J. OF PUBLIC BUDGETING, ACCOUNTING & FINANCIAL MANAGEMENT, 14(3), 445-461
FALL 2002
A DYNAMIC METHOD OF CITIZEN PREFERENCE
REVELATION
Mark D. Robbins and Bill Simonsen*
ABSTRACT. In this article we explore two citizen-based approaches to solving
the problem of selecting a desirable level of public goods for a jurisdiction. The
first approach seeks to inform decision-makers about citizens’ preferences by
observing the choices of citizens faced with the actual budget constraint facing
the government and asking them to choose service levels within that constraint.
The second approach gauges citizens’ willingness-to-pay for their share of the
cost of a desired level of public expenditure. In an effort to foster discussion
and research into new modes of citizen participation in resource allocation we
pose a model that combines both the constraints of the jurisdiction with the tax
share of the respondent into a survey methodology that will reveal the
underlying demand for government services in ways that are useful for public
managers.
INTRODUCTION
Typically, public managers or elected officials select the amount of
public goods and services to be provided and how much citizens will pay
for them. This is because there is no observable demand schedule for
many public services. That is, the underlying demand schedules for
collectively consumed public services, such as police protection, are
masked because they are paid for collectively through taxes. The
resulting disconnect between the level of service provided and the
amount preferred by citizens is one form of what is sometimes referred to
as the ‘public goods
…………………..
* Mark D. Robbins, Ph.D., is an Assistant Professor in the Institute of Public
Affairs and Department of Political Science, University of Connecticut. His
research focuses on municipal finance and citizen preference revelation. Bill
Simonsen, Ph.D., is Professor and MPA program director for the Institute of
Public Affairs, University of Connecticut. His research focuses on public
finance and budgeting, and citizen preference revelation.
Copyright 8 2002 by PrAcademics Press
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problem.’ Citizen participation mechanisms help to reveal to officials
the underlying preference structure of the citizenry and provide decisionmakers with a picture of the underlying demand for public services.
However, the state of the art for involving citizens in these resource
allocation decisions is in its early stages of development. There has been
only a limited amount of research on citizens’ willingness-to-pay for
various services. Further, only a small group of methodologies provides
citizens with a realistic approximation of the complex trade-offs facing
decision-makers. In this article we discuss the above literature and
propose extensions of this research. Specifically, we propose a new
survey method that queries respondents within a truly realistic decision
environment; one that includes both government trade-offs and
individual costs. In the end, it is left to elected and appointed public
management officials to select service and revenue levels on behalf of a
jurisdiction. The process of selecting these officials (voting) is the most
rudimentary citizen participation and preference mechanism. However,
the study of voting behavior is limited in its ability to reveal citizen tax
and service preferences. As a revelation mechanism it is crude, and
rarely directly addresses questions of taxation and service level. Even
when making choices with direct tax implications (such as when casting
votes in a bond referenda) citizens do not have complete information
about the decision environment facing the government (what are the
trade offs?), and the personal implications of their choices (how much
will this choice cost this particular voter?). In most circumstances,
however, voting for representatives may be enough to satisfy citizens
that their interests are acted upon.
In practice, the public goods problem is only a public management
problem when the need for citizen participation in resource allocation is
acute (high levels of controversy and large impacts on taxpayers). When
the stakes are small, or general agreement seems pervasive, public
managers may be comfortable imposing their choices on the municipality
without investing in a citizen participation mechanism. However, many
of the decisions that governments face, particularly about resource
allocation, are complicated, have high long run (and perhaps short run)
costs, and generate passionate disagreement. These are the times when
knowledge of the ‘true’ preference structure of an informed citizenry
seems most valuable. The purpose of this article is to propose a
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447
methodology that best provides decision-makers with such a ‘true’
picture of citizen preferences and the consequent demand for public
services.
In the pages that follow, we lay the groundwork for a preferable
method of preference revelation by examining the literature regarding
citizen preference surveys generally. Next, we describe techniques that
present budget decisions in their complexity. We then propose a
methodology that improves on the current state of the art in citizen
preference revelation. Finally, we discuss the implications of our
proposed methodology for budgeting and policy-making.
WHAT WE HAVE LEARNED FROM CITIZEN PREFERENCE
SURVEYS
Citizen involvement in resource allocation decisions can take place
in many ways. In most cases, citizen input is not systematically
included. These methods include public hearings, citizen committees,
and advisory boards.1 Attendance at public hearings is generally low.
Further, and more importantly, these methods do not represent what
citizens at large would choose—rather they indicate the preferences of
the individuals who are most motivated to participate.
Citizen preference surveys typically ask respondents how much they
support various services or how satisfied they are with them. Miller and
Miller (1991) analyzed 261 citizen surveys about service delivery in
forty states and found consistently good rankings. Without being faced
with the real budget constraints and service needs facing decisionmakers, or the cost of their choices, citizens appear to find acceptable
any government services that don't offend them. Little is learned from
such efforts.
There are a group of methodologies that present citizens with the
realistic constraints governments' face when making resource or budget
allocations. We describe many of these methods in greater detail in our
book Citizen Participation in Resource Allocation, and so we will only
discuss a few here (Simonsen & Robbins, 2000).2
In this article we are interested in the citizen involvement techniques
most likely to be helpful to governments trying to solve the public goods
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problem in accordance with citizen desires. These techniques must go
beyond the 'typical' citizen survey and attempt to provide the most
realistic representation of the public will. These more sophisticated
techniques fall into two broad categories: those that present the
constraints that governments face in their complexity and those that
attempt to determine the willingness-to-pay of respondents based on
information about the prices they face for government services. We will
discuss these two techniques in turn, but pause first for a word about the
information rich environments of these methods.
The theoretical assumption underlying our approach is that the
inclusion of information changes the decision environment for citizen
respondents. This assumption has been established empirically in the
research described below. Our normative assertion is that in order to
obtain meaningful citizen input, citizens must be informed. The assertion
that citizens, absent information, are not prepared to represent their own
desires is, in our opinion, less arrogant than it may at first sound. Just as
the heart patient would not be asked to pick between animal and
synthetic mitrol valves without first learning more about the
implications, it seems inappropriate to query citizens about taxes and
services without facing them with their corresponding consequences. Pig
or plastic? Service cuts or tax hikes? To shrug and choose either is to set
in motion in a cavalier manner a set of actions that have profound
implications. The decision method (frivolous and simplex) is
mismatched to the decision impact (profound and complex). The
methods described in this article gauge citizen preferences under
information conditions of various levels of complexity. We now turn to
those methods that take into account these various levels of complexity.
Techniques That Reflect the Complexity of Budget Decisions
The thread that ties together this group of techniques is their attempt
to represent the trade-offs that government officials face when making
budget decisions. Pioneering work in this area was completed by Terry
Clark using budget pies (Clark, 1974). Budget pies are one way to
impose a budget constraint, by requiring that respondents allocate funds
for various services with the total equaling 100% (a circle, or pie, is
presented to illustrate this choice). The strength of the budget pie
approach is that it presents the budget to the respondent in a way that
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449
represents the actual constraints facing the government. Two potential
weaknesses are the resource and financial cost of conducting such
processes, and the difficulty in getting members of less educated and
lower income groups to participate (McIver & Ostrom, 1976).
Citizen juries and panels are also techniques that attempt to present
government decisions in their complexity. Users of these techniques
recognize that citizens generally do not have the time and energy to
understand complex government decisions but that a smaller group of
systematically selected people can deliberate about these issues. Since
these people are representative of the general population, their judgments
reflect what the larger group of citizens would choose if they were also
presented with the same information.
A noteworthy example of the citizen panel technique was designed
by Kathlene and Martin (1991) and took place in Boulder, Colorado. In
this case, a panel of representative citizens deliberated transportation
policy choices, some of which were very controversial (the process also
included interviews and surveys). The panel participants were provided
with information about the transportation choices important for making
informed decisions. In this way, the panel represented the sentiment of
an informed citizenry.
The Jefferson Center for New Democratic Processes implemented a
notable example of the citizen jury technique on the federal budget
deficit (Jefferson Center, 1993). A small (representative sample) group
of Americans heard testimony about the budget deficit, including
statements by Democrats and Republicans. After hearing testimony, the
citizen jury deliberated and came to a judgement. (In this case, they
chose to cut more than Republicans would have, and raised taxes higher
than the level supported by the Democrats.)
Techniques that reflect the real decision environment place
respondents in a position to understand the difficult trade-offs that
characterize much of the government resource allocation process. They
also rely upon sampling techniques to secure the claim of
representativeness for the choices made by respondents on behalf of the
citizenry. However, they don't focus directly on the respondents'
willingness-to-pay for government services. In the next section we
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discuss those methodologies that measure respondent’s willingness-topay.
Techniques Assessing Willingness-to-Pay
Another approach to gauging preferences is to ask about willingnessto-pay for services. One way to measure citizen willingness-to-pay is
through contingent valuation; a complex system designed to reveal each
respondent’s personal willingness-to-pay.
Respondents are taken
through a series of nested decision trees designed to determine the dollar
value they attach to certain public assets. At each subsequent decision
point the boundaries of respondent’s willingness-to-pay are narrowed
until a clear maximum is determined for each benefit. Contingent
valuation was developed to establish the benefit levels derived from
purely public, and intangible goods not traded on markets, such as the
benefits derived from the existence of a wilderness area. This technique
is most helpful where benefits are unknown or hard to measure. This is
the case for many public goods in addition to natural resources.
A simpler approach was adopted by Arrington and Jordan (1982)
who estimated citizens’ willingness-to-pay for government services in
Mecklenburg County, North Carolina. Respondents were asked whether
they were willing to pay certain amounts for services if government did
not provide them. They were presented with the per capita cost of 20
services. A control group was given questions that corresponded to these
without the fiscal information (Table 1).
Their results revealed that “for virtually every [government service]
activity the support was less when respondents were asked whether they
would pay the costs directly.” (p. 169). The authors theorize that the
large drop in support for police, tax office, court system and elections
services is likely explained by the absurdity of directly paying for them.
The results are consistent for people of varied gender, party affiliation,
race and age. The only areas where these differences were not
significant were for the lowest cost services, and for fire, which the
authors note “still seems like a bargain at $30 per year.” (p. 169).
Glaser and Hildreth (1996) relate willingness-to-pay taxes to the use
of park and recreation services. Many of their respondents' willingness-
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451
TABLE 1
Arrington and Jordan Survey
If local government did not currently provide for it, would you be
willing to pay:
1. $1.60 per year to support an animal shelter?
2. $1.40 per year for parks and recreation?
[Experimental Group]
Do you believe that it is the responsibility of local government to:
1. Operate an animal shelter?
2. Provide parks, golf courses and recreational facilities?
[Control Group]
Source: Arrington, T. S., Jordan, D. D. (1982). “Willingness to Pay Per
Capita Costs as a Measure of Support for Urban Services.” Public
Administration Review, 42 (2), 169.
to-pay corresponded to service use. However, they also found many
heavy users with low levels of willingness-to-pay as well as the reverse:
low service users with higher levels of willingness-to-pay.
In our book we report on three surveys of Eugene, Oregon, residents.
This effort combined the two above mentioned approaches: budget pies
and willingness-to-pay. Eugene was facing a substantial budget shortfall
and wanted citizen input into how to achieve budget balance.3 One of
the three surveys allowed respondents to build their own balanced budget
(called the BOB survey). This survey was similar to the budget pie
method. Respondents were presented with the current cost of services.
They were then allowed to reduce services or raise revenues in order to
erase the city’s $8 million projected budget deficit. The second survey
(called “Blue” because the paper it was printed on was blue) asked
respondents about their support for various services and provided the
approximate household cost. The third survey (named “Ivory”) asked
respondents about their support for services without providing a budget
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constraint or cost of services. Response rates for these surveys were
quite high; in excess of 50% for the BOB survey and about 80% for the
Blue and Ivory surveys.
One drawback of the budget pie approach mentioned earlier is
achieving a high response rate among groups with low socio-economic
status. The BOB survey substantially overcame this problem evidenced
by satisfactory and uniform response rates for individuals with household
incomes under $20,000.
Similar to the result of the citizen jury that deliberated the federal
budget deficit, BOB survey respondents generally favored both revenue
increases and service reductions. The median respondent favored 38%
service cuts and 62% revenue increases to solve the budget problem.
Further, respondents most often chose to cut services where user fees
were also possible and where the benefits were obscure. Public safety
and social programs were the most preferred.
We combined the Blue and the Ivory surveys to test the cost effects
on willingness-to-pay for services, since only one survey contained cost
information. The survey results indicated a remarkable difference in
support depending upon whether the service cost was revealed to
respondents. In the vast majority of cases, support fell significantly in
the face of cost information. These findings mirror Arrington and
Jordan's results.
So, what have we learned about the use of preference surveys for
gauging citizen demand for government services? We know that unless
faced with some form of budget realism, either through a budget pie
approach or by being given fiscal information directly, citizens are likely
to appear globally satisfied with government service provision. Once
faced with cost information, service support decreases, so omitting it will
bias upward the levels of support. We have also seen that complicated
surveys can still yield high response rates. We propose a further variant
of the survey of citizen preferences for government revenue and
spending. Our approach faces each respondent with his/her own tax price
for each of the service levels selected. Next, we review the notion of tax
price and then describe this survey design.
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DESIGNING A DYNAMIC METHOD OF PREFERENCE
REVELATION
Using Information About Tax Prices
Citizens have an incentive to understate their demand for services
when they believe that such expression will influence how much they
pay for them. At the same time, we have learned that citizen support for
services is significantly weaker in the face of information about the
magnitude of the taxes and fees necessary to support them. We cannot
solve directly the problem of understatement, but we can control for it by
allowing citizens to identify directly the service mix and level that they
desire, given the costs that they individually would face. The primary
revenue source for most local government services is the property tax.
The property tax faced by any given household can be expressed as their
share of the total amount of taxes collected by their jurisdiction. This is
referred to in the public finance economics literature as the tax share.
The tax share for an individual in a property tax supported system is
determined by the assessed value of their property relative to the total
assessed value in that jurisdiction.
Ti = E* [AVi / 3AV]
If E* is the chosen jurisdiction wide expenditure on a particular
public good then the tax share for individual i (TSi) is the product of that
expenditure level and the ratio of i's property value to the total assessed
property value in the jurisdiction. Each individual's cost for an additional
dollar of public service consumed by their household (assuming that
services are consumed in equal proportion by households) is their tax
price for that unit (Stiglitz, 2000, p. 142).
For the purposes of survey research, this means that a change in the
desired expenditure level E* will affect the budget constraint of each
individual differently, based on their tax price. Survey methods that seek
to present citizens with the cost implications of their tax and service
selections should face them with information that reflects the change in
tax price associated with changes in service consumption. However, this
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requires a dynamic approach where the change in tax price due to service
changes is calculated and presented to the respondent. A failure to do so
forces the assumption that all individuals in the jurisdiction face the same
tax price. The weakness of this assumption increases with the
heterogeneity of the jurisdiction.
Much of the work looking at tax price describes their variation and
distribution across communities. Some have used this cross-sectional
approach to estimate a demand curve for local public services based on
the relationships between price and government expenditures
(O'Sullivan, 1996; Inman, 1979). In other words, it assumes that the
preferences of the population (or the median voter) are a key determinant
of the amount of service provision. Average effects across communities
are difficult to gauge since communities have different service
responsibilities.
There is evidence that people act as if they understand their tax price
and the differences in service provision. Specifically, there is evidence
that people sort themselves into communities based on their demand for
public services (O’Sullivan, 1996). This is particularly true the greater
the number of municipalities available from which to choose (Gramlich
& Rubinfeld, 1982).
A Dynamic Approach
Two of the studies we mentioned that attempt to measure
willingness-to-pay used different measures of tax price. Arrington and
Jordan used per capita costs of the services in their survey. This is a tax
price for the average person if all persons shared the tax–which they
don’t. The Blue survey asked about services in relation to average
household taxes. This is the tax price if you live in the average
household–which no one does. This is a better measure because the
household figure is more likely to correspond with a respondent’s
household tax share. In both cases individual respondents were not faced
with their own tax price, but a proxy based on some average for the
jurisdiction. Responses, therefore, are different from what they would be
if the respondents’ individual tax price were presented.
Our interest is in determining citizen willingness-to-pay for public
services in a full information environment. In other words, what set of
public services would a representative set of citizens be willing to buy?
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The best data for definitively revealing these preferences would be
broadly representative, would contain much information about the
respondents, would record their service preferences in a full information
setting, and would contain a complete set of environmental control
variables.
The willingness-to-pay methodology and the provision of a budget
constraint are related approaches.
The budget pie presents the
respondent with information that reflects the government’s budget
constraint. The willingness-to-pay approach presents the respondent
with an approximation of his/her tax price (per capita cost or average
household cost, for instance) and support for services. This assumes that
the tax price is equivalent for all households, an assumption that is
almost always false. (In the case of contingent valuation methodologies,
all possible prices are potentially considered regardless of the actual
price facing the respondent). Therefore, it would be better to combine
these approaches–present the situation given the real trade-offs facing the
government, present the respondent with his/her tax price, and find out
his/her service preferences given these constraints. Given the recent
advances in computer and Internet technology, combining these elements
is now possible.
FIGURE 2
Surveying Citizen Preferences for Public Services
Public Service
dynamics
Government
specific Budget
constraint
Respondent specific
budget constraint
based on tax price
Computer and
Internet survey
technology
Respondent
preferences
Willingness to pay
and demand for
public service
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The government specific and respondent specific budget constraints
can be combined using computer technology that provides real time
computation of the effects of respondent choices. This leads to a better
measure of willingness-to-pay and demand for public services.
An ideal survey instrument would retain key features of the ‘Build
your Own Budget’ (BOB) survey from Eugene as it would query
residents about their preferred service and revenue combinations given a
balanced budget requirement and real cost information from the
jurisdiction. The interactive computer based citizen budget survey
method would query each respondent about his/her desired combination
of taxes and services in a graphical environment that continuously
presents information about the tax price for that service and the
combined service package. We present below a more detailed proposal
of how such a methodology should be constructed. This technique is
likely to be costly, but in all likelihood not more so than the sophisticated
methods we mentioned earlier.4
Proposed Elements of a Dynamic Tax Price Survey
Sampling Frame. A random sample of citizens (perhaps voters) is useful
for informing the public and elected officials of the desires of the
electorate. While a national sample has appeal for making broad
conclusions about citizen preferences it is less useful when researching
attitudes towards local government. Another reason that a national
sample is not optimal is due to the possibility of Tiebout (moving and
sorting) behavior. In other words, as mentioned earlier, there is evidence
people may select a jurisdiction because of the service level and tax price
present in that municipality. In this context, it is not meaningful to assign
the same underlying preference structure to the residents of different
jurisdictions.
Pre-Survey Information Gathering. Some information about the
respondents themselves needs to be included in the dataset–even prior to
surveying the respondents. Under this approach, information about the
property tax burden of each household is collected in advance so that
each respondent’s service selections during the survey is accompanied by
his/her tax price for the service.5 A complete set of demographic
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457
information is collected as well, including age, race, income, education,
housing tenure, vocation and family constellation.
Jurisdiction specific information regarding revenue sources and the
costs of services is gathered from the local government. Additional
information about the way that public services are constructed and
delivered is necessary to determine the marginal effects of the revenue
increases or decreases that respondents may select.
A unique aspect of this approach is the record of respondents’
choices when faced with the host of local services in their jurisdiction,
their true costs, the costs to the respondents, and the administrative and
legal constraints facing the jurisdiction.
Dynamic Survey Design. One innovation in this survey design is the
real-time update of the information provided to the respondent.
Respondents completing a survey face a computer screen with windows
revealing 1) their total tax bill, 2) their share of the cost for the current
service under consideration, and 3) the amount (quality) of the service to
be provided. The information in these windows is updated with each
choice. Respondents increasing the allocation for police services, for
instance, see a corresponding increase in the number of police patrols.
Survey Process. Respondents are contacted by phone and asked to
complete a budget balancing exercise for their government (likely in
exchange for a small fee). They are given a code that they can use to
access the survey over the Internet, or are scheduled for an appointment
at a centrally located computer lab. Computer assisted telephone
interviewing (CATI) is an alternative used to complete the same exercise
while the respondent is on the phone; the interviewer verbally provides
verbally the information from the dynamically updated windows.
Survey Elements. Using this method, respondents are queried in three
areas:
1) Service use and experience. These questions focus on the
satisfaction with a service and a record of how often in the past
year the respondent has used it.6
2) Preferences for service allocation levels: Respondents choose the
mix of services that satisfies them, given the impacts each choice
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makes on their overall tax bill. Service reduction and expansion is
permitted, as is indefinite iteration through the survey. Each
iteration reveals the impacts of both tax price and service level on
the quality level (outcomes) of services selected.
3) Respondent demographics: Survey participants are asked to provide
information about themselves, their families, and their occupations.
Survey Analysis. The surveys could be analyzed descriptively, using
frequencies and measures of central tendency and dispersion. However,
the core analysis of such data should be completed using a host of
multivariate techniques focused on the identification of key determinants
of different citizen choices. The core set of regressions would examine
allocation levels preferred by citizens given their tax price, and control
for their experience with the service, the quality of the service and
respondent demographics.
Unlike many preference surveys where strength of support is
indicated creating an ordered hierarchy of responses for analysis, the data
resulting from this survey method would produce completely continuous
dependent variables.
DISCUSSION
Public decision-makers face the problem of selecting a mix of public
services and offsetting revenues for their jurisdiction. In circumstances
where the need for citizen participation is most acute, methods are
needed that provide a reliable and representative sense of what an
informed citizenry would choose. Surveys of representative blocks of
the public can be designed to produce an accurate view of citizen
preferences.
Surveys that have attempted to measure willingness-to-pay for
government services typically do not present respondents with their
actual tax price, nor do the surveys capture the complexity facing
government decision-makers. Conversely, surveys designed to present
respondents with the government decisions in their complexity typically
do not include their tax price. Both approaches are tepid when they try
to provide useful guidance for government decision-makers.
The benefit of our proposed survey design is that it reveals the
demand schedule for public services more accurately than has ever been
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459
done before, through the use of interactive, real time computer (or
Internet–based) technology for survey completion. Our approach faces
respondents with their own costs for the services they select and the
impacts of their choices on the level of services to be provided. This
information is provided immediately in response to the choices made.
This allows the respondents to settle into the set of revenues and
expenditures that they find satisfactory while at the same time reflecting
the constraints facing decision-makers.
Consumers of data produced by such a method should recognize that
respondents are made 'different' from the general population because
they are basing their decisions on their actual tax price. In effect, the
respondents’ choices are representative of what an informed set of
citizens would choose if they knew the tax price and service implications
of their choices. As such, this method is likely to be a poor predictor of
voting behavior since most citizens do not posses such detailed
information. We should also recognize that there might be a price to be
paid for the realism of such an exercise. The more realistic the method,
the greater the risk that respondents will view their expressed preferences
as decisive. This creates an incentive for the respondent to understate the
strength of a respondent’s demand for services in the hope of avoiding
the need to pay for it. To the degree that this occurs, willingness-to-pay
might be understated in the resulting data.
A dynamic survey method of preference revelation satisfies many of
the concerns about the quality of citizen input (that other methods
cannot) by gathering data from a representative sample of the opinion of
truly informed citizens. Ideally, it would be the information that
decision-makers use to guide them through the difficult choices when the
stakes are high and agreement is low. The method is complex, would be
difficult to implement, and would be costly. It would also give decisionmakers something that they have heretofore gone without: a reasonable
claim to the informed will of the public about revenue and budget
allocations.
NOTES
1. Non-representative methods, such as 'come one, come all ' public
forums, cut out newspaper surveys, non-representative focus groups,
etc. are not designed to provide an accurate representation of the
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public will, and therefore could be misleading to decision-makers.
Such efforts, however, may be justified on process grounds to the
extent that they help engage the public.
2. Specifically, see Chapter 2 “Contemporary Techniques for
Citizen Involvement” of Simonsen and Robbins (2000).
3. The surveys were co-designed by Edward C. Weeks and
William Simonsen.
4. Computer assisted telephone surveys could accomplish the
same result. In this model the person administering the survey
uses a specially written computer program to calculate the
changes in tax price resulting from the respondents' choices.
The respondent is then told the service and tax impacts of
his/her service preferences.
5. Ideally, this would mean knowing the market value and assessed
value of each property and the degree to which the property tax was
capitalized into the respondent’s housing costs. Information on nonresidential property values would also be needed. The renter’s tax
burden could be determined by a preliminary set of regressions of
rent upon a set of community characteristics including property tax.
6. We found in our analysis of the Eugene, Oregon, surveys that service
use influenced citizen support for services.
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