Another Example Of The Difference Between Value And Price: Free Mosquito Nets Are More Valued
from the economics-at-its-finest dept
We’ve pointed out time and time again how price and value are not the same thing. They may be related, but value tends to explain the demand curve, whereas price is determined by the intersection of supply and demand. To think about it logically, we buy stuff all the time because we value what we buy more than the money we’re paying for it (the price). That’s why the economic transaction happens. Or, to put it another way, you’ll pay the price for something if it’s lower than what you value it at, but that doesn’t automatically change the value of it to the price. Now, there are some reports that suggest that the price, acting as a signal, can impact perceived value, but that appears to be limited only to a few specific situations.
We saw another example of the difference between price and value in a recent episode of Planet Money, which involved a discussion with the authors of the book Poor Economics, about their very data driven look at various economic questions. An early part of the discussion looked at the question of whether or not people in poor countries don’t value mosquito nets when they get them for free. Apparently some economists have argued that you have to make poor people pay for their mosquito nets or they won’t “value” them. Tragically, it seems that even some economists don’t recognize the difference between price and value.
Thankfully, the folks who wrote this book went out and did real research, and the data shows that people in poor countries actually seem to value the free mosquito nets even more than when they have to pay for them. That is, people who received free mosquito nets seemed even more likely to use them than those that were paid for. I’m a sucker for data driven economics, so it’s always nice to see stories like this one.