On the Dollar Value of Nature

The Dasgupta Report was released last week with great promise. The news outlets were happy: The Guardian newspaper for example reported:

“The world is being put at “extreme risk” by the failure of economics to take account of the rapid depletion of the natural world and needs to find new measures of success to avoid a catastrophic breakdown, a landmark review has concluded.

Prosperity was coming at a “devastating cost” to the ecosystems that provide humanity with food, water and clean air, said Prof Sir Partha Dasgupta, the Cambridge University economist who conducted the review.

The 600-page review was commissioned by the UK Treasury, the first time a national finance ministry has authorised a full assessment of the economic importance of nature.”

What should we make of this scenario? Are ecologists happy that economists now think all the things we have been fighting for are finally recognized? Or are we barking up the wrong tree? The first assumption is that we have surrendered all environmental decision making to economists. A corollary of this assumption might be that we tried having David Attenborough and the many excellent nature presenters convince the world that nature is wonderful and should be kept for all to enjoy, and this has mostly failed to alleviate our environmental problems. Many people do not seem to really care about nature unless it affects their livelihood directly. A second assumption is that economics is king of all, and by rolling out the big guns we will finally get progress in resolving environmental problems. Forget studying ecology and take up economics instead. If these two assumptions are correct, I would propose that we have lost the plot, and if we can deal with our ecological mess only by talking dollars, we really are lost.

Many people believe that we can overcome environmental changes and at the same time carry on much as we are today. The ever-increasing number of sustainability institutes and journals will attest to the reversal of environmental damage. Unfortunately, the correlation is positive rather than negative, and as this and many other reports detail, environmental damages continue to increase and at an increasing rate. What can we do to change this?

The first problem is that the environmental mess accumulates at too slow a rate, so the simplest solution for each person is to live by the maxim “I will pass away soon anyway, so why bother”. That does not help our children, and the next convenient viewpoint is that technology will save us. It is quite clear that technology will entertain us, but there are legitimate doubts that technology can be relied on for environmental salvation.

The nub of our problem is that we live in a world that has no leader. There certainly are leaders good and bad in many countries, but there is no supreme leader who can tell all the world’s peoples to act sustainably, and to be the police chief if they do not (Mearsheimer 2018). So burn coal if you wish, and mine coal even if people complain, and spread pollution as your individual right in spite of the clear rules of sustainable living. And the key is that you can ban mining and burning coal in one advanced country, but you have no power to tell other countries that they must do the same for the good of the Earth.   

When Nicholas Stern in 2006 released his 692-page report on the effect of global warming on the world’s economy, he summarized it this way:

  • there is still time to avoid the worst impacts of climate change, if we take strong action now
  • climate change could have very serious impacts on growth and development
  • the costs of stabilising the climate are significant but manageable; delay would be dangerous and much more costly
  • action on climate change is required across all countries, and it need not cap the aspirations for growth of rich or poor countries
  • a range of options exists to cut emissions; strong, deliberate policy action is required to motivate their take-up
  • climate change demands an international response, based on a shared understanding of long-term goals and agreement on frameworks for action.

The comments of some of the reviewers echoed that “the Stern Review was critically important in moving the climate issue from one of science to one of economics”. The Dasgupta Report of 2021 devotes 606 pages to the economics of biodiversity and perhaps will be lauded as moving the biodiversity issue from the realm of science to the realm of economics. The realms of science and of economics are intertwined, as the current Covid epidemic illustrates all too well. But I think it is a mistake to convert human beings into Homo oeconomicus because the world of biodiversity should not be worthy of protection solely because of its economic value to humans. There are many values that are of higher importance than economic values.

It is nevertheless important to align economic policies with biodiversity protection, and there is already an enormous literature discussing this from one extreme (Gray and Milne 2018) to another (Maron et al. 2018). Ecologists have tried mightily to incorporate our ecological world view into the economic realities but with only limited success (Constanza et al. 2017). The history of human treatment of nature is not very inviting to consider, and I do not like to project the past linearly on the future. But even in this pandemic one sees too many people who ignore all reasonable requests to alleviate problems, and the political systems of our day are so weak when it comes to protecting nature that most policy people seem to think that protecting a few small parks and reserves is enough. We certainly value the David Attenborough presentations on our TV but the need for real world responses seems muted and very slow to develop. I fear that economic science will do little better than biodiversity science to stop the juggernaut, but I hope to be wrong. To date the Titanic paradigm fits the facts too closely. If you are optimistic, go back and read the Stern Report of 2006 and then the Dasgupta Report of 2021. Progress?

Costanza, R., et al. (2017). Twenty years of ecosystem services: How far have we come and how far do we still need to go? Ecosystem Services 28, 1-16. doi: 10.1016/j.ecoser.2017.09.008.

Dasgupta, P. (2021) The Economics of Biodiversity: The Dasgupta Review. (London: HM Treasury. Available at: www.gov.uk/official-documents.

Gray, R. and Milne, M.J. (2018). Perhaps the Dodo should have accounted for human beings? Accounts of humanity and (its) extinction. Accounting, Auditing, & Accountability 31, 826-848. doi: 10.1108/AAAJ-03-2016-2483.

Maron, M., et al. (2018). The many meanings of No Net Loss in environmental policy. Nature Sustainability 1, 19-27. doi: 10.1038/s41893-017-0007-7.

Mearsheimer, J.J. (2018) ‘The Great Delusion: Liberal Dreams and International Realities.’ (Yale University Press: New Haven.). ISBN: 978-0-300-24856-2

Stern, N. (2006). The Economics of Climate Change: The Stern Review. (London: HM Treasury). ISBN number: 0-521-70080-9 (Cambridge University Press, 2007).

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