A sweeping new review makes it clear that nature has fundamental economic value – and that our bill is heavily overdrawn.
Why it matters: The natural capital created by clean water and air, biodiversity and basic resources has been the foundation of human prosperity, but because it has no apparent economic value, all too often we treat it as infinite. To secure a sustainable future, it may be necessary to treat nature less like lottery winnings and more like a retirement account.
Driving the news: On Tuesday, Cambridge University economist Partha Dasgupta published an important report commissioned by the British government on the undervalued economy of biodiversity.
- In economic terms, Dasgupta notes that although the capital produced – assets such as factories and roads – doubled between 1992 and 2014 and human capital increased by about 13%, the stock of natural capital per person has decreased by nearly 40%.
- The report cites estimates that current extinction rates are 100–1,000 times higher than the planet’s baseline and that 20% of species could become extinct in the coming decades.
- These trends are in large part a result of the extent to which the Earth has become a support system for a single species: humans.
- 70% of all birds living today are poultry – usually the 23 billion chickens raised for food at any one time – while humans themselves and the domesticated species used for livestock now make up 96% of the mass of all mammals on the planet.
The consequences: “Estimates of our total impact on nature suggest that we would need 1.6 Earths to maintain the world’s current standard of living,” Dasgupta writes.
- Last time I checked we only have one.
The big picture: Nature’s decline coincided with revolutionary improvements in the human condition, with the world’s ultimate output of goods and services growing more than 13 times over the past 70 years to more than $ 120 trillion in value.
- The report considers these two facts to be related. From the richest billionaire to a person just emerging from absolute poverty, human prosperity depends on being able to draw for free from the resources nature provides – at least in market terms.
- A 1997 study estimated the global flow at the time of the services of the biosphere – everything from water to air to pollination – was worth $ 33 trillion, more than the value of global GDP at the time.
The problem is that while nature bank account can have many zeros, it is not infinite, and if we pull it down, we undermine the future of humanity, like a wealthy family squandering the legacy of its descendants.
- Dasgupta argues that we should look at natural capital as we would with other forms of capital, investing it wisely to ensure that future generations enjoy not only natural beauty but also the resources on which an economy depends. .
- To do this, we need to think of ways to share the planet’s natural capital fairly, set up payments to protect the ecosystems controlled by individual nations, and impose rents for common global resources such as the oceans and the atmosphere. .
The catch: Such a system requires a degree of international governance and cooperation – not to mention individual discipline – that seems to go far beyond what we can currently handle.
- And while Dasgupta speaks the language of the markets, his recommendations call for a revision of an economic system based for a long time on the short-term exploitation of natural capital, a fact that some critics were quick to point out:
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Our thought bubble: One of my underlying assumptions about Future is that technological progress is especially valuable in that it can enable us to circumvent our political and even psychological limitations.
- I doubt nearly 200 countries would ever come together to distribute the world’s natural capital fairly, just as I doubt people can be convinced to significantly curb their consumption patterns.
- More likely to save us is the development of technologies that allow us to get more out of our natural capital stock – an approach that Dasgupta praises. We only have one Earth, but the ultimate economic value of the planet largely depends on what human ingenuity can make of it.
It comes down to: As Dasgupta writes, when it comes to nature, “we are all asset managers.”