The value of services supplied by the New Zealand government

JOURNAL OF

ELSEVIER Journal of Economic Psychology 16 (1995) 23-37

The value of services supplied by the New Zealand government

Simon Kemp *, Karyn Willetts

Psychology Department, University of Canterbury, Private Bag 4800, Christchurch 1, New Zealand

Received 28 May 1993; accepted 24 October 1994

Abstract

A sample of 563 New Zealanders rated the perceived value of 27 services currently funded by the New Zealand government. Although there were substantial individual differences between respondents in their ratings, these differences were only poorly accounted for by demographic variables. In general, the services were rated highly but average rated values of the services and actual expenditure on them were only moderately correlated, and there were relatively expensive services which were not rated very highly. Various reasons for the continued provision of such services in a democracy are suggested.

I. Introduction

How worthwhile do electors perceive the programmes and services the government supports? This article attempts to answer this question for a number of the services currently provided by the New Zealand government.

The measurement of the value or utility of government-provided services has long been at tempted by both economists and psychologists and a number of different methods have been suggested. For example, one simple method asks respondents whether they would like to see more, less, or about the same expenditure on each of a range of services (e.g. Ferris,

* Corresponding author. E-mail: [email protected]; Tel.: + 64 3 364-2968; Fax: + 64 3 364-2181.

0167-4870/95/$09.50 © 1995 Elsevier Science B.V. All rights reserved SSDI 0167-4870(94)00035-2

24 S. Kemp, K. Willetts /Journal of Economic Psychology 16 (1995) 23-37

1983; Lewis and Jackson, 1985). In De Groot and Pommer's (De Groot and Pommer, 1987, 1989) "budget game", respondents are presented with information about current government spending and asked to indicate the cuts they would make in a range of services to produce an overall 10% budget cut. At the other extreme, one can point to methods of trying to infer preferences for government-supplied goods from the voting behaviour of individuals and interest groups (e.g. Schram, 1990, 1991).

In the present study, people simply rated the perceived value of a range of services on a scale from 0 to 10. Although this is a comparatively simple method, previous research indicates that it yields meaningful results that are comparable to those obtained from other methods. For example, the ratings are well correlated with the logarithms of magnitude estimates (Kemp, 1991), with people's contingent values or stated preferences for what they would choose to pay for individual services (Kemp and Willetts, 1995), and with estimates obtained from Edwards's (Edwards, 1977) multiattribute rating procedure (Kemp and Willetts, 1995). In addition, ratings of the value to the country of an individual service correlate highly with the value of increasing expenditure on the service, with the perceived loss to the country if the service was to be reduced or discontinued, and with the perceived value for money of the service (Kemp, 1991; Kemp and Willetts, 1995).

Median magnitude estimates or average category ratings of the value of privately consumed or market goods have been found to have a close functional relationship with the costs of the goods (Galanter, 1990; Kemp, 1988, 1991; Kemp and Willetts, 1995), but only comparatively modest correlations between the perceived value of government-supplied services and their costs are obtained, even when market goods and government-supplied services are valued side by side (Kemp, 1991). In general, average category ratings of a psychological dimension have been often found to be a logarithmic function of a physical or objectively measured dimension (e.g. Gescheider, 1988; Poulton, 1989; Wegener, 1982). Previous research suggests that the relationship between average ratings of the value of government-supplied services and their costs is also logarithmic, but correlations between rated value and the logarithm of cost are of the order of 0.4 to 0.6 (Kemp, 1991; Kemp and Willetts, 1995).

Relatively low correlations between the rated values and costs of government-supplied services imply the existence of services which are relatively costly but perceived as relatively low in value, leading to the obvious question of why such services are supplied at all. The present survey was

S. Kemp, K. Willetts /Journal of Economic Psychology 16 (1995) 23-37 25

primarily designed to investigate the relationship between the perceived values of government-supplied services and their costs with a sample that is more or less representative of the New Zealand electorate. Such a sample is obviously crucial, since one explanation for the relatively low correlations found previously is that they may be an artefact of using small or unrepre- sentative samples.

It is neither surprising nor of great economic or political consequence if particular individuals or subgroups regard some costly services of little or no value. It would, however, be surprising if the result held for the electorate as a whole. Theorists in the area of public choice (e.g. Schram, 1991; Stigler, 1972; Tullock, 1967, 1976) have concluded that in a democracy the level of a service actually supplied should accord with that desired by the median voter, unless there are unusual preference distributions, or unless "log-rolling" takes place.

Log-rolling (e.g. Tullock, 1967, ch. 4) describes a means by which a given service could be supplied even though it is not desired by a majority of the electorate. To take a simple example, suppose that 26% (and only 26%) of the electorate want measure A, and a completely different 26% wants measure B. Neither A nor B commands a majority of votes. However, if the supporters of A and B coalesce, they can together ensure the supply of both A and B.

Such coalition formation, either implicit or explicit, implies that relatively unpopular services do have a minority group of supporters for whom the service is an important, perhaps crucial, determinant of voting behaviour, and afortiori that there will be some subgroup who rates the service rather highly. Thus, the degree to which there is public consensus on the value of government-supplied services was also investigated in the analysis of the survey.

2. Method

2.1. Questionnaire

Respondents were asked to rate the value of 27 items of current government expenditure (see Table 1). These items were chosen so as to cover all the more costly programs supported by the New Zealand government (with the exception of debt servicing) and a selection of the cheaper ones. Considerations influencing the selection of the cheaper programs

26 S. Kemp, K. W'dletts /Journal of Economic Psychology 16 (1995) 23-37

were, firstly, whether sufficient detail was contained in the government budget to tell what the cost of the program was; secondly, whether a pilot study showed the item to be generally familiar to New Zealanders; and, thirdly, the desire to cover a range of different types of service.

Respondents were instructed "to consider how worthwhile and useful each one is for the people of New Zealand", and respond with a number between 0 and 10. "A score of 10 means you consider that particular service to be extremely worthwhile and useful; a score of zero means you consider the service worthless and useless." This number was recorded by the interviewer. A single order of presenting the items was used, but the first i tem presented was randomly varied. Questions relating to the respondents' personal and demographic characteristics were also asked.

2.2. Respondents and procedure

The survey was undertaken as part of the AGB McNair National Omnibus Survey, which interviews New Zealanders throughout the country (including rural areas), and whose sampling procedure is based on area units designed to produce a representative sample. All interviews were conducted at the respondents ' homes in October or November, 1992. The final sample comprised 563 respondents of 15 years or over.

3. Results

3.1. Demographic variables

The demographic variables not only defined the characteristics of the sample, but also served as independent variables in bivariate and multiple regression analyses. Abbreviated titles of the variables and brief descriptive statistics of the responses, are given below. The coding for the first seven variables was such that the first named category was given the higher code number. Hence a positive regression coefficient for, say, Gender implies that women have higher scores on the dependent variable.

Gender. There were 331 women and 232 men. Employ. Two hundred and eighty respondents were in paid employment

at the time of the survey, 283 were not. Maori. Sixty respondents reported being of Maori (i.e. indigenous New

Zealand) descent; 503 claimed European or other ancestry.

S. Kemp, K. W'dletts /Journal of Economic Psychology 16 (1995) 23-37 27

Couple. Three hundred and forty-six respondents reported being married or living with a partner; 217 were single, widowed, separated or divorced.

National. Two hundred respondents reported having voted National, the (centre-right) governing party at the time of the survey, in the previous (1990) election; 332 respondents claimed to have voted for other parties or did not vote.

Labour. One hundred and eighty-four respondents claimed to have voted Labour, the principal (centre-left) opposition party, in 1990; 348 voted for other parties or did not vote. (Labour and National correlated -0.54.)

Table 1 Actual per capita cost, value predicted from the equation: Value = 0.651 average rated value and its s tandard deviation for each item.

log 10(Cost per capita) + 6.539,

I tem Actual cost Predicted Rated value

($ per capita) value Mean SD

1. Public Hospitals 811.3 2. Primary & secondary schools 713.5 3. The police force 220.0 4. Guaran teed Ret i rement Income 1556.2 5. NZ universities 189.5 6. NZ polytechnics 120.4 7. Conservation of the environment 41.0 8. Pharmaceutical Benefits 184.5 9. Kindergarten & childcare subsidies 41.9

10. Customs Depar tment 18.5 11. National Library 38.5 12. Family support 182.0 13. Ministry of Agriculture 39.5 14. Prisons 87.5 15. Subsidised work for the unemployed 48.5 16. Meteorological Service 5.0 17. Hillary Commission for Recreation & Sport 0.3 18. National Archives 3.7 19. Unemployment Benefits 467.4 20. Access courses 46.8 21. Housing Corporation 29.0 22. Legal Aid 6.0 23. Domest ic Purposes Benefits 329.4 24. Defence 489.5 25. Ministry of Women ' s Affairs 1.4 26. NZ Arts Council 1.2 27. NZ Symphony Orchestra 2.3

8.4 9.4 1.5 8.4 9.3 1.5 8.1 9.3 1.5 8.6 8.8 1.9 8.0 8.7 1.9 7.9 8.6 1.8 7.6 8.3 2.2 8.0 8.3 2.0 7.6 8.2 2.3 7.4 8.1 2.1 7.6 7.9 2.3 8.0 7.8 2.3 7.6 7.8 2.1 7.8 7.5 2.5 7.6 7.5 2.4 7.0 7.2 2.6 6.2 7.1 2.5 6.9 7.1 2.6 8.3 7.1 2.6 7.6 7.0 2.6 7.5 6.8 2.6 7.1 6.8 2.7 8.2 6.6 2.7 8.3 6.4 3.0 6.6 6.3 2.8 6.6 6.0 2.5 6.8 5.7 2.7

Note: I tems are ordered by their mean rated value.

28 S. Kemp, K. Plrdletts /Journal of Economic Psychology 16 (1995) 23-37

Child. One hundred and seventy-five respondents lived in households containing at least one child under 15 years; 388 did not.

Educ. Two hundred and fourteen respondents had no formal secondary qualification (Coded as 1); 170 had formal secondary (School Certificate, University Entrance) but not tertiary qualifications (code 2); 179 had some tertiary qualification such as a University degree or trade certificate (code 3).

House. The number of people living in the respondent's household ranged from 1 to 8, with a median of 2.

Age. The respondents' ages were coded in five-year groups, beginning with 15-19 and ending with a single category for those 65 and over. The median age group was 40-44 years.

GHI. The gross yearly income of the respondent's household was recorded in eight categories. These, with the number of respondents in each, were: Under $20,000 ( N = 169); $20-30,000 (107); $30-40,000 (90); $40-60,000 (105); $60-80,000 (54); $80-100,000 (29); $100-120,000 (4); more than $120,000 (5).

GPI. The respondent's gross personal yearly income was also recorded in eight categories: Under $10,000 (204); $10-20,000 (153); $20-30,000 (95); $30-40,000 (63); $40-50,000 (20); $50-60,000 (13); $60-80,000 (10); more than $80,000 (5). This variable correlated 0.64 with GHI, and was conse- quently dropped from the regression analyses, which were all based on the preceding 11 variables.

Overall, the demographic information indicated a reasonably representative sample, with some underrepresentation of men and National Party voters.

3.2. Relationship of service ratings to their costs

Table 1 shows the mean ratings given to each of the 27 items as well as the sums actually spent on them. Although there were considerable differences in the average values assigned to the different services, the average rating of all the services was 7.6, and the lowest average rating assigned any item was 5.7. Thus, the sample of government services was generally perceived as valuable.

Average ratings correlated 0.45 with the actual costs of the 27 services, and 0.62 with the logarithms of the actual costs, indicating that, as in previous research (Kemp, 1991; Kemp and Willetts, 1995), the relationship between perceived value and actual cost is logarithmic rather than linear.


O'J e- o~

e e

_= t~

E

10.

]13 flail; ~ 9

X6 115

x,o I ; x ~ I1 12

/ X 1 5 X~4

7 ~IC17 X21X20 X 19

/ x 25 x2x2 , 3 6 1126

X27

5

! 40.1 I 10 100 I000

Cos t ($ per head)

Fig. 1. Average perceived value as a function of actual per capita cost for 27 government-funded services. Numbers give the ranking of the services from highest to lowest average rated value (cf. Table 1).

Moreover, as Fig. 1 shows, average perceived value and costs were only moderately correlated.

Median ratings correlated 0.64 with the logarithm of the actual costs. The corollary of imperfect correlation between perceived values and

costs is that some items, those which appear towards the upper left-hand corner of Fig. 1, represent relatively high perceived value for their actual costs while some, those towards the lower right-hand corner, have relatively low perceived value for their cost. Items which appear to be regarded as particularly good value relative to their costs (Columns 2 and 3 of Table 1 enable the comparison of the values predicted from the regression on costs and the actual rated values) include the police, the Department of Conser- vation, public hospitals, and schools. Those regarded as particularly poor value compared to their costs are the New Zealand Symphony Orchestra, Unemployment Benefits, Domestic Purpose Benefits, and defence.

Note that although, as Table 1 suggests, there were considerable individual differences in the ratings, the large sample size implies that the aggregate ratings given in Fig. 1 have fairly small standard errors, ranging from 0.06 to 0.12.

3.3. Factor structure o f the services

Principal components analysis of the ratings of the 27 items did not suggest a multifactorial structure. The eigenvalue of the first factor ex-


tracted was 7.8, with subsequent eigenvalues of 2.1, 1.8, 1.4, 1.1 and 1.0. Other factor extraction methods gave similar results. Reliability analysis of a single additive factor resulted in a Cronbach alpha of 0.97 and item-total correlations ranging from 0.66 to 0.86. The single factor which these analyses suggest might be considered a general attitude to government-supplied services, high scores approving government services in general, low ones disapproving.

For individual respondents, the factor may be contaminated by different people being more or less likely to use relatively high numbers. That is, if A and B both rate a given service as 8, this does not necessarily mean that they view the service equally, since A and B might differ in their readiness to give high ratings. However, this contaminant should not effect compar- isons between services for the same individual (e.g. Wegener, 1982). Nor is it likely to contaminate, say, women rating all government services as more valuable than men do.

The factor analysis results actually obtained have implications for subsequent analyses. They suggest that analysis should focus on the average service scores and the ratings of individual services, rather than, for example, on factors apparently related to education or health or social welfare.

3. 4. Respondent differences in average service scores

Female respondents had a significantly (t(556) = 4.65, p < 0.001) higher mean rating (Av = 7.8) of the 27 government services than male respondents (Av = 7.3). Those in paid employment valued the average government service significantly lower (Av. = 7.5) than those not employed (Av. = 7.8; t(556)= 3.02, p < 0.01) and Maoris valued it significantly higher (Av. = 7.9) than non-Maoris (Av. = 7.6; t(556)= 2.10, p < 0.05). The average rating was also weakly but significantly correlated with both GPI (r = 0.09, p < 0.05) and GHI (r = 0.12, p < 0.01). There was no significant (p < 0.05) relationship with Child, Couple, Labour, National, Age, House or Educ.

Multiple regression was carried out with the average government service value as the dependent variable and the 11 independent demographic variables. An R 2 of 0.08 was obtained, with three significant (p < 0.05) standardised regression coefficients: Gender 0.09, Educ. 0.11, and Maori 0.09. The low R 2 value emphasises the most significant feature of the bivariate analyses: The average service score is not strongly related to the demographic variables, either singly or together.

S. Kemp, K Willetts /Journal of Economic Psychology 16 (1995) 23-37 31

3.5. Respondent differences in rating individual services

An impression of intergroup differences can be gained from bivariate analyses. For example, the Ministry of Women's Affairs was given average value ratings of 6.7 and 5.7 by women and men respectively; the value of the Domestic Purposes Benefit (paid to solo parents, usually women) was rated 6.8 on average by women and 6.2 by men; Guaranteed Retirement Income (the pension paid to those 60 or over) was rated 8.4 by those under 35, 8.8 by those aged between 35 and 59, and 9.2 by those aged 60 or over;

Table 2 Variance accounted for (R 2) in the ratings of the 27 services (after dividing the ratings by the average service score) by multiple regression on the 11 independent variables. Significant (p < 0.05) standardised regression coefficients (/3 weights) are also shown

Item R 2 Significant/3-weights

Public Hospitals 0.04 Age 0.17 Primary & secondary schools 0.03 The police force 0.06 House -0.13, Couple 0.09 Guaranteed Retirement Income 0.06 Educ -0.15, Age 0.13 NZ universities 0.06 GHI 0.15 NZ polytechnics 0.07 Child 0.14, GHI 0.12, Educ 0.11 Conservation of the environment 0.08 GHI 0.19, National -0.16, Gender -0.12 Pharmaceutical Benefits 0.03 Kindergarten & childcare subsidies 0.05 Age -0.13, Couple 0.11 Customs Department 0.06 National Library 0.06 Family Support 0.05 Ministry of Agriculture 0.05 Prisons 0.04 Subsidised work for the unemployed 0.05 Age -0.16, Gender 0.09 Meteorological Service 0.03 Hillary Commission for 0.06 National 0.16, Labour 0.15, Age 0.13,

Recreation & Sport Gender - 0.13 National Archives 0.04 Age 0.20 Unemployment Benefits 0.06 Employ -0.13, House 0.16, Child 0.14 Access courses 0.03 Age - 0.22 Housing Corporation 0.07 Child - 0.23, GHI - 0.15, Maori 0.11 Legal Aid 0.12 National -0.16, Age -0.15, Educ -0.13 Domestic Purposes Benefits 0.11 GHI - 0.17, National 0.15, Couple -0.13,

Age - 0.12 Educ - 0.14, National 0.13 Labour 0.13, Gender 0.13, Age -0.12, Educ -0.11 Gender 0.14, Educ 0.11 Age 0.29, Educ 0.17, Gender 0.10

Defence 0.06 Ministry of Women's Affairs 0.09

NZ Arts Council 0.05 NZ Symphony Orchestra 0.09

Age 0.16, Employ 0.15, Educ 0.13 GHI - 0.13, Maori - 0.11 Gender - 0.15, House - 0.14, National 0.12


Polytechnics were rated 8.2, 8.6, and 9.1 respectively by the three educa- tional groups; Defence was rated 6.8 by 1990 National voters and 6.2 by the rest of the sample; Subsidies for kindergartens were valued at 8.6 and 8.0 by those with and without children under 14 years.

Another way of looking at the issue of consensus is to consider the correlations between the average rated values of different services for different subgroups. The correlation between the average rated values for male and female respondents was 0.97. Corresponding correlations for the other dichotomous variables were Employ 0.97, Couple 0.97, Labour 0.95, National 0.91, Maori 0.88, and Child 0.94. The correlation of average values between 1990 Labour and National voters was 0.90.

Average values for those with least education correlated 0.93 with those with secondary qualifications, and 0.85 with those with tertiary qualifications. The correlation between those with secondary and tertiary qualifications was 0.97. The other three independent variables were trichotomised: Age into those under 35, those 35 to 59, and those 60 or over; House into those living alone, those living with one other person, and those living with more than one other person; GHI into incomes less than $20,000, between $20,000 and $40,000, and those over $40,000. The three correlations between average values for respondents in the three categories were 0.91, 0.86, and 0.95 for Age; 0.95, 0.94, and 0.96 for House; and 0.97, 0.90, and 0.96 for GHI. For all three variables, the first correlation is between the lowest and middle categories, the second between the lowest and highest categories, and the third between the middle and highest categories.

The implication of these high correlations can be gained from two examples. Although women on average regarded the Ministry of Women's Affairs more highly than men, both women and men valued it less highly on average than the national archives. Although older respondents were more heavily in favour of the NZ Symphony Orchestra, both older (60 and over) and younger (under 35) respondents rated it less valuable than Legal Aid.

The combined effects of the 11 demographic variables on the individual service ratings were investigated by 27 separate multiple regressions, one for each of the government services. Before these regressions were per- formed, the rating given by each respondent to each of the individual services was divided by the average service rating for that respondent, and these scores used as the dependent variables in the regressions. These scores were used because they lead to more readily interpretable results. Otherwise, a significant effect of gender, say, on the ratings might be the

S. Kemp, K~ Willetts /Journal of Economic Psychology 16 (1995) 23-37 33

result either of women perceiving that particular service as more valuable or in consequence of women perceiving government services in general as more valuable. (Discussion of the some of the psychological implications of this procedure is given in Kemp, 1991.)

Table 2 shows the R 2 values and the significant standardised regression coefficients obtained from the 27 multiple regressions. The most striking feature of the table, evident in both the R 2 values and the standardised regression coefficients, is that the value ratings of the individual services are not strongly linked to the demographic variables. (Incidentally, this is also true when the original value ratings were used.) What associations there are tend to be in the expected direction. For example, the Ministry of Women's Affairs is regarded as most valuable by women; defence is more highly regarded by voters for the centre-right party; Unemployment Bene- fits are perceived as more valuable by those who are not employed; older people on average perceive Guaranteed Ret i rement Income as more valuable. However, overall the analyses suggest that the demographic variables, both individually and collectively, explain very little of the differences between individuals in valuing the individual services.

4. Discussion

Two important general results emerged from the survey. One is the demonstrat ion that there are substantial differences in perceived value between the different government services even when their costs are taken into account and even when a representative sample is questioned. More- over, it is clear from Fig. 1 and Table 1 that the moderately low correlation between the perceived value of the services and the logarithm of their costs is due not only to relatively cheap items which are perceived as relatively valuable but also to relatively expensive items - defence, unemployment and domestic purposes benefits - which are perceived as relatively valueless.

The second general finding, which emerges from the analyses carried out with the demographic variables, is that, although there were differences in rated values both between individuals and between groups, there appears to be an approximate social consensus in New Zealand about the relative merits of the different items. This finding emerges, in particular, from the very low proportion of variance in the ratings that is accounted for by the 11 demographic variables and from the high correlations between the

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average rated values of different subgroups. Some of these correlations, for example that between the average ratings of 1990 voters for the government (National) and major opposition (Labour) parties, are indeed surpris- ingly high.

Another aspect of social consensus is that, although services are some- times valued higher by the respondents whom they benefit directly, for example older respondents valued Guaranteed Retirement Income more than younger, the size of these effects is not large. Moreover, some of the effects of the demographic variables, for example the relative hostility of the better educated towards defence, cannot be easily explained by considerations of personal or group gain.

Some of the results reported here can be compared with those from previous studies. For example, the lack of factorial structure in the rated values of the different services corresponds with the finding of substantial intercorrelation of the value dimensions in a multiattribute study of government-supplied services (Kemp and Willetts, 1995), as well as with De Groot and Pommer's (1989) conclusion that budget-game responses seemed to be based on rather simple good versus bad notions of public goods.

Research using other methods has found that public goods are not all rated equally valuable. Lewis and Jackson (1985), for example, found many more people thought there should be more spending on hospitals and health in the United Kingdom than on defence. Their exact results, however, were not strictly comparable to ours, unsurprisingly suggesting that there are international differences in priorities. For instance, they found spending on defence and the police force were about equally valued, while the present results paint a very different picture.

Previous researchers have also found little of the variation between individual respondents to be the effects of the individual difference variables they investigated. Tan and Murrell (1984) sought to predict evaluations (graded A to F) of city services from a variety of demographic and attitudinal variables, but only explained between 7 and 18 percent of the variance in the evaluations. Indeed, where data from different years were pooled this figure shrank to around 3 percent. Similarly, the independent variables considered by De Groot and Pommer (1989) typically explained less than 10 percent of the variance in budget-game responses.

Obviously the actual results presented here have implications for the political economy of New Zealand. More generally, however, how is the result shown in Fig. 1 possible at all? Why does a democratically elected government provide services which are rather expensive (and thus preclude

S. Kemp, K. 14,Wletts /Journal of Economic Psychology 16 (1995) 23-37 35

providing or expanding other services) but not perceived as particularly worthwhile by electors? In what way could such a mismatch be regarded as politically rational?

One possibility is that services of this kind arise from log-rolling and are provided because a minority of the electors make them a very high political priority. Support of defence spending by the right or of Domestic Purposes Benefits by a subgroup of women might be examples from the present research. However, the present results suggest that this is probably not the correct explanation, since we were unable to discover groups who rated the generally unpopular services highly. Thus, for example, the identifiable political right (National voters) did not actually value defence spending very highly, even though they did value it slightly more than the rest of the electorate. Of course, the categories of the demographic variables used here are unlikely to have corresponded exactly with issue-driven political groups, but if substantial log-rolling does take place, one would have expected more variation between groups.

Secondly, it is possible that certain interest groups - for example the armed forces - become disproportionately influential in the government, perhaps through the influence of the senior levels of the permanently employed bureaucracy. In support of this hypothesis, in New Zealand the relative importance of different government departments is institution- alised (in, for example, higher salary levels for permanent heads of more senior departments such as the Ministry of Defence).

Thirdly, we may be witnessing inertia. Changes in patterns of government expenditure are typically slow, partly because of the effects of past commitments, and it may be that these changes lag behind changes in public perceptions. If, for example, changes in public perceptions were volatile - something that could only be determined by measuring public values over a relatively long period - imperfect correlation between them and actual amounts spent would be anticipated and, indeed, probably desirable.

Such inertia might be in part the product of a lack of political focus. It is likely that the political process in New Zealand, in which there is an election every three years, focuses attention on two or three political issues at each election. It may be that the apparent anomalies we have found have not been anomalous or important enough to become election issues. In this context, it is worth remarking that none of the services was rated as valueless in absolute terms, and all had a mean rating greater than 5. Thus, programmes which might be perceived to be really valueless, such as the

36 S. Kemp, K~ Willetts /Journal of Economic Psychology 16 (1995) 23-37

cabinet spending a high proportion of tax revenue on palaces for itself, are simply not carried out.

If inertia were the correct explanation for the provision of services that are expensive but not perceived as valuable, then one would expect that changes in spending patterns might lag behind changes in perceived value but they would actually occur. Clearly, a satisfactory answer to this question could only be obtained by a series of investigations such as the present research. However, it is suggestive that even in the time interval between carrying out this survey and the present (September, 1994), the New Zealand (centre-right) government has actually moved to decrease defence spending and increase spending on health.

Finally, of course, there is the large question, which we shall not at tempt to answer, of whether even in the long term a government should actually follow the electorate's wishes in every particular. Many people, indeed, would regard it as a virtue occasionally to pursue policies which are unpopular but believed by those involved in government - surely not always incorrectly - to be good for the country.

Acknowledgements

The research was funded by the New Zealand Foundat ion for Research, Science and Technology. We are grateful for useful advice and comments from Garth Fletcher, Newell Grenfell, Stephen Lea and two anonymous reviewers.

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The value of services supplied by the New Zealand government

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