Is human genome mapping a merit good and if so, how should it be financed?

Is human genome mapping a merit good and if so, how should it be financed?

22nd August 2015 Ideas, Uncategorized 0
By Lucy Roe, The Perse School

The first record of an experiment investigating the extraordinary work of genetics dates back to 1865 when Gregor Mendel published the results of breeding smooth and wrinkled pea plants. Since Mendel’s Laws of Inheritance, scientists have collated experimental data to create a revolutionary history of genetics1. The first gene map was created in 1911, by Alfred Sturtevant, showing the genetic composition of a fruit fly which is an organism in the Drosophila family2. Perhaps the most defining moment was the discovery of the structure of DNA in 1953 by James D. Watson and Francis Crick3.

The international Human Genome Project started in 1990. One of the fundamental desired outcomes of the human genome project is to improve the quality of life of individuals suffering from genetic diseases by suppressing discomfort and prolonging their lives. This can be achieved by spotting genetic bases for certain diseases present in an individual’s sequence early on so suitable therapies can be arranged. Therapies range from a change in diet to somatic gene therapy4.

The first issue that should be addressed is whether human genome mapping is a good or service. In reality, many products exist somewhere along a spectrum where one end is a pure good and the other is a pure service. The debate exists with human genome mapping as the providers do sell the genome map to the consumer; however it is not a pure good as it cannot be sold on as it is specific to the individual consumer. Also, the provider is selling knowledge (for example, information regarding the genes that are present which may predispose the individual to certain disease) rather than a tangible good; the MyGenome app can be used to discover more about the consumers mapped genome. In addition to this, the consumer needs to spend time with the provider to obtain the product. Considering the above, it can be assumed that human genome mapping is a service.

Whole genome sequencing is undertaken in laboratories and maps the complete DNA sequence of an organism’s genome5. The service is currently provided to individual consumers by the free market at a cost of around $5000. Vast improvements on the efficiency of the method used are evident from the rapid rate at which the cost of mapping one genome has decreased. In 2003 it had taken them 13 years and cost $2.7bn. Euan Ashley, an assistant professor at the Stanford School of Medicine, outlines the revolutionary rate at which the price fell by using the following analogy; “Every day, I drive past this Ferrari dealership in Palo Alto, and I see the 458 Ferrari Spider which retails at $398,000. I’ve worked out that if that was the cost of sequencing at the time of the Human Genome Project, and the price had dropped at the same rate, the car would now cost 40 cents.”6

A merit good is a commodity or service which has marginal social benefits which outweigh marginal private benefits. Examples are health care and education where they are deemed to be worthy of public finance in the opinion of society or the government7. The government also feels that merit goods will be under consumed by society therefore there is a need for them to be subsidised or provided free at the point of use. This prevents the price mechanism acting as a rationing function8.

A benefit of the current structure of the market is that the profit made by private companies from the providing of the service, can be put into the funding of more research to further improve the efficiency of the method used to sequence genes. An example is the privately owned company Oxford Nanopore which, in February 2012, presented two new generation machines similar to the size of USB sticks, that are able to “decode the building blocks of life” within the short space of an hour, in comparison to the mainframe-sized machines which took days9.

On the other hand, a market failure arises when genome mapping is left to the free market as the price acts as a rationing function; low income individuals who do not have sufficient income to consume the service will not see the benefits and will be forced out of the market even though they may derive the greatest utility from it.

By analysing the private benefits/ costs against the social benefits/ costs it can be concluded whether human genome mapping is a merit good, taking into account the definition stated above.

A private benefit of the consumption of whole genome sequencing is that the health of two individual’s offspring can be pre-empted. As a result of mapping all the three billion base pairs and one hundred thousand genes of the human genome scientists have been able to associate specific genes with diseases such as Huntington’s, cancer and diabetes10. In 2013, Illumina’s Jay Flatley, spoke with assurance that in a couple of years’ time, all babies will have their DNA sequenced at birth11. This would allow soon-to-be parents to make decisions on whether they are mentally and financially capable of having a child with a severe genetic disability. Although ethically debatable, deciding against having a disabled child may improve the quality of life for certain individuals due to less stress and greater disposable income; parents of disabled children sometimes have to leave their job to create time to care for their child and also spent large amounts of money on medication and required equipment. Anticipating the birth of a child with a genetic disease also means that options such as gene therapy become possibilities. This gives rise to moral disagreements in society which are to be briefly discussed in the conclusion.

Early identification of genetic bases which make an individual susceptible to certain diseases means that suitable therapies can be chosen early on; therapies include a change in diet, regular infusions of a particular product of DNA-specified synthesis (often an enzyme) that a patient with a genetic defect cannot manufacture and gene therapy (implanting a healthy gene into a person’s bone marrow)12. Early diagnosis of genetic disease, perhaps even before birth, means treatment can begin much earlier than in normal circumstances (in which diagnosis may only occur after symptoms and signs appear) and therefore the likelihood of the disease being cured is increased, especially as therapies are becoming more advanced.

It was also stated by Illumina’s Jay Flatley in 2013 that “in five to ten years, cancer will be downgraded to a chronic disease.”13 The U.S. Department of Health and Human Services posted an article in the NIH News on 19th May 2014 stating that researchers have developed a system that ranks genetic mutation and variation in relation to their “clinical and biological relevance” to the specific cancer the patient has14.

A current market failure of both the public and private health care system is the information asymmetry that exists; the doctor has all the knowledge of the patient’s condition whilst the patient has limited understanding. As a result, decisions made on treatment are largely influenced by the doctor. The development of human genome mapping will abolish this market failure to a certain extent as the individual will have the rights to the knowledge of their own genome and therefore what diseases they are predisposed to or suffering from. This will allow them to make decisions based on their own knowledge. However, experts in the medical field will be much more qualified to make suitable decisions on what treatment to receive therefore correcting this supposed market failure may not be beneficial to the patient.

Scientists are continually developing new biochemical methods which allow them to synthesise medication which is genetically specific to certain individuals. This is a much more effective and efficient mechanism in curing disease, rather than using general medicine which is designed to suit the whole population. This is a private benefit for individuals as better treatment would improve their health and therefore quality of living. This extraordinary advance in medicine may be seen as an upgrade of the health care system however there is a governmental view that everyone should have equal access to health care, therefore questions arise on how it should be supplied; by the government or free market? If it was to be sold by private companies under the free market, a market failure would arise as there would be under consumption of a merit good due to the price mechanism acting as a rationing function where low income individuals are forced out of the market. The development of personalised medicine make the greatest improvement to the health care system if it was to be funded by the NHS where individuals could consume it free at the point of use or under prescription for a maximum price.

Developing personalised medicines and new treatments for cancer and other genetic diseases does not only benefit the immediate individual but it also has a positive impact on society and the economy. If diseases are more curable, the labour force as a whole will be healthier and therefore more productively efficient. In 2010/11, illness of the British work force had an approximate cost of £8.4 billion to society15. If this figure could be reduced by less long term illness, the British economy would thrive more and the production potential would expand.

On the other hand, there are social costs involved with longevity of the population increasing due to improvements in the quality of health care. In the UK there is an increasing problem of an aging population where the ratio of retired to working is rising16. This has meant that there are a decreasing number of economically active people supporting an increasing number of economically inactive people. Consequently, the government has had to increase spending on pensions etc. This increases the financial burden on society, decreasing disposable income for tax payers. In addition, government spending, which perhaps would have been spent on health care or education, is now being used to fund the aging population. The pie charts below demonstrate how the pattern of government spending has changed between 2000 and 2015.


It can be seen from the pie charts that pension spending increased from 19% in 2000 to 21% forecasted for 2015. Although spending on health care also increased, without the aging population, perhaps some of the extra 2% (15.6 billion) spent on pensions would have been spent on other sectors. Improvement in sectors such as education and health care are crucial for boosting the future economy of Britain; moving potential spending from these sectors to pensions could be costly to the long run aggregate supply and cause the UK to fall behind trading partners in terms of production potential.

The development of genomics has meant that information, which could be of great interest to organisations such as insurance companies, law enforcement etc, is now provided17. Insurance companies will be able to carefully choose who they provide insurance to, such as life and health, by using the data revealed by the genome maps. Certain individuals being denied health/life insurance, due to the information stored in their genome could be seen as discrimination and ethically wrong considering basic human rights. In some cases, it is not one hundred percent certain that the disease which an individual is predisposed to will actually come into effect. In this situation, it may be viewed as unfair if there is only a 50% chance, for example, of contracting the disease but they are still denied insurance; insurance companies will face complicated decisions with the aim of maximising their profit.

However, from a less moral and more economical point of view, genome maps are a private benefit for insurance companies as they will be able to insure people with less financial risk and with a lower probability of having to pay out large sums of money to the sick. This will mean insurance companies are more financially stable and therefore they will have the confidence to invest more in capital goods and consequently boost aggregate demand and productive efficiency in the economy.

Following the above analysis and prior to concluding, it is worthwhile pointing out that for the most accurate conclusion to be drawn, it would be necessary to assign monetary values to all the private/social benefits/costs. It should also be noted that it would be extremely ambiguous to assign a monetary value to, for example, the private benefit of being able to pre-empt the health of two people’s offspring as there is such a wide variety of diseases with varying symptoms and implications. Considering the obscurity of attempting to value benefits and costs, the conclusion will be drawn based on the approximate weight of external factors.

In conclusion, human genome mapping is a merit good. It can be seen from the above analysis that there are significant marginal social benefits (MSB) on top of marginal private benefits (MPB). This can be demonstrated diagrammatically:

The red arrow in the diagram above demonstrates the positive externality that exists in consumption of human genome mapping. Considering this externality, the government would feel that the service may be under consumed. This suggests that the service should be funded by the government and not left to the free market. However, the human genome project perfectly demonstrates how increasing scientific knowledge can have ethical implications.

One form of gene therapy is germ line therapy which is the manipulation of reproductive cells. This has been seen as a highly unethical option in treating genetic diseases as altering the DNA of offspring will have unknown and potentially unintended effects on future generations. The moral factors must be taken into account by the government when deciding whether the service should be subsidised or not. However, it is undeniable that genome mapping has, and will do even more so as techniques become yet more advanced, induced an eminent turning point in medicine, adding new dynamics of ‘probability’ and ‘susceptibility’. This merit good deserves government finance as such revolutionary discoveries cannot go unused, such as the development of personalised medicine. However it is the role of the government to ensure careful application of the service, by enforcing laws, to avoid abuse of the knowledge leading to discrimination of certain individuals by various third parties.

3 Watson, J. D. (1968). The Double Helix. UK: Weidenfeld & Nicolson
4 2481991017&uid=60&sid=21103866399721

About the author

Andrew Tan: Head of Technology and Website Development. 2nd year Economist at St. John's College. Please e-mail me with any inquiries/issues regarding the website at!


Would you like to share your thoughts?

Your email address will not be published. Required fields are marked *

Leave a Reply