1. Background

The Review (P. Dasgupta, Reference Dasgupta2021) has been shaped by the finding of Earth scientists, ecologists and social scientists, that over the past several decades the global demand for Nature’s goods and services has exceeded the biosphere’s ability to meet it on a sustainable basis and that the gap between demand and sustainable supply has been increasing alarmingly. The Review is thus global in its reach in two senses: First, it is not restricted to a particular group of countries or cultures; it instead constructs an economic grammar that can be adopted anywhere. Secondly, it offers a vocabulary that speaks to institutions everywhere (government, charities, households, firms, banks and financial companies). Anyone can adopt the common grammar and choose the vocabulary that meets their motivation and reach.

The common grammar is built on a recognition that the biosphere is a tangled web of self-regenerative entities called ecosystems. Processes governing ecosystems are non-linear and differ among one another in both speed and spread. The former characteristic tells us that ecosystems harbour thresholds, crossing which would move them into regimes to which our economies are not necessarily adapted (e.g. decimation of tropical rainforests). The latter pair of characteristics are the reason the decision to designate a patch of the landscape as an ecosystem depends on the context (a hedgehog’s gut is as much an ecosystem as the woodland in which the hedgehog resides). Biodiversity, by which is meant the diversity of life, is a property of ecosystems. There is now a fair understanding of the sense in which it contributes positively to their productivity (Review, Ch. 2). Which is why the economics of biodiversity is the economics of the biosphere.Footnote ¹

Individual actors in ecosystems include organisms that, among other activities, pollinate, decompose, filter, transport, redistribute, scavenge and fix gases. Nearly all organisms that help to produce those services are hidden from view (a gram of soil may contain as many as 10 billion bacterial cells), which is why they are almost always missing from popular discourses on the environment. But their activities enable ecosystems to maintain a genetic library, preserve and regenerate soil, fix nitrogen and carbon, recycle nutrients, control floods, mitigate droughts, filter pollutants, assimilate waste, pollinate crops, operate the hydrological cycle and maintain the gaseous composition of the atmosphere.

These are what ecologists call ‘regulating and maintenance services.’Footnote ² The processes giving rise to them are in large measure complementary to one another: degrading one severely can be expected to threaten the others (Review, Ch. 3). Nutrient recycling, for example, does not a substitute for soil regeneration.

Regulating and maintenance services provide the basis on which we draw upon Nature’s ‘provisioning goods’, such as food, timber, medicines, dyes, fibres and fresh water. The Review shows that there is a tension between humanity’s needs for these two classes of goods and services. Because private companies are in large measure unable to capture the returns from investment in regulating and maintenance services (they are in all too many cases ‘non-excludable’, that is, the benefits cannot be confined to select people), they invest mostly in those forms of natural capital that are direct inputs for provisioning goods (farms, plantations, housing, manufacture and transportation), whose products are excludable. That has eroded Nature’s regulating and maintenance services. Non-excludability is a reason the economics of biodiversity pays particular attention to ‘externalities’, which are the unaccounted consequences for others of our actions. (For brevity I am laying aside here ‘cultural services’—places of beauty and tranquillity; sacred sites and monuments—which also tend to give way to our demands for provisioning goods.)

Since pre-historic times, increasing the production of provisioning goods has come at the cost of biodiversity. Agriculture has thrived on monocultures. But until relatively recently, the scale of production was small relative to the reach of the biosphere. Reductions in biodiversity was confined to local areas. The Review documents that such is no longer the case (see below).

Because the biosphere is a tangled web of ecosystems, the Review, unlike the economics of global climate change, does not offer sharp formulae for policy, such as a global social price for biomass. It does not even prescribe ‘biomass offsetting markets.’ The reason it does not is that a unit of biomass in a particular location in one ecosystem (e.g. a tropical rainforest) has widely different roles to play from a unit of biomass in another (e.g. in a grassland). Decapitating a square mile of forest in the Amazon cannot be substituted for by planting an equal amount of biomass in an agricultural field in the UK. The differences arise because the (non-linear) processes governing ecosystems are entangled with one another. Their entanglement is the reason the constituents of ecosystems are interconnected, and why fragmenting an ecosystem results not only in the loss of the patch that has been decimated, but also weakens the productivity of its neighbourhood (Review, Ch. 3).

In short, ecosystems harbour what may be called ‘natural externalities’. If biomass offsetting markets were introduced, brokers could profitably purchase units of biomass from ecologically productive places and offset them in ecologically unproductive places, making a profit. Further institutional mechanisms would then be needed to regulate such transactions. The Review speaks of ecosystems as the source of Nature’s supply of goods and services; it does not build the economics of biodiversity on units of biomass.

That the Review found it necessary to construct a common grammar for the economics of biodiversity is self-explanatory. Fires cannot be put out if fire fighters do not coordinate their tasks. If humanity is to face up to the emergency we have created by the enormous overshoot in the demands we have been making on the biosphere relative to its ability to meet them in a sustainable manner (see below), there needs to be coordination among agencies. The Review therefore urges not only national governments and central banks, but also international organisations such as the World Bank, the International Monetary Fund and the Food and Agriculture Organization to include estimates of the ecological consequences of their policies before advocating them. By extension, the Review concludes that ecologists should be employed in not only Environmental Ministries of government, but also Ministries of Finance and Central Banks.

2. Evidence is always model dependent

That government policies should be informed by evidence is a truism. What counts as evidence, though, is shaped by the model on whose backs the evidence has been drawn. That means evidence is model dependent. Policy W may look good because it is backed by evidence, but if the underlying model does not include natural capital—as is the case in mainstream models of growth and development and in government income-expenditure models—it may be that W is in fact a socially bad policy. Likewise, it may be that policy X is not supported by the evidence that has been elucidated, but if the underlying model of economic development does not include natural capital, it may be that X is in fact a socially desirable policy.

Nor do mainstream models of economic development pay attention to ‘reproductive externalities’. The Review (Ch. 7–9) identifies two classes of such externalities: (i) those that are transmitted through the physical world and (ii) those that travel across the social world.

A substantial literature has now unravelled the social embeddedness of our needs and wants. That is the source of the externalities in class (ii). Mainstream models of economic development and the income–expenditure models that governments use assume instead that people are egoists. The Review shows that our social embeddedness implies that policies which lead us to alter our choices synchronically, say, by mutual emulation—over the food we eat, the clothes we wear, the appliances we find useful and the size of families we hope to create—may enhance our own well-being even in our own assessment (Review, Ch. 9). Collectively reducing our demands for the biosphere’s goods and services may be far less costly at the personal level than mainstream models of growth and development ask us to suppose.Footnote ³

Policy menus that are put forward without an assessment of the future impact on the biosphere of additional births [type (i) externalities] are at odds with the Review’s finding that family planning and reproductive health are central to the economics of biodiversity (Review, Ch. 7; see below). Policy Y may look good because it is backed by evidence, but if the underlying model does not include reproductive externalities, it may be that Y is in fact a socially bad policy. Likewise, it may be that policy Z is not supported by the evidence that has been collected, but if the underlying model of economic development does not include reproductive externalities, it may be that Z is in fact a socially desirable policy.

That we are embedded in a finite biosphere is largely missing in both academic and government models of economic growth and development. The Review argues that the lacuna has resulted in both type-1 and type-2 errors in policy making.

3. The impact inequality

Changes in ‘land’-use accompanying the enormous expansion in the global demand for provisioning services over the past 70 years has diminished Nature’s ability to supply regulating and maintenance services. The Review reports findings in the Earth sciences, ecology and the social sciences, that the global demand for the biosphere’s goods and services today far exceeds its ability to meet it on a sustainable basis (Review, Ch. 4).

The Review calls the gap between the demand humanity makes of the biosphere and the ability of the biosphere to meet that demand on a sustainable basis, the Impact Inequality. Footnote ⁴ It has become customary today to call our collective demand the global ‘ecological footprint’. Human activities give rise to that footprint. The Review decomposes the global footprint by taking global gross domestic product (GDP) to be a measure of human activities. So then let N be global population and y per capita global GDP. Global GDP is thus Ny. But GDP is the market value of the final goods and services produced in a period (a year). Let α be a numerical measure of the efficiency with which the biosphere’s supply of goods and services are transformed into marketable products. Prevailing technologies and institutions shape α. It follows that Ny/α is the aggregate demand for the biosphere’s flow of goods and services.Footnote ⁵

To illustrate the biosphere’s supply of goods and services, assume for simplicity that they can be aggregated—say, as the weighted sum of the production of Nature’s goods and services—into a numerical measure, labelled by G. (If the aggregation reads far-fetched, the supply of each service should be read separately.) The biosphere is the stock of our global natural capital. Let S denote that stock, measured in terms of the biosphere’s characteristics such as biodiversity. (We should again imagine that S is a weighted sum of stocks of ecosystems. The weights would be ‘accounting prices’.) G is a function of S, the bigger the stock, the larger is G, at least in the biosphere that prevails today. We may then write G = G(S). Because the biosphere is finite, G(S) is bounded above. Armed with this notation, the Impact Inequality can be expressed asFootnote ⁶:

(1) $$ Ny/\unicode{x03B1} >G(S) $$

The Impact Inequality contains five variables: N, y, α, G, and S. Each can be influenced by policy. Of them, N and S are stocks, y and G are flows and α is a conversion factor. If the Impact Inequality is to be closed, we must reduce Ny/α or find ways to increase G(S), or both. α reflects the technologies that are in use and the institutions that are in play. In view of the prevailing distortions in the world economy, we can surely improve both the technologies we deploy and the institutions we have fashioned. We can do that by eliminating subsidies and charging social rents for the use of the global commons, such as the open seas. But no amount of improvement in technology and institutions can raise α to infinity. To imagine otherwise would be akin to imagining that it would be possible, through technological advances, to convert heat into work at 100 per cent efficiency. The Review (Ch. 4–4*) shows that to assume that α is unbounded is to imagine that humanity can asymptotically free ourselves of Nature. A corollary of the fact that α is bounded is that perpetual growth in global GDP is an impossibility.Footnote ⁷

By one (inevitably very crude) estimate, the ratio of demand to supply, (Ny/α)/G(S), is today approximately 1.6, which provides the image that we need 1.6 Earths to meet our current demand (Wackernagel and Beyers, Reference Wackernagel and Beyers2019). The demand overshoot has led to a staggering rise in the rate of biodiversity loss, among many other losses. Because biodiversity writ-large is a global public good, continual biodiversity loss threatens us all.Footnote ⁸ As with fighting fires, humanity should be responding to the urgency created by the overshoot by designing institutions that speak to it. If ‘sustainable development’ has any meaning, it should as a minimum be read as a pattern of development in which the Impact Inequality is converted into an equality. Which is why it is a puzzle that designers of the United Nation (UN)’s 17 Sustainable Development Goals—to be reached by year 2030—did not ask whether the goals, taken together, are sustainable. In the Appendix I borrow from the Review (Ch. 4, Box 4.3) to show that meeting them on a sustainable basis would require transformative changes in global institutions.

In the remainder of this Note, I highlight ways in which the variables on both sides of the Impact Inequality can be affected by public policy, and more generally by the design of institutions.

4. Causality

Mono-causal explanations are to be avoided in the social and ecological sciences. That is illustrated by the fact that N, y and α are not independent of one another. Policies that affect y may cause households to alter their reproductive goals, implying that future values of N would be affected. As already noted, policies that affect technology and institutions, summarised in α, would be expected to influence y, N and G, with varied gestation lags. Per capita income y can be affected even in the short run, as can S (it does not take much time today to decapitate a forest), and the trajectory of N has been known to alter sharply under rapidly changing fertility behaviour and improved hygiene and medical facilities. Investment in family planning and reproductive health has proved to be remarkably effective in ushering fertility transitions (Bangladesh in recent years; Taiwan and South Korea in the post War decades).

It can take time to increase S (wetlands cannot be restored overnight). Even so, it can be socially profitable to invest in S. That is because in the face of a growing gap in the Impact Inequality, the social worth of S relative to produced capital is increasing over time. If society enjoys high rates of ‘capital gains’ in holding S, it can even be that the effective discount rate to be applied to future benefits from investment in Nature is negative, amplifying the future benefits of conservation and restoration of ecosystems (see below).

One route to reducing the Impact Inequality is to find ways to increase α. And one way to do that is to remove natural capital subsidies. The Review estimates that active global subsidies on the use of natural capital amount today to some 4–6 trillion U.S. dollars a year, or approximately 3–5 per cent of global GDP. Huge as the figure is, it does not include the passive subsidies humanity pays itself to exploit global commons such as the high seas (as a source of fish and a means of transportation) and the atmosphere (as a sink for carbon emissions) by allowing them to remain ‘open access’. One of the Review’s recommendations is the creation of a transnational institution for monitoring, managing, and charging for the use of Nature’s global public goods that are currently open to all at no cost. The revenue thus generated could be used to pay for the protection of such global public goods as peatlands and tropical rainforests, which fall within national jurisdiction. The latter would be an extension of ‘payment for ecosystem services’, a practice that is increasingly being put to work for the preservation and restoration of local ecosystems (Review, Ch. 7). Following the end of the Second World War, nations displayed imagination, courage and magnanimity by designing the Marshall Plan and creating transnational institutions such as the World Bank, IMF, and World Health Organisation to supply global public goods. We do not yet have a transnational institution for the biosphere’s global public goods.

The Review (Ch. 4* and 13*) presents a dynamic socio-ecological model in which all five of the factors in the Impact Inequality are endogenous variables: each influences the others over time and is in turn influenced by the others. The model shows that mutual causation is the rule in socio-ecological systems. It is thus as wrong to insist that high consumption (read y) in industrial countries is the underlying cause of biodiversity loss as it is to claim that large population (N) is the underlying cause.Footnote ⁹

A reduced form of that model has been studied in Dasgupta, Dasgupta and Barrett (Reference Dasgupta, Dasgupta and Barrett2021) to demonstrate the mutual influence of N and y on ecological footprint (Ny/α). Under production structures commonly assumed by economists to display economic possibilities, the authors show that y responds to changes in N in a negative fashion. Contrary to what a superficial reading of the product Ny/α would suggest, N is not inverse of y, but it is a monotonically declining function of y. The moral is banal: potentially, there is a continuum of sustainable development paths. Of the greatest urgency is in closing the Impact Inequality.

In public discourses on the environment, the practice is all too often to avoid mentioning policies that would affect future values of N; the focus is instead on y, α, and the biosphere’s ability to produce goods and services as expressed in G. The Review argues that there are no reasons for awarding N a different normative status from the others (Review, Ch. 7 and 9).

5. Accounting prices, national balance sheets and inclusive wealth

The Review points to various directions in which our institutions and practices need to change if private and collective incentives are to be brought into alignment with the common good. Formally, the problem faced by societies is to find ways to bring the prices individual agents face for goods and services in line with reasoned assessments of their social worth. The formal term for the social worth of goods and services is ‘accounting prices’. The Review explores the many ways by which the prices individuals and groups face can be brought into alignment with accounting prices. It explains the logic underlying institutions that involve payment for ecosystem services, and those that administer taxes on the use of ecosystems and the services they offer (even restrictions over their use, such as protected zones).Footnote ¹⁰

Many have argued that awarding legal rights to ecosystems may be a way to require human institutions to protect vulnerable parts of the biosphere. The problem would remain, however, of which body is responsible for representing their ‘claims’. Perhaps none is needed, for it may be that civil society would serve as an adequate prompter. Pressure groups—more formally, non-governmental organisations—in democratic societies have been known to precipitate government action on environmental matters.

The Review (Ch. 7–9) catalogues the reasons market prices of natural capital are below, often far below, their accounting prices. The wedge between the two sets of prices is traced to environmental externalities (as noted above, some natural assets such as the open oceans are even open access resources) and social externalities, accentuated by public subsidies on natural capital. That same wedge is the reason that even what the best each of us are achieve with our portfolios has resulted in a massive collective failure to manage the global portfolio of all our assets. The analogy of each person in a crowd trying to keep balance on a hanging bridge and bringing it crashing down speaks to what will happen if the biosphere continues to be diminished.

In contrast to market prices, accounting prices have a subjective element to them. Which is why people differ in their valuation of natural capital. The forest patch that is sacred to one community may not be sacred to another. For people in the former community, use of the patch would be non-negotiable (Review, Ch. 12). But even the ‘use-value’ of natural capital among the latter community is often contested among experts. That is because the models they use to estimate accounting prices can differ.Footnote ¹¹

Possible disagreements over accounting prices should, however, not deter us from rejecting market prices as measures of the social worth of natural capital. It is better to compromise on a price for an ecosystem, so long as the compromise is on a positive value, than allow the price to be set at zero by default. The Review takes it that differences among citizens over accounting prices should be mediated by the political process, akin to the way differences among citizens over the allocation of private and public goods are mediated by the political process. The recent proposal by the UN Statistical Commission to establish a framework for Ecosystem Accounting is a move towards creating a common international standard for countries to coordinate as they prepare national balance sheets (Review, Ch. 13). National statistical offices could be charged with the responsibility of providing a first round of estimates of accounting prices with which to value assets, to be revised regularly to reflect an increased understanding of their implications for investment and consumption decisions (Review, Ch. 10–13). The Review shows that by ‘sustainable development’ we should mean a path of development along which ‘inclusive wealth’—that is, the aggregate accounting value of the stocks of produced, human and natural capital—does not decline over time. Private companies construct their balance sheets, they do not rely entirely on income–expenditure accounts. National statistical offices (e.g. the Office of National Statistics in the UK) should be required to construct national balance sheets as additions to national income and expenditure accounts. For natural assets to which accounting prices cannot be ascribed, data on their stocks should be provided. The goal of government would be to find the mix of consumption and investment that maximises inclusive wealth at each point in time.

Balance sheets need to be tempered by the presence of uncertainty. For example, the location of ecosystem thresholds is always uncertain. Moreover, information on technology and the state of ecosystems is not commonly held: a regulator would typically know less about local ecosystems than these who reside in them. Taken together, these features of the human economy tell us that in many situations there is a strong economic rationale for quantity restrictions over pricing mechanisms. The establishment of protected zones is an expression of this. Moreover, insistence by consumers that firms disclose conditions along their entire supply chain would ultimately reduce the risks those firms face in their profits. Disclosure serves as a substitute for incompleteness of risk markets.Footnote ¹²

The Review (Ch. 6–9) reports on the varied experiences communities have had with those institutions and practices. It is noteworthy that in traditional societies local ecosystems (woodlands, village ponds and coastal fisheries) have typically been held as common property to the community. A rich anthropological literature describes the widely differing social norms of behaviour that communities instituted to protect their local ecosystems. Pricing mechanisms were not unknown, but over the use of assets with multiple products (shrubs, trees and water bodies), norms were imposed on the quantities that could be extracted.

6. Conservation and restoration as investment

Investment in Nature conservation and restoration is a way to increase S, and thereby G. Footnote ¹³ As the processes governing ecosystems are non-linear, reversing the damage they have been inflicted on them is subject to hysteresis. That is why it is typically less costly to conserve Nature than to restore it once it is damaged or degraded.

The term ‘investment’ does not carry the same connotation to everyone. To the private investor it would be to hold the right portfolio, and the right portfolio would be one that maximises his personal wealth. For identifying the best portfolio, he will be guided by the prevailing stock market prices and his expectations of their movements over time. Because both price expectations and price realizations change, he periodically shifts assets in his portfolio, buying some while selling others.

In contrast, investment in a capital asset by a public decision maker (the Review calls her the Citizen Investor) is the routing of public expenditure towards increasing the asset’s stock (in quantity or quality, or both). The investment rule she should follow is to maximise the economy’s inclusive wealth. That amounts to appraising projects according to their net present (accounting) value, or NPV. And that is another way of saying that investment in an asset is the accounting value of the change in its stock (in quantity or quality, or both) over a unit of time. Note though, we are talking of net investment, that is, investment net of depreciation.

The two senses of investment are of course related. Government policies, including investment policies, influence the stock market prices private investors face and expect to face. It is no great simplification to think of the private investor as a passive price taker, in contrast to the government investor, who chooses her investment portfolio with a view to shaping the economy’s future. But both choose their investment portfolios with a view to maximising ‘wealth’. Where they differ is in the way they compute wealth.

It is a commonplace that investment is deferred consumption. But the matter is subtler. Providing additional food to undernourished people via, say, food guarantee schemes not only increase their current well-being, it enables them also to be more productive in the future and to live longer. Because their human capital increases, the additional food intake should count also as investment. Note though that food intake by the well-nourished does not alter their nutritional status, which means the intake prevents ‘depreciation’. Which is why it can be counted as consumption.

Common-sense notions of investment carry with them a sense of robust activism. When a government invests in infrastructure, the picture drawn is of bulldozers levelling the ground and tarmac being laid by people in hard hats. But the notion of assets in the Review extends beyond produced capital to include human capital and natural capital. That training people to be teachers is investing in human capital is simple enough. To leave a forest unmolested may not sound much like investment, but it is an investment: it enables the forest to grow. To allow a fishery to re-stock is to invest in the fishery; and so on.

Investment in natural capital often involves simply waiting (Review, Ch. 10 and 13). The problem is, the waiting can be long, as in the case of slow growing forests. More generally, the waiting can be long for degraded ecosystems to recover. If the rate at which the government uses to discount future public incomes exceeds ecosystem productivity, public decision makers would steer public expenditure away from conservation and restoration projects. They would say ecological investments have low economic returns. This is a common response of economists when they are asked to advocate the shifting of national investments towards Nature conservation and restoration projects.

There are two faults in the reasoning economists deploy, of which one is subsumed in the other. First, public decision makers ought to value ecosystems in terms of their accounting prices, not market prices. Secondly, the rate of return on an asset is the algebraic sum of its marginal productivity (or yield) and the capital gains it enjoys on income, which is usually taken to be the numeraire.Footnote ¹⁴ If the economy were on a balanced economic trajectory, spot (accounting) prices would be constant over time, which means there would be no capital gains or losses on assets. The truth though is that our economies are not on ‘balanced paths,’ the Impact Inequality assures us of that.

Nevertheless, investment projects are routinely evaluated on the assumption that the flow of benefits and costs remains constant over their lifetime. This is bad practice because the (spot) accounting price of natural capital relative to produced capital should be expected to be rising over time. It should be expected to be rising because produced capital is being accumulated in the contemporary world even as natural capital is decumulated. The growing gap in the Impact Inequality reflects that.

This has far reaching implications. Suppose, for example, the Citizen Investor believes that produced capital will continue to be accumulated in the global economy even while natural capital continues to be decumulated. In that case, the accounting price of natural capital relative to produced capital will be expected to rise over time. And that would make Nature restoration and conservation projects look good even to the hard-boiled economist. Including the capital gains ecosystems will enjoy makes a huge difference to project evaluation. We confirm that with a pair of examples.

Imagine that, as is common practice, the public decision maker (the Citizen Investor) chooses produced capital as numeraire. Imagine also that the discount rate she uses to appraise projects is 3 per cent a year. Thus, 3 per cent a year is the rate at which she discounts marginal changes in consumption as expressed in units of produced capital. That is her ‘social discount rate’. Suppose now that the immediate prospects of reducing the Impact Inequality is negligible even if investment is steered vigorously towards Nature conservation and restoration projects.Footnote ¹⁵ The Citizen Investor therefore expects the accounting price of natural capital relative to produced capital to increase over the near future. Suppose she estimates the rate of increase to be 1 per cent a year. Consider now a Nature restoration project that is expected to increase the flow of the biosphere’s goods and services by B in social benefits, at a social cost in terms of foregone consumption of E every year. Viewed from the present, the project’s net social benefit in year t would read as [B(1.01) ^t – E]/(1.03) ^t. The expression could be interpreted as saying that as against a discount rate of 3 per cent a year for the project’s running costs, the project’s gross benefits B should be discounted at the lower rate of 2 per cent.

To make the point more strikingly, suppose the economic trajectory the world is projected to follow over the next few years reflects business-as-usual. In that case, because of the biosphere’s non-linearities, the Impact Inequality would continue to increase at an even higher rate than it has in recent years. So then suppose the Citizen Investor expects the accounting price of natural capital relative to produced capital to increase at a rate of 5 per cent a year. She now considers a Nature restoration project that is expected to increase the flow of the biosphere’s goods and services by B in social benefits, at a social cost in terms of foregone consumption of E every year. Viewed from the present, the project’s net social benefit in year t would read as [B(1.05) ^t – E]/(1.03) ^t. The expression could be interpreted as saying that as against a discount rate of 3 per cent a year for the project’s running costs, the project’s gross benefits B should be discounted at the rate of minus 2 per cent. Practitioners are accustomed to using positive rates to discount future benefits and costs. The Review shows that it can be that the benefits of conservation and restoration projects should be discounted at negative rates. As negative rates of discount amplify future benefits, even slow growing forests would be found to be socially beneficial and so pass the cost–benefit test.

This is not to say that conservation and restoration projects should be discounted at a lower rate than investment in produced capital.Footnote ¹⁶ (Our example only pointed to the desirability of using a lower discount rate for the benefits B, not for the costs E.) For suppose there is a competing project that would produce a consumer good but would incur a recurrent cost involving the same set of inputs as the project we have just studied. If the Citizen Investor was to deploy two systems of accounts, each using its own numeraire, there would be confusion. The recurring costs would have to be valued differently in the two projects. That could of course be done, but in practice it would lead to errors.

The figures I have used to illustrate movements of natural capital accounting prices are not fanciful. The Review (Ch. 2, Box 2.3) estimates that globally the yield on natural capital in the form of ‘primary producers’ is as a minimum 19 per cent a year.Footnote ¹⁷ In contrast, the long-run global yield (rent or dividend) on housing and equities has averaged around 5 per cent a year. If we take that figure to be a proxy for the yield on produced capital and assume that the global economy has been managing its portfolio of assets in an efficient manner, then the capital gains on produced capital relative to natural capital would as a minimum equal the difference between the two figures: 14 per cent a year. In short, we would expect the accounting price of primary producers relative to produced capital to be declining by 14 per cent a year.

Patently the latter has not been happening in recent decades, nor is it happening today. Destruction of the world’s rainforests and degradation of the peatlands, when taken together with global accumulation of produced capital (approximately 3 per cent a year), points to rainforests above ground and the soils underground—they are important seats of primary producers—becoming scarcer relative to produced capital, not more abundant. Simple and crude as this calculation is, it demonstrates how far off we are from an efficient allocation of global assets. It points especially to the enormous imbalance we have created between produced and human capital on the one hand, and natural capital on the other.

7. Poverty and the local resource base

The Impact Inequality does not speak only to the global scenario, it is relevant for local scenarios as well. The idea that trade would permit all regions to live beyond their sustainable ‘footprint’ suffers from an adding-up problem, for if all regions were to live beyond their ecological means the Impact Inequality would be enlarged. Deep poverty in Sub-Saharan Africa (SSA), South America and South Asia is not unrelated to the erosion of the local natural resource base. It is helpful to remind us that rural communities in the world’s poorest regions do very little trade with people in distant regions. They may not be autarkic, but they rely for the most part on raw materials (timber, fibres, mud, dung, plants and animals for food) that are obtained from the local landscape. The economic historian Tony Wrigley has called them ‘organic economies’ (Wrigley, Reference Wrigley2004).

Mainstream models of poverty alleviation and economic development ignore ex cathedra the links between households’ reproductive goals, their incomes and their local landscape. Although the Impact Inequality points to their links, it is formal models of rural economies that display the links sharply and trace them to underlying features of the overall economy (Dasgupta, Reference Dasgupta1993). The Review draws on a sizeable literature in paleo-history, geography and anthropology that traces the links between population, consumption and the local ecology. It uncovers processes by which people in organic economies can get trapped in a deteriorating environment, and attempt to migrate when the situation becomes intolerable. Studying rural poverty in the world’s poorest countries without recognising the centrality of the local natural capital base of the poor is self-defeating.

The purpose of foreign aid is in large measure poverty alleviation, but in practice the direct target is all too often provisioning services (y and the provisioning component of G). That affects the regulating and maintenance components of G adversely. But y is affected by policies that target the other variables in the Impact Inequality. So, there are indirect means of raising y. The emphasis the Review places on the need for investment in community-based family planning and reproductive health in SSA was not casual. It is certainly true that the continent cannot remotely be held responsible for the global overshoot in humanity’s demand for the biosphere’s goods and services: the share of SSA’s GDP in global GDP is only a bit over 10 per cent. But the Review shows that unlike the rich West, who can depend on trade to obtain a good proportion of its provisional goods from other parts of the world, the rural poor in SSA are unable to do that: the fraction of their income that is based on trade is negligible. If the demands they make on their local environment exceed their local environment’s ability to supply daily needs, they face destitution. That is the Impact Inequality as confined to the local community. It explains why the high rate of population growth in SSA today should be of concern to Africa’s citizens.Footnote ¹⁸

8. Family planning and reproductive health

In one set of population projections (UNPD, 2000), population in the continent can be expected to rise to 3.8 billion in year 2100 from the current size of approximately 1.1 billion, which would be an increase of 2.7 billion—a good deal more than twice the present population size in a matter of 80 years. The Review urges development practitioners to recognise that it is in the interest of people in SSA that their governments give assistance to help bring about a fast fertility transition through investment in community-based family planning and reproductive health programmes. A transition to replacement fertility rate in, say, 20 years’ time rather than in 40 years’ time would mean a massive lowering of their projected population size in 2070 and would reduce the pressure population size under current projections would inflict on the local environmental resource base in the continent.Footnote ¹⁹

Currently the EU’s Official Development Assistance towards ‘family planning and population services’ in SSA is less than 1 per cent. The World Bank also attaches low priority to it. Moreover, recipient countries relegate family planning to minor government departments. The introduction of family-planning related media messages is credited in part for the rise in contraceptive demand and use in countries where governments have taken family planning seriously. Between 2000 and 2019, total demand for family planning (which is the sum of contraceptive use and unmet need) among women of reproductive age rose from 48 to 61 per cent in Malawi, and from 27 to 44 per cent in Rwanda (UNPD, 2020). In contrast, little or no change in demand was observed in those countries, such as Nigeria and the Democratic Republic of Congo, where family planning programmes remain weak.

Over the years, female education has been seen by development experts as the surest route to women’s empowerment, including, for example, choice over birth spacing. All governments recognise the importance of women’s education for empowering women, and yet even today nearly 30 per cent of women between 15 and 24 years of age in low-income countries are illiterate (World Bank, 2019). Family planning programmes in contrast are affordable by governments even in low-income countries (see below), they offer an easy and effective route to governments for empowering women—they are a low-hanging fruit—and yet they remain low on the development agenda. It is a paradox.Footnote ²⁰

By providing access to subsidised contraceptive commodities and services, family planning programmes were successful in accelerating fertility declines in East Asia and Latin America in the 1960s and 1980s (the experiences of Taiwan and South Korea are especially striking). Cleland et al. (Reference Cleland, Bernstein, Ezeh, Faundes, Glasier and Innis2006) estimated that promotion of family planning in countries with high birth rates had the potential at that time to avert more than 30 per cent of all maternal deaths and nearly 10 per cent of childhood deaths. The rationale for vigorously expanding the content and reach of such programmes today also lies in the more than 215 million women in developing, mainly low-income countries who have reported they want to prevent pregnancy but are not using modern contraception. Among them over 150 million use no method of contraception and nearly 66 million rely on traditional methods (UNPD, 2020). The Guttmacher Institute (2020) estimated that there are more than 110 million pregnancies in low- and middle-income countries annually that are unintended. The institute also estimated that if all unmet need for modern contraception were satisfied in developing countries, there would be a near 70 per cent decline in unintended pregnancies, amounting to around 35 million a year. Meeting unmet need for contraception would reduce pregnancy related deaths by 70,000. Many unintended pregnancies end in abortion, a significant proportion of which are performed under unsafe conditions.

In addition to reducing unintended pregnancies, contraceptive-use among women enhances their own health and that of their children by spacing births and by providing greater opportunity for education. The Guttmacher Institute (2020) estimated that more than 2.5 million babies in low- and middle-income countries die each year in the first month of life. Access to modern family planning is a means that women have for enjoying greater control over their lives and improving the chance of having healthy babies. If the benefits of modern family planning are high, the costs are low. By one estimate (Guttmacher Institute, 2017), expanding and improving services to meet women’s needs for modern contraception in developing countries would cost under 2 U.S. dollars a year per person.

None of this should involve command and control. Instead, it would involve enlarging investment in information, community wide discussions and the means for people to plan their own family size in an informed way. The Review builds the need for community-based family planning on the fact that fertility behaviour is influenced not only by private desires and wants, but also shaped by societal mores: Preferences over family size are socially embedded. Reproductive behaviour is ‘conformist’ when the family size a household desires stays close to the average family size in the community or, more broadly, in the world households are in contact with (Dasgupta and Dasgupta, Reference Dasgupta and Dasgupta2017). This feature of our preferences gives stimulus to fertility transitions when households have access to modern family planning services. The neglect of family planning and reproductive health in official aid from the European Union and in governments in SSA is indefensible.

Unfortunately, family planning and reproductive health have received scant attention among development economists even in the way their programmes are designed. Dasgupta and Dasgupta (Reference Dasgupta and Dasgupta2017) noted that ‘desired family size’ is typically elicited from answers to the following question: ‘If you could go back to the time when you did not have any children and could choose exactly the number of children to have in your whole life, how many would that be?’ The way the question is framed denies the social embeddedness of desired family size. Women are not asked what their desire would have been if the prevailing fertility practices of others had been different. In fact, there is no mention of the prevailing fertility rate. Since respondents are not invited to disclose their conditional desires, they very likely disclose their desired family size on the assumption that fertility will remain at its prevailing rate. A direct way to discover socially embedded preferences would be to reconstruct the questionnaires by asking a series of conditional questions, which we collapse here for convenience into one: ‘If you could go back to the time when you did not have any children and could choose exactly the number of children to have in your whole life, how many would that be, assuming everyone else in your community had n children over their whole life?’ The number n could run from 0 to, say, 10.

9. Externalities and rights

Socially embedded preferences harbour behavioural externalities that move through the social world. But additional births also give rise to externalities that are transmitted through the physical world. Households may be deemed to have a right to their own fertility decisions, but if additional births accentuate the Impact Inequality, future people would be adversely affected. That gives rise to tensions between externalities and rights (Dasgupta and Dasgupta, Reference Dasgupta and Dasgupta2017).

Although the failure to protect property rights has traditionally been at the heart of the theory of externalities, the language of rights sits awkwardly there. We are speaking of fundamental rights, not rights that are assigned to people or organisations because they are instrumental in advancing the well-being of the people involved. But even fundamental rights need to be justified. As elsewhere in the economics of biodiversity, trade-offs should be weighed if actions are to be judged. Rights short-circuit those complexities.Footnote ²¹

Rights are peremptory, which is why they are problematic. One way to overcome the problem is to place them in a hierarchy. That was the conclusion John Rawls famously reached when framing his principles of justice (Rawls, Reference Rawls1972). But if note is taken of adverse externalities accompanying a person’s actions, it is by no means clear whose rights are to trump. That is why the language of rights sits awkwardly in the economics of the biosphere. In recognisably exceptional circumstances governments resolve the dilemma by creating a hierarchy of rights. In the context of the COVID-19 pandemic, many governments have insisted that the right not to be infected by others and risk death trumps the individual right to do as we please when it comes to wearing face masks and keeping safe distance from our friends. Most people would seem to have accepted that allocation of rights.

A far more sensitive sphere where rights would seem to clash is reproduction. The 1994 International Conference on Population and Development reaffirmed the language of rights in the sphere of family planning and reproductive health, prompted by the infringement of women’s reproductive rights in China and, for a brief period, in India. The Conference’s conclusions read:

‘Reproductive rights … rest on the recognition of the basic right of all couples and individuals to decide freely and responsibly the number, spacing, and timing of their children, and to have information and means to do so, and the right to attain the highest standards of sexual and reproductive health’, (UNFPA, 1995).

The qualifier ‘responsibly’ could be read as requiring couples to include in their deliberations the adverse environmental externalities their reproductive decisions may give rise to, but that probably would be a stretched reading. Certainly, writings affirming the UN declaration have interpreted the passage and its intent more narrowly. For example, the fundamental right of individuals ‘to decide freely and for themselves whether, when, and how many children to have’ is central to the vision and goals of Family Planning 2020. It is also pivotal in the reproductive health indicators of the UN’s Sustainable Development Goals (SDGs). In this vision, information and other services pertaining to family planning and reproductive health are rights, as is choosing one’s family size regardless of whether one’s ideal family size is anything from zero to eight. But it is not clear that the two sets of rights have the same force, nor is it clear how they are to be weighed against one another should a choice have to be made at the margin between them.

In a world where the Impact Inequality holds, and holds strongly, it may seem reasonable to insist on the rights of future generations when an appeal is made to curb our impact on the biosphere. Sen (Reference Sen and Lind1982), for example, likened persistent pollutants to instruments of oppression: ‘Lasting pollution is a kind of calculable oppression of the future generation’. But if additional births can be expected to contribute further to the discharge of persistent pollutants, why does a couple’s reproductive rights trump the rights of future people not to be oppressed? That is the kind of ethical dilemma the language of reproductive rights misses. The Review does not offer a position on this contentious issue, but to avoid any discussion of these conflicting rights cannot be right.

10. Education in nature

All that said, as much of Nature is silent and invisible or mobile, institutions cannot be expected to eliminate all the negative impacts our activities have on one another. Citizens will have to serve both as judge and jury for their own actions. Citizens need to be empowered, not only to demand the changes that are needed in our demands on Nature—and many of those demands are at the local level—but also to make informed decisions about their own, individual impact on the natural environment. And that cannot happen without enabling individuals—above all through educational policy—to understand and appreciate the workings of the natural world.

Small-scale success stories from around the world show us that much is possible. They also demonstrate that the same ingenuity that has led us to make demands on Nature that are so large, so damaging and over such a short period, can be redeployed to bring about transformative change, perhaps even in just as short a time. Our descendants deserve nothing less.