Trevor Hancock: Our economic system must recognize the price – and value – of nature

A cynic, writes Oscar Wilde, is someone who “knows the price of everything and the value of nothing”. On this basis, our dominant economic system – corporate capitalism – is beyond cynicism.

A cynic, writes Oscar Wilde, is someone who “knows the price of everything and the value of nothing”. On this basis, our dominant economic system – corporate capitalism – is beyond cynicism. This takes Wilde’s aphorism a giant leap forward because he doesn’t even know or consider the price of everything, let alone recognize and account for the priceless.

That is, if not quite in these words, the conclusion of a startling review of the economics of biodiversity by the eminent Cambridge economics professor, Sir Partha Dasgupta. Surprising not only because of what it says, but because of who commissioned its report: the Chancellor of the Exchequer (read “Finance Minister”) of the British government of Boris Johnson. So this week, I’m taking a detour down the road from Donut Economics to review its 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 properly included the price and value of nature in our economic models and practices, nor in the price of our goods and services. Instead, we treat them as an “externality”, by which he means “the unconsidered consequences for others, including future people, of actions taken by one or more people”. In other words, we win at the expense of people elsewhere, future generations and, he might have added, other species.

The result of ignoring the damage to nature (and, he might also have added, the damage to people’s health and the social well-being of communities) caused by our economic system and way of life, he writes, is that “while humanity has prospered immensely in recent decades, the manner in which we have achieved such prosperity means that it has come at a devastating cost to nature.

Indeed, he reports, “between 1992 and 2014, produced capital per person doubled, and human capital [health, education, ­aptitude and skills] per person has increased by around 13% worldwide. However, he adds, “the stock of natural capital per person has shrunk by nearly 40 percent.” Also, it should be noted that this is only over 22 years; the decline since the start of the “Great Acceleration” of human impact in the 1950s is far greater.

The result is that “many ecosystems, from rainforests 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 our well-being. Unfortunately, as he notes, “that’s what economic growth and development means to many people.”

But even if we could include the cost of ecological damage in the price of our goods and services, that would not be enough. Professor Dasgupta notes: “Nature is more than an economic good: many appreciate its very existence and also recognize its intrinsic value.

This view is evident in a 2018 report by the International Institute for Sustainable Development on measuring “aggregate wealth,” by which they mean the combination of five forms of capital: product (infrastructure, buildings, and machinery), natural, human, financial (equities, bonds and cash) and social capital.

While some forms of natural capital—marketable natural assets (such as minerals, fossil fuels, timber, water resources, and the fish we extract)—can be expressed in monetary terms, other forms of capital natural — a stable, warm climate and key ecosystems such as forests, wetlands, grasslands, lakes/rivers and oceans — “are, in fact, invaluable.”

Indeed, these “are essential to well-being. Any degradation of these imposes direct and irreplaceable costs to well-being, and their monetary value is therefore irrelevant. So while we can measure and report on some forms of natural capital, those ecosystem “goods and services” that are critical to our well-being “cannot (and should not) be included in aggregate measures of global wealth.

In other words, it is not enough to understand the price of nature; we must recognize that it is to a large extent priceless, invaluable.

As a society, we need to know not only the price but also the value of nature, and we need an economic system that recognizes and integrates this.

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Dr. Trevor Hancock is a retired professor and senior researcher in the School of Public Health and Social Policy at the University of Victoria.