When the United Kingdom Treasury approached Sir Partha Dasgupta in 2019 to carry out a review of the economics of biodiversity, the first time a finance ministry is believed to have commissioned such a study, the eminent Cambridge University economist did not think twice about saying “yes”.
Over the next 18 months or so, Dasgupta and his team combined scientific, economic and historical evidence with rigorous mathematical modelling to produce The Economics of Biodiversity: The Dasgupta Review.
Published in February 2021, the landmark report shows that economic growth has come at a devastating cost to nature. It makes clear that humanity is destroying its most precious asset — the natural world — by living beyond the planet’s means and highlights recent estimates that 1.6 Earths would be required to maintain current living standards.
“Economic forecasts consist of investment in factories, employment rates, [gross domestic product] growth. They never mention what's happening to the ecosystems,” said Dasgupta, who is this year’s United Nations Environment Programme (UNEP) Champion of the Earth laureate for Science and Innovation. “It really is urgent that we think about it now,” he said.
The report was the culmination of four decades of work in which Dasgupta has sought to push the boundaries of traditional economics and lay bare the connection between the health of the planet and the stability of economies.
The Economics of Biodiversity is the foundation of a growing field of what is known as natural capital accounting, in which researchers attempt to assess the value of nature. Those numbers can help governments better understand the long-term economic costs of logging, mining and other potentially destructive industries, ultimately bolstering the case for protecting the natural world.
“Sir Partha Dasgupta’s ground-breaking contributions to economics over the decades have awakened the world to the value of nature and the need to protect ecosystems which enrich our economies, our well-being and our lives,” said Inger Andersen, UNEP Executive Director.
Economics as part of a ‘tapestry’
Dasgupta was born in 1942 in what is now the Bangladeshi capital of Dhaka. (At the time, the city was part of India.) His father, the noted economist Amiya Kumar Dasgupta, had a huge influence on him and his path towards academia. After completing a bachelor’s degree in physics in Delhi, Dasgupta moved to the United Kingdom where he studied mathematics and later gained a doctorate in economics.
Through his many major contributions to economics for which he was knighted in 2002, Dasgupta has helped to shape the global debate on sustainable development and use of natural resources.
“Nature is a wondrous factory, producing a bewildering variety of goods and services at different speeds and of varying spatial coverage. Think of, for example, all the beautiful processes that shape wetlands – the birds and insects that pollinate, the water voles that dig round for food, the way tiny organisms decompose material and filter water,” said Dasgupta.
“It is a bewildering tapestry of things that are happening, many of which are unobservable. And yet they are creating the atmosphere in which humans and all living organisms can survive. The way we measure economic success or failure, the whole grammar of economics, needs to be built with this tapestry in mind.”
Affection for nature
Dasgupta traces his interest in the idea of living sustainably in a world of limited natural resources to his now classic 1969 paper On the Concept of Optimum Population. In the 1970s, Swedish economist Karl-Göran Mäler encouraged him to develop his ideas on the links between rural poverty and the state of the environment and natural resources in the world’s poorest countries, a subject that was notably absent from mainstream development economics at the time.
This led to further explorations of the relationships between population, natural resources, poverty and the environment, for which Dasgupta has become acclaimed.
“I’ve had a ball working in this field,” he said. “One reason it’s been fun is that I had no competition. Nobody else was working on it.”
Grasslands, forests and freshwater lakes are some of Dasgupta’s favourite ecosystems. He believes children should be taught nature studies from an early age and that the subject should be as compulsory as reading, writing and arithmetic. “That’s one way to generate some affection for nature. If you have affection for nature, then she is less likely to be trashed,” he said.
Inclusive wealth
Dasgupta is passionate about the need to replace gross domestic product (GDP) as a measure of the economic health of countries because it tells just part of the story. He argues instead for “inclusive wealth”, which not only captures financial and produced capital but also the skills in the workforce (human capital), the cohesion in society (social capital) and the value of the environment (natural capital).
This idea is embedded in the United Nations-supported System of Environmental Economic Accounting which allows countries to track environmental assets, their use in the economy, and return flows of waste and emissions.
The United Nations Environment Programme (UNEP) has developed the Inclusive Wealth Index. Now calculated for about 163 countries, the index indicates that inclusive wealth expanded by an average of 1.8 per cent from 1992-2019, far below the rate of GDP, largely because of declines in natural capital.
Nature as a capital asset
Echoing the urgency of the UN Decade on Ecosystem Restoration to prevent, halt and reverse ecosystem degradation, Dasgupta’s Economics of Biodiversity warns that critical ecosystems, from coral reefs to rainforests, are nearing dangerous tipping points, with catastrophic consequences for economies and people’s well-being.
The 600-page report calls for a fundamental rethink of humanity’s relationship with nature and how it is valued, arguing that the failure to include “ecosystem services” on national balance sheets has only served to intensify exploitation of the natural world.
“[It is] about introducing nature as a capital asset into economic thinking and showing how economic possibilities are entirely dependent on this finite entity,” said Dasgupta.
