Partha Dasgupta and Tim Besley Talk Sustainability and Biodiversity

It sometimes feels to me like discussions of environmental issues and sustainability have a tendency to end up being phrased in terms of greenhouse gases and climate change.

That’s an important issue, but it’s not the only issue. Indeed, Partha Dasgupta argues that climate change is really a subset of the broader issue of how humans are interacting with natural resources. Tim Besley discusses these topics with Dasgupta in “Biodiversity: A Conversation with Sir Partha Dasgupta” (Annual Review of Economics, 2023, pp. 755-773, video of the interview is also available). Here are a few of the comments from Dasgupta that caught my eye:

Demand for natural resources is more than the planet can bear on a sustainable basis.

Global GDP has grown more than 15 times since 1950, world population has grown from some 2.5 billion to 8 billion, per-capita global GDP has increased nearly fivefold to some 18,000 dollars PPP (purchasing power parity) annually, life expectancy at birth has increased from 46 years to 72 years, and the proportion of people in extreme poverty has declined from 60% to 10%. All this would be unadulterated good news, but for the fact that we have achieved those successes by mining Nature to the point where there is an enormous global overreach into her goods and services. Crude estimates suggest that the ratio of our global demand for Nature’s goods and services and her ability to meet that demand on a sustainable basis is 1.7 (an almost certain underestimate), hence the refrain that we need 1.7 Earths to support the current global standard of living …

Because the global economy is in a fire-fighting situation, several of us jointly published a paper (Barrett et al. 2020), in which we identified the economic variables that define the global overreach on the biosphere. Our idea was to point to what national statisticians will need to measure if they are to document the demand we make of Nature. We argued that national statistical offices will have to be opportunistic. Instead of moving immediately to estimating inclusive wealth, they should create natural capital accounts to estimate their countries’ ecological footprint. The UK National Statistical Office is active in that direction, and Chile has recently established a Natural Capital Committee connected to the country’s Ministry of Finance. China, Costa Rica, and New Zealand are moving in that direction as well. No doubt other countries will follow.

Does the climate change literature assume, in effect, that it is the only sustainability problem?

[T]he established economics of climate change supposes that Nature provides us with only one maintenance and regulating service: carbon regulation. It permits analysts to imagine that with only modest investment in the transition to clean energy—say, 2% of global GDP until a net zero economy is attained—we can expect a future of indefinite GDP growth. The presumption is that GDP can grow indefinitely even as humanity dips into the biosphere for its goods and services, transforming what is taken into production and consumption, depositing the residue back into it as waste, but inflicting vanishingly small further pressure on Nature’s ability to decompose that waste. This is to imagine that no matter how large the human economy grows to become, further growth would make but vanishingly small further demands on Nature’s maintenance and regulating services. The vision is of a human economy asymptotically extricating itself from the biosphere while enjoying unlimited GDP growth. That is the sense in which the
established economics of climate change sees the human economy as external to the biosphere. If instead one acknowledges that the human economy is embedded in Nature, the escape route afforded by the idea of asymptotic release from the biosphere does not appear as an option. …

You are right, of course, in pointing to the simplicity of reducing the economics of climate change to ways of controlling a single scalar number, carbon concentration. We do not have that luxury in the economics of biodiversity, but we do have an utterly simple concept on which to rest the subject: productivity of capital. Once we regard ecosystems as capital assets, the economics of biodiversity reduces to a problem (a complex problem no doubt) of asset management. The economics of climate change then becomes a branch of the economics of biodiversity (or of Nature writ large). So, instead of continually finding ways to reduce carbon concentration, as is customary in the economics of climate change, we search for ways to better manage our portfolio of assets in the economics of biodiversity.

Many services of nature are in countries where markets for those services are missing.

It is not an accident that the bulk of the world’s biodiversity is in the tropics and that most of the world’s poorest people live there. Principal exports from those regions are primary products, whose extraction (from mines, plantations, wetlands, coastal waters, and forests) inflicts adverse externalities on local inhabitants. The externalities are not reflected in export prices, meaning that local ecosystems are overexploited; but that amounts to a transfer of wealth from the exporting country to the importing country, from a poor to a rich country. … . Propositions on the benefits of free trade suppose that all goods and services have perfectly competitive markets. The economics of biodiversity is perforce built for a world where markets are missing for many of Nature’s services.

The West has for the most part outsourced its needs for primary products. The United Kingdom, for example, has little biodiversity left, but that does not affect its GDP growth rate; the accompanying losses of biodiversity are felt elsewhere. … Ecological externalities within regions suggest that countries in sub-Saharan Africa should collectively impose export taxes on primary products. That would ease pressure on their local ecosystems such as rainforests and fisheries and would also be a source of income for them.