In 2021, the Dasgupta Review, a landmark review into the economics of biodiversity, concluded: “To detach nature from economic reasoning is to imply that we consider ourselves to be external to nature. The fault is not in economics; it lies in the way we have chosen to practise it.”
Authored by Sir Partha Dasgupta, the hard-hitting document provides a damning assessment of how traditional economic models have failed to accurately value the goods and services provided by nature, and argues that humanity has collectively “mismanaged its global portfolio of assets” – with dire implications for the environment. It has been compared with the influential 2006 Stern Review on the Economics of Climate Change, but also attracted its fair share of controversy, with critics claiming that it ignores fundamental problems with capitalism and allows for the pursuit of endless growth.
As one of the most eminent economists of the 20th and 21st centuries, Dasgupta is not afraid to confront these critics, forthright in his assertion that a new approach to economics is required to tackle the biodiversity crisis facing the world today.
Dasgupta first became interested in nature and ecology while growing up in India, later becoming involved in environmental economics when studying for his PhD at Trinity College, Cambridge in 1968. “My interest in the workings of the biosphere dates back to my schooldays, when my geography teacher at the Rajghat Besant School taught us geography as an analytical subject – he was inspirational,” he says. “Formally, in my PhD dissertation, the central chapter was on the concept of optimum population size. To study that, I constructed a model in which there is a fixed factor that limits consumption possibilities, in contravention to normal practice among growth economists.”
Indeed, there was very limited understanding of environmental economics when he started out at Cambridge, with most traditional economists ignoring impacts on nature and resource limitations when analysing growth trends. “It was little understood in 1968, nor were mainstream economists interested in the environment. Even today, received growth and development economics, and the economics of poverty, steer clear of ecological matters. You won’t find ecological economics in economics departments in the UK, but you will in geography departments.”
Population, poverty and nutrition, the environment, social science and how these interact with the economy are all areas covered by Dasgupta’s research over the decades. His impact on the field of environmental economics is impossible to overstate, culminating in his review on the economics of biodiversity, published in February last year.
“Our institutions are so designed that the prices we pay for nature’s goods and services are a lot lower than they should be”
Commissioned by the UK Treasury, the Dasgupta Review highlights how demands on nature far exceed supply, and states that the introduction of natural capital into national accounting systems would be a “critical step” in transforming how wealth is measured globally. This would involve governments valuing goods such as soils, air, water
and all living organisms in the same way they value buildings, machines and roads. The services that nature provides are overlooked by accounting systems, too, ignoring how the natural environment breaks down our waste, for example, or how forests and other carbon sinks mitigate the effects of climate change.
“Our institutions are so designed that the prices we pay for nature’s goods and services are a lot lower than they should be,” Dasgupta explains. “Estimating the relative productivities from various forms of natural capital, such as wetlands, lakes, coastal fisheries, forests, mangroves, coral reefs and so forth, is hard work, but there is now an impressive literature that does just that. The problem isn’t that there aren’t such studies to help introduce ecological concerns into economic decision-making, but rather that economic decision-makers remain ignorant of them, and continue to ignore them even when informed of them.”
However, the concept of putting a monetary price on the goods and services of nature sits uneasily with some. Environmental writer and activist George Monbiot last year accused the Dasgupta Review of promoting “totalitarian capitalism”, where “everything must now be commodified and brought within the system” by extending “the capitalist revolution” into our relations with the living world. Dasgupta is unmoved by the accusation. “I find the criticism the armchair sophistry that intellectuals are fond of uttering,” he says. “They should ask rural households in South Asia, Africa and Latin America what they make of natural capital, whether they are cognisant of the relative worth to them of the various forms of natural capital they live on directly.”
Valuing nature in such a way would force us to think about how our economic activities now will impact future generations. The Dasgupta Review also calls on governments to adopt new metrics for economic success that account for the benefits of investing in “our most precious asset” – nature – and to end our obsession with gross domestic product. “GDP is the market value of the output of final goods and services, but the measure does not deduct the depreciation of capital assets,” Dasgupta explains. “So, if nature is depleted, such as a wetland destroyed for raising output of produced goods like roads and buildings, GDP will record an increase.”
“The disconnection from nature has meant that we have no inner compunction to protect it”
The review instead calls on politicians to consider ‘inclusive wealth’ when determining economic success. “The right measure to use for assessing the sustainability of economic programmes is an inclusive measure of ‘wealth’, which is the social worth of an economy’s stock of produced capital, such as roads, and human capital, such as health and education, and natural capital, such as ecosystems and minerals,” says Dasgupta. “Nature does not appear in received growth and development economics, but economic development is sustainable only if the economy’s inclusive wealth per capita does not decline over time.”
His review also explains how we have degraded nature to the point where the demands we make of its goods and services far exceed its ability to meet them on a sustainable basis, which it describes as ‘impact inequality’. Demand is influenced by population, GDP per capita, and the efficiency with which we convert nature’s goods and services into GDP, while ‘supply’ is the rate at which nature can regenerate itself. “To address the imbalance, we can either lower the demand or help to raise the supply. We could reduce future population size from what it would otherwise be through increased aid for family planning and reproductive health in sub-Saharan Africa, for example; reduce per capita GDP of the rich world; or increase the efficiency with which nature’s goods and services are converted into final output, such as lowering food waste and moving to clean energy.”
Nature is a “blind spot” in economics, according to Dasgupta; he calls this “an institutional failure, not only a market failure”. However, he believes that growing urbanisation, the profusion of technology, and reduced access to green spaces have led to the situation we are in today, with society having become more detached from the natural world. “The disconnection has meant that we have no inner compunction to protect nature,” he says. “We need that compunction because the market does not offer the incentive to economise on nature – quite the contrary.”
Establishing the natural world within educational policy could help counter this societal shift, leading to the development and design of new environmental education programmes. “Our education should, in part, be directed in nature studies, from primary school onward,” he says. “That may allow us to develop a love for nature, which would then create an inner urge not to tarnish it willy-nilly. Self-restraint would serve to substitute for the market’s inability to impose restraint on our part by charging us more for nature’s goods and services.” Our disregard for biodiversity and nature has been brought into sharp focus in recent years, with the UN warning that one million species may be pushed to extinction within the next few years due to human activity.
However, with a raft of educational, financial, and biodiversity-related announcements made at COP26 last year, Dasgupta is optimistic that the protection of nature is now taking a more prominent role in efforts to tackle climate change.
“It is gratifying that the UK government now places nature at the heart of climate change, for climate regulation by nature is only one of the multitude of services she provides.” This has not always been the case, with governments having prioritised policies and initiatives to halt global warming above ending the destruction of nature, failing to recognise that the two crises go hand in hand. “Separating climate change from deterioration of the many other services nature provides has been an unhappy interlude in the economics of climate change governments have been encouraged to adopt over the years. Happily, that is likely to change. Whether biodiversity loss will be placed on a par with climate change remains to be seen.”
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Chris Seekings is the Deputy Editor of IEMA’s Transform magazine, which is published biomonthly for IEMA members. Chris’s role involves writing sustainability-related news, features and interviews, as well as helping to plan and manage the magazine’s other day-to-day activities.