Economic Factors Underlying Biodiversity Loss

Abstract

Contemporary economic thinking, including the prevailing economics of climate change, does not recognize that we are embedded in Nature; it instead sees humanity as customers drawing on Nature. In this paper we present a grammar for economic reasoning that is not subject to that error. The grammar is based on a comparison between our demand for Nature’s services and her ability to supply them on a sustainable basis. The comparison is then used to show that economic possibilities are shaped by the way we deploy our capital stocks - including such assets as ecosystems - and that national statistical offices should estimate an inclusive measure of their economies’ wealth and its distribution, not GDP and its distribution. The concept of “inclusive wealth” is then used to identify institutional reforms that need to be introduced for managing such global public goods as the oceans and tropical rainforests. It is also shown that trade liberalization without heed paid to the fate of local ecosystems from which primary products are drawn and exported by developing countries leads to a transfer of wealth from there to importing countries. Humanity’s embeddedness in Nature has far-reaching implications for the way we should view human activities – in households, communities, nations, and the world. Examples are cited to show that grammatical errors in economic reasoning have given rise to seemingly innocuous habits of thought that have brought about the ecological crisis we face today.