UNIVERSITY OF CAMBRIDGE
Our fixation with Gross Domestic Product for over half a century as the primary indicator of economic health has rendered nature “invisible” from national finances, intensifying the biosphere’s destruction by omitting its value from the systems that govern us.
This is according to leading economists from Cambridge University and the United Nations, who meet on Tuesday 15 December to help launch a “statistical standard” that allows governments and banks to calculate the worth of natural “dividends”: from fish stocks and carbon ‘sinks’ to reduced health burdens from purified air.
Almost a decade in the making, the new statistical approach, called “Ecosystem Accounting”, had its final consultation on the first of this month, and will go before the UN General Assembly next year with hopes of ratification as the global standard for measuring how the natural world underpins national economies.
“A focus on GDP without proper regard for environmental degradation or inequality has been a disaster for global ecosystems and undermined social cohesion,” said Prof Diane Coyle, who leads ‘Beyond GDP’ research at Cambridge’s Bennett Institute for Public Policy and is a key speaker at Tuesday’s public event.
“Statistics are the lens through which we see the world, but they have made nature invisible to policymakers. Twenty-first century progress cannot be measured using twentieth century statistics,” she said.
While many talk of the need to ‘build back better’ from the ravages of Covid-19, we cannot recover better without better information to guide us, says United Nations Chief Economist Elliot Harris, who will also speak at the Cambridge-hosted event.
“It is high time we moved beyond GDP and measured our wealth and success with tools that recognize the value of nature and people. The developments to our System of Environmental Economic Accounting are a giant leap in the right direction,” Harris said.
As part of a global team, economists from Cambridge’s Bennett Institute for Public Policy such as Dr Matthew Agarwala have been working with the UN to develop aspects of the new accounting methods. With his colleague Dimitri Zenghelis, Agarwala has written a guide for treasuries and central banks that the UN will roll out as a training programme.
“Some of the ways we currently value nature, what we term ‘natural capital’, are just absurd,” said Agarwala. “Most parks in the UK, including huge parks in major cities, have an asset value of £1, because they can’t be sold.
“Local Authorities have a balance sheet with a £1 asset that costs many thousands in annual upkeep. But this ignores revenues from higher property values in the vicinity. Even worse, it ignores the value of outdoor recreation, cleaner air, and the greatly reduced impact on local health services this creates.
“We now have the framework for putting that information into everyday economic decisions and scaling it up to the national level,” he said.
The Bennett Institute also works closely with the UK’s Office for National Statistics, early adopters of Ecosystems Accounting during its previous “experimental” phase. ONS work published last year used these methods to reveal the startling value of nature.
“Shading and cooling services” provided by greenery and waterways were valued at almost a quarter of a billion pounds a year in the UK through improved worker productivity and air-conditioning energy savings alone.
Just the green spaces and rivers in urban areas saved almost £163m annually in healthcare costs, and urban woodland was estimated to be worth £89m a year through carbon removal. Recreation spent in nature just in urban areas was valued at some £2.5 billion a year in the UK.
“We need statistics that can guide us through the new challenges we’re facing – biodiversity loss, inequality, climate change, and automation,” said Agarwala. “We are only just scratching the surface of what these accounting methods can reveal.”
Two Cambridge graduates at the Central Statistical Office – the precursor to the ONS – James Meade (later a University professor) and Richard Stone, laid the foundations for GDP as we know it: essentially, the value of things and services produced by a given country.
But Cambridge is also home to Prof Sir Partha Dasgupta, considered the father of the modern movement to knock GDP from its pedestal and infuse economics with the worth of life on Earth: from nature to the value of human connection.
Prof Dasgupta will also be speaking at the Ecosystem Accounting event, discussing his landmark commission from the UK Treasury to investigate the economic benefits of global biodiversity – and the costs of its rapid loss.
“Ecosystem services are simply absent from most national statistics,” he said. “Vast intellectual energy is given to estimating GDP, but there is little data on the biosphere’s capacity to meet human demand for natural goods and services.”
Dasgupta describes natural capital as a necessary step towards the creation of “inclusive wealth”, in which economics accounts for everything from health and skills to the value of communities – all fundamental to productivity, and all currently gaping holes in national balance sheets.
At the event, Prof Coyle will discuss the major Bennett Institute report she produced with Agarwala called ‘Building Forward: Investing in a resilient recovery‘. Published last month, it outlines how inclusive wealth could be developed in response to the pandemic and the UK’s longstanding “productivity puzzle”.
“Gaps in economic measurement have contributed to chronic underinvestment in natural and social capital,” said Coyle. “Assets such as public green space or personal networks do not have a market price and so are not counted in economic statistics.”
This omission of life’s fundamentals in national economic calculations is not just a missed opportunity for governments, but a massive risk. “The halls of power have yet to grasp how vital it is to include natural capital in the economy,” added Agarwala. “Look at the precipitous falls in fossil fuel value, and that’s just one small part.
“The extreme human and economic cost of the pandemic arise from a failure to manage natural capital. It has proved far more costly than it would have been to protect wild habitats and biodiversity in the first place to avoid such zoonotic spillover.”
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This is quickly becoming a fight amongst so-called intellectual elites as to who is going to be at the top of the power heap telling everyone what to do. Climate scientists, economists, phycologists, social scientists (lol), political scientists (lol) all trying to step on each other. Is it any wonder that people come to hate big government?
The one thing I noticed was missing was any measurement about the value of people. Are more people good or bad? Is the land to support housing, food, etc. going to be valued negatively or positively? Some of these will tell you what the ultimate goal actually is.
Interesting…money is a measure of human toil and sweat. Money was a major improvement on the barter system. You can be paid for your toil or you can pay to save yourself toil. Even if it seems you are paying to have fun, you are actually paying for the toil it would take to arrange your life to have that fun. Payment for toil is good because it allows effort to be exerted upon those goods and services that are of sufficient benefit that others are willing to pay for them. Payment for doing nothing, such as a basic minimum income program, can practically be only the amount of money others would short of, should your existence be terminated. Communist regimes have terminated many without understanding that this was the rule.
I will listen to Cambridge, and all the other major universities and colleges, after they surrender the billions of dollars in trust fund money they are sitting on. Till then they can shut the f***k up about what needs to be done economically. And until they and all their students and alumni stop benefiting in any way from “fossil fuels”, hydro and nuclear produced power and products they can shut the f***k up about the environment.
An interesting book: “The Coming of Neo-Feudalism” by Joel Kotkin (available also on Kindle).
“…our wealth and tools…?”
Our? So, private property is out, and collectivism is in, all based on “government and banks to calculate the worth of natural dividends.”
I wonder if their models include the effects of clouds.
help launch a “statistical standard” that allows governments and banks to calculate the worth of natural “dividends”: from fish stocks and carbon ‘sinks’ to reduced health burdens from purified air
This is a move to monetize everything, thus making it for sale (regardless of laws and regulations). It puts resources that are held close to the heart on the ledgers and available to those with money to bargain for.
This must be a Chinese idea.
They have the money to own nations, especially the 3rd World.
These people are living in La-La land. Imposition of their non-GDP valuation will result in people living in societies rich in this “new wealth” starving to death.
Did they do their homework, in very short supply nowadays? Probably not, putting such on wildlife, fish, marshes, usw, is nothing new. Actually what is sometimes shorted in the name of ‘progress’ are refuges and other necessary spaces for values other than making money. Conforming the two is above me, but these guys have a history of running into each other.
The ecosystem evaluation should incorporate the ability to sustain human and animal life, the impacts on health and safety advances, and there should be deductions for the land and ocean devastation wind and solar (including mining).
How about Britain ends the era of allowing rich universities like Cambridge to dodge taxes? Instead, tax them like everything else. They have around 5 billion pounds in their investments – tax them an additional 10% per year until they learn to behave as a nonpolitical organization.
The U.S. ought to do the same to its large over-rich elite universities. You want to pack your tenured positions with liberals and then promote propaganda, you lose all tax dodges and are taxed like any other corporation. You want to base admittance on race – no more tax-free spending for you.
Then use the proceeds as grants to smaller universities that actually behave like neutral places of learning.
As George Orwell said: some ideas are so stupid that only intellectuals believe them. Or economists, I add.
But don’t hold your breath. I see a Nobel Prize coming for this nonsense.
When one starts making subjective, judgment decisions on what has value you end up with a ‘no limiting principle’ “we get to make the rules” society. Socialists love the “No Limiting Principle” as it always justifies bigger government controls, more taking and redistribution… because they get to decide who and what has value.
This Intellectual Yet Idiot (IYI, to take Nassim Taleb’s term for her) Diane Coyle even acknowledged the roots of her ideas are in Maoist thought with her statement, “The developments to our System of Environmental Economic Accounting are a giant leap in the right direction”.
This is utter garbage from this IYI is just dressed up Great Leap Forward maoist-communism of the kind that decimated China in the 1960’s and k1lled probably 40 to 70 million Chinese in its pursuit.
Just more proof that we need to defund academia and the UN.
Social progress? Social justice? And several hundred million lives aborted in selective-child policy. Is that the measure of success that they have in mind? How green do they think people are? That said, diversity of individuals, minority of one. Lose your Pro-Choice quasi-religion (e.g. “ethics”).
Because there’s not already enough fuzziness in economics…
She’s a “George Costanza-Rule” economist, just like the New York Times and Nobel winning economist Paul Krugman.
As Jerry Seinfeld told George, “If every instinct you have is wrong, so doing the opposite of has to be “right.”
So do exactly the opposite of whatever they say if you want to affect a correct economic policy.
There wasn’t any “zoonotic spillover”. The same people involved in function gain research on “enhancing” bat viruses to infect humans are hired by UN to find out where the virus came from.
This is using Stone Age technology to value things – modern shamanism. Value communities? How? A country with mud huts where its citizens live 30 years on average will be valued higher than a country that has people living 70 or 80. This is a MURDEROUS IDEOLOGY put in place so people can be subjected to untold poverty and austerity. It will end at best in much shortened lifespans, and at worst in millions of deaths.
Yeah, comparisons to the Great Leap Forward in China are apt, especially that the commie used a very similar phrase – Giant Leap In The Right Direction.
It’s odd that nobody seems to notice that it’s the countries with high GDP that are the ones that do the best job of protecting the biosphere. In fact, they’re the only ones that protect the biosphere – they’re the only ones that can afford to.
Dr. Bjorn Lomborg has written books on that topic (how energy poverty leads to environmental destruction in developing countries, the opposite of what the ecotards claim they want) and has an entire institute to pushing that truth about prosperity and environmental stewardship.
https://www.lomborg.com
From the article: “This omission of life’s fundamentals in national economic calculations is not just a missed opportunity for governments”
I think giving the government more power over our lives is the purpose of this exercise.
OT… where is our resident Arctic Ice Worrier when needed 😉
https://notrickszone.com/2020/12/14/modern-icelands-climate-is-colder-with-more-ice-than-any-other-time-in-the-last-8000-years-except-the-1800s/
Rising global gross product has lowered abject poverty to its lowest level in history, and all these people can think about is stopping that.
Why does the Progressive elite hate poor people so much?
To replace one fuzzy measure with something that has many more ‘fiddle factors’ available to the dishonest is plain stupid.
You can see this with national productivity figures. I could never understand how the French productivity figures were consistently higher than the UK figures. What, with all of their additional holidays etc.
Eventually, when I looked into it, I discovered that each nation has its own independent way of estimating the productivity figure!!!!!
I can see the this suggestion being as good and useful as the productivity calculation.
GDP should be abolished anyway. The formula Y = C + I + G includes G for Government. So any government can notionally manipulate GDP by printing money then spending it.
In the real world government is a dead hand which stifles the real economy with silly regulations. No better example exists than the Covid-19 rules, which seem to be made up out of thin air. Catastrophic to small businesses and ordinary people trying to survive.
So it’d be more accurate for the formula to be Y = C + I – G.
Cui bono? A cursory review shows big business, the stock market and the ChiCom economy are the clear winners of the ChiCom virus. Small businesses and the regular people are taking it in the shorts.
I’m sick of this now. I have little to say.
Bring on the firing squads.
Social Credit comes to Soviet Gosplan, with Green as the new Red. Brexit seems to be too late.
Just when did GDP “rule” anything?
Socialist economists set the scene for a new economics to be ratified in Davos as part of the Great Reset agenda. Just ignore them.