Dasgupta Review:
Nature’s value must be at the heart of economics

Nature is a “blind spot” in economics. We can no longer afford for it to be absent from accounting systems that dictate national finances, or ignored by economic decision makers.

This is according to an independent review on the economics of biodiversity, produced by Professor Sir Partha Dasgupta from the University of Cambridge.

Commissioned by the UK Treasury in 2019, and published ahead of this year’s Convention on Biological Diversity taking place in China, the review is expected to help set the agenda for the UK Government’s 25-year environment plan.

The long-awaited Dasgupta Review describes Nature as “our most precious asset” and finds that humanity has collectively mismanaged its “global portfolio”: our demands far exceed Nature's capacity to supply “goods and services” we all rely on.

The last few decades of human prosperity have taken a “devastating” ecological toll, and the Review highlights recent estimates that suggest we would need 1.6 Earths to maintain humanity's current way of life.

The Review also argues that Gross Domestic Product is no longer fit for purpose when it comes to judging the economic health of nations. Dasgupta contends that GDP is “based on a faulty application of economics” that does not include “depreciation of assets” such as the degradation of the biosphere.

“My overarching aim is the reconstruction of economics to include Nature as an ingredient,” said Dasgupta, the Frank Ramsey Emeritus Professor of Economics at Cambridge and Fellow of St John’s College. 

“Truly sustainable economic growth and development means recognising that our long-term prosperity relies on rebalancing our demand of Nature’s goods and services with its capacity to supply them.”

Dasgupta says that sustainable economics means using a different measure to GDP. “It also means accounting fully for the impact of our interactions with Nature across all levels of society. COVID-19 has shown us what can happen when we don’t do this.”

The pandemic – most likely triggered by a zoonotic disease jumping the species barrier – may be “just the tip of the iceberg” if we continue to encroach on natural habitats, the Review cautions.

Prime Minister Boris Johnson welcomed the Dasgupta Review, which he says makes clear that “protecting and enhancing nature needs more than good intentions – it requires concerted, coordinated action.”

“This year is critical in determining whether we can stop and reverse the concerning trend of fast-declining biodiversity,” Johnson said.

Biological diversity is, in fact, declining faster now than at any time in our history. Since 1970, there has been on average almost a 70% drop in the populations of mammals, birds, fish, reptiles, and amphibians. Around one million animal and plant species – almost a quarter of the global total – are believed to be threatened with extinction.

Beyond its intrinsic – and incalculable – worth, biodiversity provides fundamental natural “dividends” that nourish and protect us: from basic sustenance through fish stocks or insects that pollinate crops, to soil regeneration, and water and flooding regulation. Not to mention the cultural and spiritual values that enrich our lives.

The total absence of these essential “ecosystem services” in national balance sheets has only served to intensify exploitation of the natural world.

A very simple example of the gaping holes in our accounting might see woodland destroyed to build a shopping centre. GDP records an increase in produced capital, but no depreciation of the “natural capital” that absorbs carbon, prevents soil erosion, creates a habitat for much-needed pollinators, and provides direct benefits to us – from recreation to purified air – that reduce burdens on health services. Such losses carry economic costs.

Nations are judged to have thriving economies at the same time as their biological assets are decimated. Estimates show that between 1992 and 2014, produced capital per person doubled, but the stock of natural capital per person declined by nearly 40%.

Governments exacerbate the problem: the total global cost of subsidies that damage Nature is estimated to be up to US$6 trillion per year. Accumulating produced capital at the expense of Nature is what economic development has come to mean for many people, according to the Review.

Dasgupta argues that the species extinction crisis we face – of our own making – is undermining the “productivity, resilience and adaptability” of Nature. This, in turn, has put our economies, livelihoods and wellbeing at serious risk. “Nature is our home,” he said. “Good economics demands we manage it better.”

The landmark 600-page report makes clear that urgent and transformative action taken now would be significantly less costly than delay, and will require change on three broad fronts:

Firstly, humanity must ensure its demands on nature do not exceed its sustainable supply. We must urgently increase the global supply of “natural assets”. Recommendations include the expansion and improved management of Protected Areas, and enacting policies that “discourage” damaging forms of consumption – meat-heavy diets, for example.

Secondly, we must adopt different metrics for economic success. This requires moving towards an “inclusive” measure of wealth, one that injects natural capital into national accounting as a critical first step. Dasgupta was among the Cambridge academics to help the United Nations launch their updated ‘Ecosystems Accounting’ framework at the end of last year.

However, this “inclusive wealth” should ultimately go further, so that national economics can also account for human health, knowledge and skills right through to the value of communities – all essential to what we think of as “productivity”.

Leading Cambridge academics including Professor Diane Coyle are already building on Dasgupta’s work to define new ways of measuring economic success – physical, financial, human, natural and social capital – at the University’s Bennett Institute for Public Policy.

Coyle and her colleague Dr Matthew Agarwala call the case set out by the Review a “pragmatic” one. “Many people will agree there is a moral case for humanity to be good stewards of the rest of nature, but the Review’s point is that the economic case is powerful too,” they write. “Ethics and economics are not separate.”

Lastly, the Dasgupta Review demands the transformation of our institutions and systems – particularly finance and education – to enable these changes and sustain them for future generations. This includes increasing public and private “financial flows” that enhance natural assets, and decreasing those that degrade Nature.

The Review points to a need for “supra-national institutional arrangements” that may involve payment systems for poorer countries to protect the vital ecosystems they contain – tropical rainforests, for example – and charges or “rents” for the use of regions outside borders, such as fishing and freight traffic on open oceans.  

Crucially, this systemic overhaul also means empowering citizens to make informed choices and to demand change – not least by firmly establishing the natural world in education policy. “Education systems should introduce Nature studies from the earliest stages of our lives, and revisit them in the years we spend in secondary and tertiary education,” writes Dasgupta.

The Review outlines three properties that mean natural processes – and accounting for them in economics – differ from produced capital goods: mobility, silence, and invisibility. These features also make it impossible to trace many of the harms inflicted on the natural world back to those responsible.

“Ultimately, we each have to serve as judge and jury for our own actions. And that cannot happen unless we develop an affection for Nature and its processes,” Dasgupta writes. “If we care about our common future and the common future of our descendants, we should all in part be naturalists.”  

Sir David Attenborough, famed Cambridge alumnus and figurehead of the conservation movement, welcomed the publication, describing it in the Review’s foreword as “the compass that we urgently need”.

“Economics is a discipline that shapes decisions of the utmost consequence, and so matters to us all. The Dasgupta Review at last puts biodiversity at its core,” said Attenborough.

“This comprehensive and immensely important report shows us how by bringing economics and ecology face to face, we can help to save the natural world and in doing so save ourselves.”

Image credits:

Top butterfly image: Aaron Burden
Homepage butterfly image: Nathan Dumlao
David Attenborough image: Sir Cam