Unmarketed Good

Unmarketed Good in Health Economic Appraisal

An unmarketed good is an economic good that people value and that is scarce, yet it is not bought or sold in a market, so no price paid records what an extra unit is worth to them. Economists also call it a non-market good, and in health economics the leading example is health itself, along with lower infection risk in a community and cleaner air. Such goods matter most in cost-benefit analysis, which adds gains and losses in money and so must either put a money value on each unmarketed effect or leave the effect out of the total. Cost-utility analysis takes another route, measuring health in QALYs and judging the gain against what a fixed budget gives up elsewhere. The choice between those routes decides whose valuation of health counts, which is one of the main dividing lines between welfarist and extra-welfarist health economics.

What keeps a good out of the market

Fujiwara and Campbell, in a Green Book discussion paper for HM Treasury and the Department for Work and Pensions, define a non-market good as any good or service not traded in markets. Their definition covers public goods and also parts of life such as health, employment and marriage. They include quasi-market goods such as education and health, which are traded only at times or in part, and non-market bads such as pollution and crime.

Several different features keep a good out of the market. A public good is nonexcludable and non-rival, so a firm finds it hard to charge users and people have an incentive to let others pay, which the OpenStax textbook by Greenlaw and colleagues calls the free rider problem. Reiss, in the Stanford Encyclopedia of Philosophy, gives public health as an example, since fewer infected people lower everyone's chance of infection and that benefit reaches people in a non-excludable and non-rivalrous way. This is the logic behind vaccination externalities, a positive externality that no vaccine price captures.

Health care can be bought and sold, but a tax-funded system can take it out of the market for patients. Brouwer and colleagues quote the 1944 white paper A National Health Service, which said that getting the best medical care should not depend on whether people can pay for it. Where care is provided on that principle without a charge to the patient, no price signal shows users' valuation, even though the health service still buys staff, drugs and buildings in ordinary markets. Health itself cannot be bought directly at all, only produced with care, time and other inputs.

Why appraisal cannot leave unmarketed goods out

The HM Treasury Green Book (2026) tells appraisers to start from market prices of inputs and outputs. It adds that some goods and services have no readily available market prices, while for others market prices do not reflect their social value, and in both cases non-market valuation techniques should be used. Its examples of market failures behind distorted prices include externalities and market power. A price corrected for such failures is a shadow price.

Leaving an unmarketed good out of a sum in money is a valuation in its own right. On the value of a prevented fatality, the Green Book states that not valuing fatality risk would in effect treat human safety as having zero value. The same reasoning applies to any health gain omitted from a cost-benefit analysis, because an omitted benefit counts as nothing in the net present social value.

The Green Book also separates monetisable from unmonetisable effects. An unmarketed good can be monetisable if a credible non-market value exists, as for QALYs, while an unmonetisable effect can only be described in numbers or words, such as national security or the number of species affected. When the main benefits are unmonetisable it recommends social cost-effectiveness analysis instead, and it notes that a proposal with a benefit-cost ratio below one may still be value for money if it has significant unmonetisable benefits.

Where an unmarketed good enters the welfare calculation

Fujiwara and Campbell set the problem in the standard welfare framework, where a person's indirect utility depends on market prices, income and the level of the non-market good. Willingness to pay is the most money a person would give up to receive the good, so for an improvement it is the sum that leaves utility unchanged.

$$v(p, Q^{1}, M - W) = v(p, Q^{0}, M)$$

where $v$ is the indirect utility function, $p$ is the vector of market prices, $M$ is income, $Q^{0}$ and $Q^{1}$ are the levels of the unmarketed good before and after the change, and $W$ is the willingness to pay for the improvement. The same framework gives willingness to accept for a loss.

Several methods estimate $W$, and the Green Book ranks sources of value by reliability, with market prices first, generic prices next, then revealed preference, and stated preference and wellbeing valuation together below them. The methods themselves, and the Green Book's survey-based QALY value, are set out under monetary valuation. For health the Green Book gives a willingness to pay value of GBP 70,000 per QALY in 2020-21 prices, uprated by 2% a year for future health effects.

Welfarist and extra-welfarist answers for health

How health is valued as an unmarketed good is where the two schools of normative health economics part. Brouwer and colleagues describe welfare economics as judging changes by individual utility, measured in applied cost-benefit analysis through willingness and ability to pay, with each money gain or loss given the same weight whoever receives it. Under that approach a health gain is worth what the people affected would pay, so valuations depend on the income distribution.

Extra-welfarism, they note, can be seen in cost-utility analysis, where something like need takes the place of effective demand and willingness to pay, which keeps ability to pay out of the judgement. They also describe the decision-making approach associated with Sugden and Williams, in which the values come from the public decision maker rather than from individual sovereignty. In extra-welfarism generally, need is weighted on ethical principles that lie outside the traditional welfare economic framework, and health is often measured in QALYs.

The NICE approach to health technology appraisal sits closer to the second view. Its manual, NICE technology appraisal and highly specialised technologies guidance (PMG36), says that given the fixed NHS budget the maximum acceptable incremental cost-effectiveness ratio should reflect the opportunity cost of programmes displaced by new, more costly technologies (section 6.3.1). It applies a range of GBP 25,000 to GBP 35,000 per QALY gained (sections 6.3.4 to 6.3.8), so the cost-effectiveness threshold prices health by what the budget can buy elsewhere. The Green Book figure of GBP 70,000 is a demand-side value of what people would pay for health. The gap between them is a gap between two answers to the same question about an unmarketed good.

Worked example with a vaccination outreach programme

All numbers in this example are illustrative and do not describe a real programme. A local service offers outreach to raise vaccination uptake among older adults for one year, so no discounting is needed. It costs GBP 400,000 in staff time and vaccines, all bought at market prices. Fewer hospital admissions save GBP 150,000 of NHS resources, also priced in markets. The health gain, an unmarketed good, is 6.0 QALYs.

Valuing the health gain at the Green Book figure of GBP 70,000 per QALY gives the money benefit of health.

$$B_{h} = 6.0 \times 70{,}000 = 420{,}000$$

where $B_{h}$ is the money value of the QALY gain in GBP. Adding the hospital savings gives total benefits of GBP 570,000, and the net present social value follows.

$$\text{NPSV} = (150{,}000 + 420{,}000) - 400{,}000 = 170{,}000$$

where NPSV is benefits minus costs in GBP. The benefit-cost ratio is then

$$\text{BCR} = \frac{570{,}000}{400{,}000} = 1.425$$

where BCR is total benefits divided by total costs. On these figures the programme passes a cost-benefit test with room to spare.

A switching value shows how much rests on the value given to health. The Green Book asks for switching values and suggests using them for unmonetisable benefits, by finding the money value a benefit would need for the NPSV to exceed zero. Here that is the value per QALY at which the hospital savings plus the health gain just equal the cost.

$$V^{*} = \frac{400{,}000 - 150{,}000}{6.0} \approx 41{,}667$$

where $V^{*}$ is the switching value in GBP per QALY. The same figure is the programme's net cost per QALY gained, the ratio a NICE-style cost-utility analysis would report.

The verdict now depends on which value of health is used. Against the Green Book's GBP 70,000 the programme is good value. Against the NICE range of GBP 25,000 to GBP 35,000, a net cost of about GBP 41,667 per QALY lies above the top of the range, so if the PMG36 rules applied, a committee would need an increasingly stronger case to fund the programme from the NHS budget. If the analysis also counted an illustrative 2.0 QALYs gained by unvaccinated people through lower transmission, the net cost per QALY would fall to 250,000 / 8.0 = GBP 31,250, inside the NICE range rather than above it, so leaving out this unpriced spillover moves the programme across the top of the range.

Limits and common misunderstandings

Unmarketed does not mean unvalued. Health has a value in appraisal whether or not anyone sells it, and the real question is which method and whose preferences supply that value. Nor does a market price always settle the matter, since the Green Book warns that market prices may fail to represent social value when externalities or market power are present.

Stated values carry known biases. Fujiwara and Campbell report that people are widely believed to overstate hypothetical payments by a factor of two to three, with some evidence that this bias is larger for public goods. Revealed preference avoids hypothetical answers but picks up only use value, so it misses non-use value, such as the worth some people place on a good simply existing. Values of this kind are uncertain, and the Green Book advises a range of estimates with sensitivity analysis.

Money values for health can also embed the income distribution. Willingness to pay is constrained by income, so unweighted sums give more weight to gains for richer people, which is one reason extra-welfarist analysis and equity-weighted analysis exist. A further error is to count the same unmarketed good twice, for example by adding a separate value for reassurance to a QALY value that already reflects it.

Sources

• Brouwer WBF, Culyer AJ, van Exel NJA, Rutten FFH. Welfarism vs. extra-welfarism. Journal of Health Economics. 2008;27(2):325-338. Author copy: https://eprints.whiterose.ac.uk/id/eprint/3789/1/brouwerwb1.pdf
• Fujiwara D, Campbell R. Valuation Techniques for Social Cost-Benefit Analysis: Stated Preference, Revealed Preference and Subjective Well-Being Approaches. A Discussion of the Current Issues. HM Treasury and Department for Work and Pensions; July 2011. https://www.gov.uk/government/publications/valuation-techniques-for-social-cost-benefit-analysis
• HM Treasury. The Green Book (2026). Updated 28 October 2026. https://www.gov.uk/government/publications/the-green-book--2/the-green-book-2026
• National Institute for Health and Care Excellence. NICE technology appraisal and highly specialised technologies guidance: the manual (PMG36). Published 31 January 2022, last updated 13 October 2026. Chapter 6, Committee recommendations. https://www.nice.org.uk/process/pmg36/chapter/committee-recommendations-2
• Greenlaw SA, Shapiro D, MacDonald D. Principles of Economics 3e. Section 13.3, Public Goods. OpenStax, Rice University; 2022. https://openstax.org/books/principles-economics-3e/pages/13-3-public-goods
• Reiss J. Public Goods. Stanford Encyclopedia of Philosophy. First published 21 July 2021. https://plato.stanford.edu/entries/public-goods/