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Faculty of Economics

Monday, 13 March, 2023

Sir Partha Dasgupta, the Frank Ramsey Professor Emeritus of Economics, has been made a Knight Grand Cross of the Order of the British Empire for services to economics and the natural environment, including his work on The Economics of Biodiversity: The Dasgupta Review. The Review is expected to help set the agenda for the UK Government’s 25-year environment plan.

Professor Dasgupta said “I am both honoured and delighted. I am also reassured that it is now acknowledged that economics, when practised with the respect the subject deserves, accommodates Nature seamlessly.”

On the top floor of the Faculty of Economics Professor Dasgupta gazes over the grounds of Selwyn College next door. “A few years ago, many of our colleges in Cambridge would have maintained neat lawns, but little biodiversity. Now, small areas are being left to grow wild, and they have become a haven for wildlife, moving from a monoculture to one that supports a swathe of wildlife. It may only be a minor thing, but it is these little steps that make big changes.”

He points to these micro changes as the modifications we can make in our everyday lives to help promote biodiversity. The Dasgupta Review describes nature as ‘our most precious asset’ and finds that humanity has collectively mismanaged its ‘global portfolio’. In other words, our demands far exceed Nature's capacity to supply ‘goods and services’ we all rely on.

As he sits at his desk, above which are many citations and honours, including one for the Freedom of London which he was granted last year. It is a parchment document with his name beautifully inscribed by a calligrapher, which was presented by the Clerk of the City of London, together with a copy of the 'Rules for the Conduct of Life' which date from the mid-18th century.

However, it is the weightier matter of the economy, and how nature relates to it that matter to him. “Half a century ago economists in the Faculty, like those elsewhere, studied macroeconomics of the long run, but sans the biosphere, and it has had a deep effect on economists’ thinking.” He picks up a macroeconomics textbook from the late twentieth century to make the point. “Nature wasn’t mentioned at all.” He says economic theorists studied the concept of optimum development, but the models they constructed advocated unlimited growth both in population and output. It seems bizarre now, he says, but that's how it was. “Unfortunately, established macroeconomics of the long run continues to be practised with that viewpoint. That practice has infiltrated our thinking. Even today economists and economic commentators take it as understood that GDP can and should grow indefinitely. Repetition of a viewpoint reinforces it, and we adhere to it without thought.” He said in his PhD dissertation of 1968, prepared when he was a graduate student in the Faculty, he had constructed a model of the long run in which the human economy was constrained by a bounded renewable asset, which today would be read as the biosphere. “Optimum policies in my model economy led to finite population and finite GDP. The model served as a template for my Review for the UK Treasury some 52 years later. But even though the paper was published in 1969 in a prominent journal (The Review of Economic Studies), it had not the slightest influence on subsequent writings on macroeconomics.

Professor Dasgupta says he was somewhat disheartened by the lack of interest in the population-consumption-environment interface and left the field for a decade or so. That concern resurfaced in his 1982 monograph, The Control of Resources, and he has been chipping away at that interface ever since. The Dasgupta Review was therefore the culmination of four decades of work in which Dasgupta has sought to push the boundaries of traditional economics and lay bare the connection between the health of the planet and the viability of sustainable development.
The Rt Hon Philip Hammond, who was Chancellor of the Exchequer from 2016 to 2019, invited him to lead the Review. “The treasury gave me much support, and within a week of Hammond announcing in Parliament that I was going to be leading it, it was all go. I was given an excellent team, who worked incredibly hard for the next 18 months: The Review may have my name on it, but it was a team effort.”

However, Professor Dasgupta says initially he encountered scepticism among the economists in his team. “They were bright, they had excellent economics degrees, but had never encountered reasoning within the biosphere’s limits in their economics. They had been taught that GDP growth should be the goal of policy but had not asked whether welfare economics supports that viewpoint. In initial months I visited the treasury twice a week and converted our meetings into classroom seminars. I'd go to the whiteboard and scribble mathematical models, demonstrating formally how the human economy could be embedded in the biosphere. It was wonderful to see the scepticism of the economists in my team transform into enthusiasm.”

The Economics of Biodiversity is the foundation of a growing field of what is known as natural capital accounting, in which researchers attempt to assess the value of nature’s constituents, for example, ecosystems. Those numbers can help governments better understand the long-term economic costs of land-use changes, such as logging, mining, and other potentially destructive activities, ultimately bolstering the case for protecting the natural world.

“I didn't start writing the Review until I had prepared plenty of notes, until, that is, the analytical core was completely coherent. Mind you, I had more than 40 years of notes, and a backlog of my published books and articles,” he says, adding that the spur to start composing the completed Review was when he came back from New Zealand in March 2020, just as Covid was spreading. “I spent a month there, hosted by the country’s Central Bank, and when my wife and I returned, I knew what the Review would look like. Covid was helpful because I didn't have to, indeed I couldn’t, go anywhere. The Review was penned and worked on over a period of about ten months. It was hard work, but it was a very pleasurable time for me. My wife Carol managed all household affairs, which left me free to work on the Review. I began work on the Review early in the morning in my small study – round about 4:30 – every day for some 10 months; so that by the time I brought Carol her morning coffee, I had already done some 3 hours of writing. We went for long walks each day, during which I checked my ideas with her to see whether they cohered, watched movies and shows that were being broadcast by museums and art galleries in the UK and US in the evenings during lockdown; it was a self-contained period in our life. We both were greatly touched that Prince Charles, Prime Minister Boris Johnson, and David Attenborough spoke at the launch in February 2021.”

Professor Dasgupta insists that his Review is not new economics; it is economics done correctly, by including nature seamlessly into economic lives - be they households or villages, communities or regions, nations, or the community of nations. He also remarks that environmental and resource economics has traditionally viewed the biosphere as external to us. “That enabled the economics of climate change to align itself snugly with standard growth and development economics, where the vision is of a human economy asymptotically extricating itself from the biosphere while enjoying unlimited GDP growth.” The Review breaks with that viewpoint and shows how economics of the long run can be so fashioned as to accommodate the fact that human economies are embedded in nature, they are not external to her.

Dasgupta says the reaction he has received has been very encouraging; however, he cautions that some might misunderstand the Review, as it has come at a time of great debate about the climate. “In the months immediately following the Review’s release, I used to receive invitations from NGOs, government departments, and international organisations, who seemed to think the Review spoke only to climate change. That’s probably because climate change has so dominated public discussions over the past three decades that climate regulation is taken to be nature’s only activity. People forget that nature engages in a myriad of complementary activities, such as soil regeneration, decomposition of waste, pollination, water cleansing, nitrogen fixation, and so on and on. The Review is altogether wider than the economics of climate change.

He says that maybe 10 or 20 years ago the Review wouldn’t have had quite the impact it has had now, that the Review has probably hit the ecological zeitgeist. His 1982 book, The Control of Resources, examined the problems of resource management and pollution control within a common framework and related them to issues in economic development and the economics of poverty. “In many ways it remains my favourite book, it was altogether different from what then existed in the literature,” he says. “But it bombed, was totally ignored, and wasn't even reviewed in the UK’s premier economics journal. That wouldn’t have been the case now.”

The Review has come at a time when ecological implications are in the forefront of people's minds, and they're wondering what they can practically do. Dasgupta comments that the environment doesn't invariably mean global. “It's often very local, but it can have an impact on the whole world. What has resonated most among readers is the idea that we should regard the constituents of nature – for example, ecosystems – as stocks of assets, and that national accounts should not just include traditional economic measures such as capital flows, GDP, employment rates, and inflation, but also the value of assets.”

He says the Office for National Statistics are adopting the concept. “We should now have stock accounts, like balance sheets of companies. So, we can ask after quantitative estimates of the size and quality of the assets we have, and proceed to compare them to those features of assets in the previous year or the year before. GDP doesn't allow you to do that, for the ‘G’ stands for ‘gross’, meaning that GDP does not include the depreciation of assets. GDP might be growing at a brisk pace, and you may think everything is going fine, but if you knew you have been enjoying that growth by degrading stocks of natural capital, you will want to rethink.”

He compares the current situation to the household that enjoys a high rate of consumption, but does so by selling its assets, and then subsequently finding that they have no wealth left to finance their consumption.

Professor Dasgupta, a fellow of St John's College, Cambridge, was recently selected by the Royal Botanical Gardens, Kew to receive the Kew International Medal for work to protect nature and stop biodiversity loss. “The recognition is wonderful – it means the Review has found a home at Kew,” he says. “I like to think that everyone, from members of the Faculty to the wider public, felt was there was something new about the Review. That is gratifying.”

With a smile he packs up his desk and is about to leave the Faculty building for an evening in the theatre to see an Agatha Christie play. It’s clear he enjoys Cambridge life. He says he loves being in the Faculty, even after all these years. Following a spell teaching at the London School of Economics, he came to the University of Cambridge in January 1985 as professor of economics, although from 1989 to 1992, he spent time at Stanford University, before returning to Cambridge in October 1991. He served as chair of the Faculty of Economics between 1997 and 2001.

“I did accept an offer in 1989 to move to Stanford permanently, but only because the Faculty in the late 1980s wasn’t a happy place. Mistaking technique for ideology is a common sin in the social sciences. But the VC, Michael McCrum, Master of Corpus Christy, who had served as Chair of the Faculty’s appointments committee, tore my resignation letter in my presence and instructed me to take leave for two years while he worked through these issues. I’m glad I took his advice, and Carol and I returned after two years. The Economics Faculty has now continued to improve immeasurably at Cambridge. It is undoubtedly world class. I feel at home here,” he says. “The impact our research is having on world problems is significant, and we’re seen as an integral part of the University’s research. But more importantly, it’s a happy place to do research; we respect different points of view but move towards a common understanding. And hopefully the Review will become part of story as we move forward.”

Professor Dasgupta has also been recently honoured at the UN Environment Programme as one of four 2022 Champions of the Earth, for the rigorous mathematical modelling to produce the Review.

A patron of the population concern charity Population Matters – formerly the Optimum Population Trust – since 2008, he also served from 2011-14 as chairman of the scientific advisory board of the International Human Dimensions Programme on Global Environmental Change in Bonn and chaired the Central Government Expert Group on green national accounting for India, which filed its report in 2013. During 2012-2021 he was Chair of the Management Committee of the Centre for the Study of Existential Risk at the University of Cambridge. He is a fellow of the British Academy and Royal Society and is a foreign member of the US National Academy of Sciences, the American Academy of Arts and Sciences, and the American Philosophical Society.

A conference in honour of Sir Partha Dasgupta will be held at Newnham College on the 20th and 21st of April 2023. Organised by Professor Sanjeev Goyal, it will celebrate Sir Partha Dasgupta's contributions to economics at Cambridge.

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