned to government and market goods and services.

3.1. Method

The questionnaire consisted of two parts. In one part, respondents wereasked to rate their preferences for market or regulation on a scale from 1(Completely favour Regulation) to 9 (Completely favour Market). Theyrated four scenarios featuring shortages of car radiator hoses, the drugneeded to treat a new disease, French champagne, and indoor sports facili-ties. Parameters for these scenarios (e.g. the duration of the shortage) were®xed for each shortage, and chosen so as to produce a reasonable range ofresponses between the scenarios (Kemp, 1996). For example, the car hosescenario read:

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``A new microbe emerges that selectively attacks car radiator hoses.Virtually all cars are quickly a�ected by the microbe. The problem can besolved by ®tting hoses made of a special polymer which a single companydeveloped some years ago and holds all manufacturing rights for. Becausethe manufacturing plant is limited the shortage is expected to last foryears.''

Respondents were asked for their preference for one of two responses tothe shortages:

``In the Regulation response, the government makes up regulations to tryto distribute the commodity to those people it thinks might most bene®t fromit. Assume that the regulators are honest and well-meaning.''

``In the Market response, there is no intervention. In this circumstance theprice of the commodity will go up until the number of people willing or ableto pay it just equals how much is available. Alternatively, a commodity whichwas free will now start to cost money.''

In the other part of the questionnaire, respondents were presented with 16items and asked to estimate the value (on a scale from 0 to 10) they thoughtNew Zealand people as a whole derived from each in a year. Eight of theitems featured goods and services provided by the government; eight goodsand services available through the market. The items used were the same asthose in Study 1, except that National Archives was used instead of theNational Library as a government item, and ``Visits to health professionals''and ``Membership of trade unions and professional organisations'' replaced``Home heat and electricity'' and ``Carpets and ¯oor covers'' as market items.These di�erences followed changes in available statistics in the interval be-tween the two studies.

Two di�erent random orders of both the preference scenarios and theservices were used. In half the questionnaires with each order, preferenceratings were requested before value ratings, in half value ratings were re-quested ®rst. Distribution of the four di�erent versions of the questionnaireso obtained was randomised.

Five paid experienced interviewers each questioned between 10 and 20people, normally acquaintances. They were instructed that a maximum ofonly a third of their samples could be students and asked to obtain reason-ably varied samples. The ®nal sample so obtained consisted of 79 respon-dents, 34 of them male. Twenty-eight were aged between 15 and 24, 21between 25 and 34, 14 between 35 and 44, 12 between 45 and 54, and threewere 55 or over. Respondents completed the questionnaires individually andusually at home.

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3.2. Results and discussion

An overall distribution preference measure was simply calculated for eachsubject by averaging the four scenario ratings. The overall mean was 5.12(SD� 1.51), with a range from 1.75 to 8.50. (Recall that higher numbersindicate an increasing preference for market distribution.) Thus, althoughthere were substantial di�erences between the scenarios (see Table 2), therealso appears to be considerable variation between the individual respondentsin their overall preference.

The eight government supplied services received an average value rating of6.84 while the eight market supplied services received an average value ratingof 7.04 from the sample. A single measure of preference for governmentsupplied services was obtained by subtracting the market service averagefrom the government service average and then dividing by the average valuefor all services. The average government preference so obtained was )0.04with a range from 0.37 to )0.51.

Table 2 shows the average distribution preference rating for each scenarioand the correlation between these ratings and the government preferenceratings obtained from the service value ratings. In all cases the correlationsare negative, indicating that those preferring to distribute scarce goods viathe market also tended to value market goods and services relatively higherthan government supplied services.

Although signi®cant, the correlations are not large. This result may re¯ect,among other factors, substantial individual di�erence in relative valuationsbetween the di�erent scenarios and between the di�erent government andmarket services. Intercorrelations between the preference ratings for the four

Table 2

Mean distribution preference ratings and their correlation with the government preference ratings from

Study 2

Shortage type Mean preference rating Correlation

Drug 2.3 )0.37��

Sport facilities 5.9 )0.30��

Car hoses 4.5 )0.34��

Champagne 7.8 )0.26�

Overall market preference 5.1 )0.45��

Distribution preference rating scores range from one (Completely favour regulation) to nine (Completely

favour market) with ®ve as a neutral point. Signi®cant correlations are indicated by an � (p < 0.05) or ��

(p < 0.01).

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scenarios ranged from 0.23 to 0.50 (Median� 0.32); those between the valuesof the eight government supplied services ranged from 0.04 to 0.63 (Medi-an� 0.23); and those between the values of the eight market services rangedfrom )0.04 to 0.50 (Median� 0.16).

4. Study 3

In this study, the relative values people placed on government and marketsupplied services were compared with their views on the top marginal tax rateand with their scores on a scale devised by Furnham (1985) to measureEconomic Beliefs.

4.1. Method

The questionnaire was divided into four parts. In the ®rst, respondentswere presented with 16 items and asked to estimate the value (on a scale from0 to 10) they thought New Zealand people as a whole derived from each in ayear. The same items were used as in Study 2.

The second part of the questionnaire informed the respondent that the topmarginal tax rate in New Zealand was 33%, payable on annual income over$30,875, and asked what the respondent thought the highest marginal tax rateshould be and what the threshold income should be for applying that rate.

The third part of the questionnaire presented Furnham's (1985) EconomicBeliefs Scale, on which higher scores correspond to more economically left-wing or socialist beliefs. The scale asks the respondent which of 20 items (e.g.nationalisation, trade unions, insurance schemes) he or she believes in. Fa-vouring left-wing, or respectively not favouring right-wing, items scores threepoints, the opposite one point. Don't know responses score two points.

Finally, respondents were asked to indicate their gender, age group (sixcategories, the oldest being 65 and over), and income (in six $10,000 perannum steps with a ®nal $60,000 and over category).

The survey was carried out by recruiting a number of students to ®ndbetween 4 and 10 non-students of their acquaintance to complete the ques-tionnaire. These interviewers were paid.

The eventual sample contained 45 men and 56 women with a median age inthe range 25±34 years, and median annual income in the range $20,000±30,000. Each age category and each income category contained at least tworespondents.

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4.2. Results and discussion

The average rated value of the eight government items was 6.75(SD� 1.37), that of the eight market items 6.71 (SD� 1.29). A compositemeasure of the relative value assigned to the government goods was obtainedfor each subject by subtracting the average market rating from the averagegovernment rating. The average government preference score so obtainedwas 0.04, with a range from )0.67 to 1.30.

The average Economic Beliefs Scale score was 32.6 (SD� 5.3). This valueis closer to the mean score obtained by Furnham (1985) from British Con-servative (30.3) than British Labour (43.0) voters, and suggests either that thesample employed here was more right-wing (in the economic sense) than theNew Zealand population at large, or that New Zealanders in 1995 were moreright-wing than the British in the early 1980s. The latter possibility is quiteconsistent with New Zealand politics over the period.

Non-signi®cant (p > 0.05) correlations of )0.07, 0.16, )0.06, and )0.09were obtained between the respondents' preference for public goods and therespondent's income, Economic Beliefs Scale score, preferred top marginaltax rate, and age respectively. A simple dichotomous measure of tax pref-erences, measuring whether the respondent thought those on high incomesshould pay less tax than they do at present or the same or more tax, wascalculated from the responses supplied. Government preference scores weresigni®cantly higher (t(97)� 2.28, p < 0.05; Av.� 0.09) for those favouringlower taxes than those (Av.�)0.04) who did not.

The above results suggest that overall preferences for government goodswere not linked to left-wing economic beliefs. Indeed, the one signi®cantassociation obtained was in an unexpected direction: Those with a greaterpreference for public goods favoured lower top marginal tax rates not higher.At ®rst sight, this lack of association may appear surprising but previousresearch with large representative samples in New Zealand (Kemp andWilletts, 1995b) and elsewhere (De Groot and Pommer, 1989; Tan andMurrell, 1984) has also found that the values assigned to government goodscorrelate poorly with demographic, income, and political choice variables.

5. General discussion

Previous work with government-supplied goods alone (Kemp and Willetts,1995a, b) suggested that simply plotting the mean value ratings of the items

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against their costs provides a valid means of comparing the perceived valuefor money of existing services. At ®rst sight, Fig. 1 suggests that extendingthe method to include market as well as government supplied goods alsoprovides a straightforward means of comparing the two types of goods. Thisimpression is reinforced by the results of Study 2, which showed that people'soverall preferences for government over market goods were positively cor-related with their preferences for regulation over the market as a means ofdistributing scarce resources.

However, the results of Study 1 indicate that comparing the rated values ofmarket and government supplied goods is not a straightforward exercise atall. For example, Table 1 shows that government goods of similar rated totalvalue to market goods seem to be rated as having higher marginal value thanthem. Moreover, while the marginal and total values of the governmentgoods in this and a previous study (Kemp and Willetts, 1995a) appear to bevery highly correlated, the marginal and total values of market goods aremore clearly distinguished (see also Kemp et al., 1995). In brief, both thepresent and past research indicates that people's view of government goodsseems to be largely based on a rather simple good±bad evaluation (e.g.Baron, 1997; De Groot and Pommer, 1989; Kahneman et al., 1993; Kempand Willetts, 1995b; Lewis and Jackson, 1985), while people think aboutitems they must pay for themselves in a di�erent and economically morecomplex fashion.

If the way people evaluate market-supplied goods is not the same as theway they evaluate government-supplied goods, then the task of decidingbetween, say, increased government spending on education and more con-sumer spending power is not a simple one. So, for example, Table 1 suggeststhat the total value of the National Library to New Zealanders is less thanthat of children's shoes, but on the other hand the marginal value of spendingon the National Library is more than that of the shoes. It is not at all clearthat our sample would value increased spending on the National Library atthe cost of reduced consumption of children's shoes.

This di�culty arises only when government and market items are com-pared, since for the government items alone the marginal and total values arevery highly correlated. However, another di�culty, that of insensitivity to thequantity or amount of the good (Baron, 1997), is more general. An indicationof this insensitivity can be seen from Fig. 1, where a tenfold increase in theper capita cost of goods produces an increase of less than one in the averageratings of the total value of the goods. The phenomenon also occurs whengovernment goods are rated alone (Kemp and Willetts, 1995a, b), and it

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suggests that the ratings obtained are not of utility per se but, for example, of``worthwhileness'' (Kemp and Willetts, 1995a, p. 18) or importance (Baron,1997). Such reasoning might also help to explain why demographic andpolitical choice variables are so poorly related to people's valuations ofpublic goods.

Asking respondents to rate the value of di�erent goods is by no means theonly possible method of trying to assess the value of public goods and ser-vices. One option has been to try to infer preferences from the way in whichpeople vote (e.g. Schram, 1991; Tullock, 1967, 1976). Probably the mostcommonly used and researched method, however, has been that of contin-gent valuation. There are a number of di�erent variations of the method (e.g.Boyle and Bishop, 1988; Brookshire et al., 1981; Hausman, 1993; Mitchelland Carson, 1989), but a common feature is that respondents are asked whatthey would be willing to pay for some public good or service. Hence themethod is squarely intended to solve the problem of valuing a public goodrelative to market-supplied goods.

In view of the extensive research into the method of contingent valuation,one might query the value of investigating the rating method, particularly inview of the di�culties just discussed. But, interestingly, at least one of thedi�culties is shared: Baron (1997) showed that insensitivity to quantity istypical of a wide range of contingent valuation methods as well. Moreover,contingent valuation turns out to be subject to a number of other biases. Forexample, respondents' willingness to pay is heavily a�ected by the presentcosts of goods and by perceptions of its fair price (Baron, 1997).

Kahneman et al. (1993) present evidence that when people are asked whatthey are willing to pay to deal with environmental problems, their answersre¯ect their attitude to the problems rather than ®nancial intentions. Kempand Willetts (1995a, Study 3) found that respondents' willingness to pay for arange of public goods was very well predicted by the current costs of thegoods and category ratings of their value. The category ratings, however,were not so well predicted from the current costs and the willingness to pay.This result suggests, in line with Baron's (Baron, 1997) thinking, that con-tingent valuations derive from an underlying construct such as importance.Such a construct, as Kahneman et al. (1993) suggest, may be more readilymeasured using the more ``psychological'' techniques such as category rating.

Overall, then, a completely satisfactory method of measuring the value ofpublic relative to market goods has not yet been found. Indeed, some re-search, including that reported here, suggests that values of the type oftensought by economists and policymakers may not actually form an enduring

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part of the human psyche at all (see also, Slovic, 1995). In these circum-stances a reasonable strategy would seem to be to persevere, at least for thetime being, with a number of di�erent kinds of measurement technique. Therating method seems at present to be a helpful tool, though surely not theonly one, for investigating how people think about value. Moreover, inBaron's (Baron, 1997, p. 74) words: ``. . .it is too early for researchers to giveup trying to measure values reliably and validly.''

Acknowledgements

The research was supported by a grant from the University of Canterbury.

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