We cannot leave nature’s values out of economic calculations – András Báldi on the Dasgupta report

Why is an economics professor and a report he prepared close to the heart of an ecologist?

Sir Partha Dasgupta studied at Cambridge and became a professor there. As well as being the recipient of many prestigious awards and one of the world’s most respected economists, his work is particularly notable for us because he is the author of the overview paper ‘The Economics of Biodiversity’. In other words, one of the most important documents on the economic importance of biodiversity was written not by biologists or ecologists, but by a renowned economist!

This is particularly important because it means that it is not conservationists from the “outside” who are trying to reason with economic policymakers, but an economic thinker who is saying that you cannot plan for the future of humanity without taking biodiversity into account.

Interestingly, Dasgupta started his career as a “classical” economist and only later turned to environmental and nature-related issues. During the lecture, he repeatedly stressed that he was originally interested in geography – perhaps that is why he has always been interested in nature.

It is hard to say how much of a reform economist he is – but it is clear that, as a Cambridge professor, he is not one of the “extreme innovators”. Rather, he is a thinker who, within the traditional framework of economics, has tried to bring nature and economics closer together – but has done so by incorporating new perspectives.

And finally, I must add that the report appeals not to the ecologist’s heart, but to his mind.

Sir Partha Dasgupta in a lecture at the Academy’s headquarters
Source: mta.hu/Szigeti Tamás

For what purpose was Sir Dasgupta asked to compile the report?

I asked Sir Dasgupta the same question in the panel discussion, and he said he did not know exactly what the background to the initiative was. What is certain is that the British Chancellor of the Exchequer asked him to prepare the report, and he was given a team of experts to do it. But why at that time, and for what political or professional motives, Dasgupta himself did not know – or at least did not want to elaborate.

The report was published in 2021 and, interestingly, was not directly linked to any specific event. However, the following year, in 2022, the Kunming-Montreal Global Biodiversity Conservation Framework Strategy was adopted, which represented a theoretical breakthrough in global nature conservation. Amongst other things, it states that $200 billion should be set aside each year to conserve the world’s biodiversity.

So the topic of money and biodiversity was “in the air”. The UN has also been working on the System of Environmental-Economic Accounting (SEEA) for years, although this has been more of a background professional effort with little international visibility.

Dasgupta’s report, however, has had a major impact. Congratulations can be seen on his website, including four Nobel laureates in economics praising his work, alongside David Attenborough and leading ecologists. While the report does not include new empirical research, it does provide a comprehensive overview of how biodiversity and ecosystem services can be integrated into economic thinking in the form of natural capital. Dasgupta works with three main categories of capital: human capital, productive capital and natural capital – and stresses that these should be treated equally in the interests of sustainable development.

If I can summarise very briefly, what is the lesson and the recommendation?

The main message of the report is that we can only maintain our well-being in the long term if, in addition to economic considerations, we also take into account the values of nature and ecosystem services.

This raises an exciting question: how should we approach valuing nature? Should we monetise everything or try to introduce new, non-monetary metrics? Economic practice often favours the former – “if we can express something in terms of money, it becomes manageable”. Following this logic, for example, attempts are made at converting the value of a forest or wetland into money based on its services.

Dasgupta argues that natural values need to be incorporated into our economic system, using the tools of economics. This approach is primarily monetary in nature: it attempts to express nature’s values in terms of money so that they can be included in decision-making processes. This way of thinking includes, for example, carbon taxes or other solutions that “put a price” on the impact on nature. Many people are averse to monetisation – and rightly so, as it can give the impression that everything is “for sale”. Hence the main theoretical criticism of the Dasgupta report: it does not revolutionise the system, but rather seeks to create stability within the existing economic framework by bringing in a new type of “capital” – natural capital. It is, however, a possible way to use other measures of well-being instead of or in addition to GDP. Such alternative indicators are being worked on, for example, by the Hungarian National Bank, or by Csaba Kőrösi and the Blue Planet Foundation, who are also working on new economic indicators of sustainable development.

Participants in the roundtable discussion held after Sir Partha Dasgupta’s presentation; second from right: András Báldi Source: mta.hu / Tamás Szigeti

But if I understand correctly, this system still does not reject the growth-oriented thinking of traditional economics?

Yes, this is an important difference: the Dasgupta report does not argue for a degrowth agenda, but seeks to make the current economic system sustainable. This is also its main criticism – that it does not fundamentally challenge the consumer society, but tries to offer solutions within it. So it is not a question of “stopping growth”, but of trying to sustain it on a different basis.

The report was published in 2021 – the question arises whether there have been any concrete practical steps taken since then, and whether the Dasgupta report has had a tangible impact. Did the professor talk about this, and did he provide any good examples of how the ideas put forward have been put into practice?

When I asked him whether the report had had any practical impact or whether he had been following developments since its release, he said that he was no longer concerned with it. He is a researcher and an educator, he produced the report, but is not tracking its further trajectory. What is certain, however, is that the report is closely aligned with the EU’s Green Deal. When Ursula von der Leyen presented the EU’s new strategies as Commission President, the biodiversity strategy was the first of them, and it was in line with the spirit of the Dasgupta report, namely the prioritisation of biodiversity. The main message was that biodiversity ensures not only our survival, but also our well-being. It is possible to live in minimalist conditions – think of areas of poverty – but our current lifestyle of comfort is unimaginable without the services provided by nature.

The Dasgupta report, like the EU Biodiversity Strategy, emphasises that we must place natural capital alongside human and productive capital in economic planning. If we do not do this, the system will sooner or later collapse. And this is where the political dimension comes in: if natural values cannot be directly monetised or treated as a store of value, then they can only be enforced through international agreements. However, if some actors – for example, think about the political tendencies of Trump – back out of these agreements or do not take them seriously, the whole system will be damaged. Protecting nature does not bring immediate business benefits, and that is why transnational, long-term cooperation is needed, otherwise some countries will “cheat” and gain short-term advantages while the common system is damaged.

Will Europe still be able to hold its own somewhat?

The question arises as to how much green thinking is still alive in the background. Earlier, we heard that Ursula von der Leyen did not want to completely let go of these green issues in her second term either. At the same time, it seems that the focus at a high level is increasingly shifting to armaments and the economy. It is a question of when the EU will get to the point of diverting funds away from research, for example, by reducing the budget for the Horizon Europe programme.

Are there good practices in Hungary?

In Hungary, the theoretical basis for the economic valuation of nature is strong – we have excellent experts in this field. This in itself is already a significant step forward. I could mention Eszter Kelemen, who was one of the lead researchers in the comprehensive study on biodiversity valuation by the UN Platform on Biodiversity and Ecosystem Services, IPBES.

But there is not only theoretical knowledge, there are also concrete case studies. For example, in the framework of the National Ecosystem Service Assessment and Mapping Programme, Zsuzsanna Szerényi and her colleagues from Corvinus University in Budapest studied the economic value of domestic forests. They found that the Pilis region generates an annual economic benefit of around HUF 4 billion in the field of tourism alone. A forest has many values beyond firewood!

Speaking of forests and firewood – there are many ways to do logging. In the case of clear-cutting, the ecosystem that previously functioned as a forest ceases to exist, even if it is still recorded as a forest. But it is not – there are no trees, no forest plants, no animals; it’s over. At the same time, the selection cutting method can be avoided when only a single tree or a small group of trees is felled. Then, say, a hillside still remains a forest, but with fewer trees. But with clear-cutting, a part of it remains forest, but the clear-cut section is lost.

And this is where a thought-provoking result from Péter Csépányi’s PhD dissertation comes in: according to his calculations, selection cutting is not only environmentally more sustainable, but also economically competitive, and in some cases even more advantageous than clear-cut forest management. This, and many other examples, show that it is possible to manage forests, fields and water resources in a way that does not damage natural values, does not deplete natural capital, and still preserves economic benefits. We just need to make use of this knowledge.