(Published as ‘Our economic system needs to recognize the price – and value – of nature’)
Dr. Trevor Hancock
9 February 2021
A cynic, Oscar Wilde wrote, is someone who “knows the price of everything and the value of nothing”. On that basis, our dominant economic system – corporate capitalism – is beyond cynical. It takes Wilde’s aphorism one giant step further because it doesn’t even know or take into account the price of everything, never mind recognise and account for that which is priceless.
That, if not quite in those words, is the conclusion of a startling review of the economics of biodoversity by the distinguished Cambridge economics professor Sir Partha Dasgupta. Startling not just because of what he says, but because of who commissioned his report: The Chancellor of the Exchequer (read ‘Minister of Finance’) in Boris Johnson’s UK government. So this week I am taking a side trip on the road to Doughnut Economics to consider his important report; next week I will look at how we will have to change.
What Professor Dasgupta has to say is both simple and profoundly important: We have not correctly included either the price or the value of nature in our economic models and practices, or in the price of our goods and services. Instead we treat them as an ‘externality’, by which he means “the unaccounted-for consequences for others, including future people, of actions taken by one or more persons”. In other words, we gain at the expense of people elsewhere, future generations and, he might have added, other species.
The result of ignoring the harm to nature (and, he might also have added, harm to people’s health and the social wellbeing of communities) caused by our economic system and way of life, he writes, is that “while humanity has prospered immensely in recent decades, the ways in which we have achieved such prosperity means that it has come at a devastating cost to Nature.”
In fact, he reports, “between 1992 and 2014, produced capital per person doubled, and human capital [health, education, aptitude and skills] per person increased by about 13 percent globally”. However, he adds, “the stock of natural capital per person declined by nearly 40 percent”. Moreover, we should note this is only over 22 years; the decline since the onset of the ‘great acceleration’ in human impact in the 1950s is far greater.
The result is that “many ecosystems, from tropical forests to coral reefs, have already been degraded beyond repair, or are at imminent risk of ‘tipping points’. These tipping points could have catastrophic consequences for our economies and well-being.” Sadly, as he notes, this “is what economic growth and development has come to mean for many people”.
But even if we could include the cost of ecological harm in the price of our goods and services, that would not be enough; Professor Dasgupta notes “Nature is more than an economic good: many value its very existence and recognise its intrinsic worth too”.
This view is evident in a 2018 report from the International Institute for Sustainable Development (IISD) on the measurement of ‘comprehensive wealth’, by which they mean the combination of five forms of capital: Produced (infrastructure, buildings and machinery), natural, human, financial (stocks, bonds and cash) and social capital.
While some forms of natural capital – so-called market natural assets such as the minerals, fossil fuels, timber, water resources and fish we extract) can be expressed in monetary terms, other forms of natural capital – a stable and warm climate and key ecosystems such as forests, wetlands, grasslands, lakes/rivers and the oceans – “are, effectively, priceless”.
That is because the latter “are critical to well-being. Any degradation in them imposes direct and irreplaceable costs on well-being, and their monetary value is, therefore, not relevant”. So while we may be able to measure and account for some forms of natural capital, those ecosystem ‘goods and services’ that are critical to our wellbeing “cannot (and should not) be included in aggregate measures of comprehensive wealth”.
In other words, it is not enough to understand the price of nature, we need to recognise that it is to a significant degree priceless, of inestimable value. As a society, we need to know not just the price but the value of nature, and we need an economic system that recognises and incorporates this.
© Trevor Hancock, 2021
Dr. Trevor Hancock is a retired professor and senior scholar at the University of Victoria’s School of Public Health and Social Policy.