Tong Wu is a researcher at Stanford University. His work focuses on the intersection of ecology, economics and international development.
From the clearing of forests to the depletion of fisheries, the value of nature has long been found in its erasure. The founders of Western economics often treated nature as a “permanent field” that, to be classed as a productive asset, needed to be exploited or converted, whether for agriculture or to make way for industrial capacity. Economic growth, in turn, has come to gravely imperil the planetary systems on which civilization depends.
While industrialization has improved the material lives of untold millions around the world, it has also saturated the atmosphere with greenhouse gases, acidified and overexploited the oceans and degraded nearly every biome, often to the point of destruction. This poses a fundamental threat to our collective future — a reality that conventional economic thought has largely ignored.
“The world can, in effect, get along without natural resources, so exhaustion is just an event, not a catastrophe,” Robert Solow, the godfather of economic growth theory, once wrote, expressing an indifference toward nature shared broadly within modern economics. In a more nuanced claim, Mahbub ul-Haq, the co-creator of the Human Development Index, averred that “the environmental debate must be given a human perspective to save it from the excesses of environmental fanatics, who often seem more interested in saving trees than in saving people.”
But in the Anthropocene, the development of trees is integral to the development of people, and an ecological perspective is therefore also a human perspective. As nature transforms from a backdrop for human affairs into an active force shaping them, greater economic value can be produced from its cultivation than from its exploitation. In other words, a standing forest is worth more than a pile of felled trees — something we have started to realize only recently.
To address the planetary consequences of its pyrrhic industrial victory, modern economics must now urgently evolve in two important and related directions: discarding long-held definitions of value that separate humanity from nature, and embracing a new model of development that recognizes ecological production as a form of economic production.
Mismeasuring The Economy
As both cause and telltale symptom, gross domestic product encapsulates why modern economics has been so anesthetized to planetary peril.
GDP, an approximation of the value of goods and services produced within a country’s borders, emerged in the U.S. during its 20th century crucible of war planning and welfare state construction. It was adopted by the government to measure the aggregate value of economic production at a time when such information was unavailable to policy and business leaders.
Today, decimal-level fluctuations in GDP’s growth can unnerve ministries and shift billions on financial markets. The ubiquity and influence of the metric have endowed it with an aura of unshakeable authority over economic affairs; it is often treated as if it were an objective feature of the world rather than a human artifact that is freighted with the biases of its creators and marked by the circumstances of its creation.
In reality, GDP includes much that is detrimental and excludes much that is essential. Only a few decades after national economic accounting was institutionalized in the U.S., Robert Kennedy highlighted the problems with using it to measure a nation’s true prosperity. Criticizing gross national product, a GDP-related indicator, he lamented in 1968 that it counted as positive economic output things like air pollution, cigarette advertising and “the destruction of the redwood and the loss of our natural wonder in chaotic sprawl.”
Nearly six decades later, United Nations Secretary-General António Guterres reiterated the sentiment in even starker terms: “Absurdly, GDP rises when there is overfishing, cutting of forests or burning of fossil fuels,” he wrote in 2021. “We are destroying nature, but we count it as an increase in wealth.”
How we measure the economy is more discretion than discovery. Simon Kuznets, who has been credited with formalizing the concept of GDP, initially opposed the inclusion of government spending and expenditures on armaments and advertising. The emphasis on private transactions and the exclusion of activities deemed socially harmful was a conceptual, perhaps even ideological, preference rather than an appeal to objective reality.
Even today, and despite the best efforts of the UN System of National Accounts (SNA) to standardize methodology, there are international divergences in GDP accounting. China is still deeply influenced by the System of Material Balances (an inheritance from its central planning period), which associates “value-added” with physical products and underweights services including healthcare, housing and education. In the other direction, the 2008 revisions to the SNA permitted the inclusion of illicit transactions such as narcotics sales.
“As nature transforms from a backdrop for human affairs into an active force shaping them, greater economic value can be produced from its cultivation than from its exploitation.”
These inconsistencies not only reflect the discretionary basis of much official accounting; they have direct bearing on the identification — or misidentification — of policy priorities. For instance, perspectives from feminist economics have long pointed out that GDP omits most of the unpaid house- and care-work that are primarily done by women, despite such services being critical to individual well-being and social welfare. That they lack formal markets should not condemn them to policy irrelevance and deprive them of financial support.
Similarly, much of nature lies outside the narrow frame of GDP and the “valuable” activities it seeks to measure. Addressing these conceptual, methodological and institutional lacunae requires a new understanding of the essential contributions ecosystems make to people. We need to recognize and cultivate this ecological production rather than mourn its loss and count the costs after industrialism has made a wasteland where nature once thrived.
Environmentalisms Of Fear
As it has been traditionally practiced, the discipline of environmental economics could more accurately be called an environmental critique of economics: identifying how people damage nature (which rebounds upon us) and designing mitigative and remediating measures in response, like taxing pollution, installing technical fixes or even modifying GDP itself.
Although GDP’s position as the headline measure of economic performance remained unassailable, by the turn of the 21st century, its blindness to the environmental costs of industrialization became undeniable. It was hoped that “greening” the economy’s key benchmark could reconcile growth with ecological frailties. “Green GDP,” as it came to be called, nets out the estimated costs of environmental damages, for instance from the health impacts of polluted air and water.
China, the colossal vanguard of the developing world, was among the countries that took serious steps in this direction. It was posting some of the highest recorded GDP growth rates in the opening decade of the 21st century, with steel-girded, neon-lit cities seeming to sprout from the earth like chantarelles after a spring shower. But in their wake came environmental devastation — denuded landscapes, haze-smothered cities and poisoned soils — so China launched a green GDP accounting initiative in 2004. However, it quickly became politically fraught.
GDP had long been a lodestar of national governance and index of corporate self-worth; a green variant that subtracted environmental costs could only be a downward revision — sometimes alarmingly so. It was perhaps inevitable that resistance from influential quarters emerged, leading to the decline of official green GDP accounting efforts in China and other nations, including the U.S.
As with many environmental policies, green GDP treats nature as something to be shielded, and therefore fundamentally passive — still a permanent field, but one around which a fence and warning signs must be placed. The global quest for sustainability has for the most part been a political economy of prevention and clean-up.
An agenda focused exclusively on preventing and remediating industrial excess is insufficient and could even devolve into an “environmentalism of fear.” “Liberalism of fear,” coined by the political philosopher Judith Shklar, was hegemonic in the Transatlantic West during the Cold War and favored a defensive, conservative approach to securing freedoms. It was premised on the fragility of freedom and sought to guard against the inherent evil within people.
Today, an increasingly mainstream environmentalism of fear is premised on the fragility of nature and seeks to guard against the inherent rapaciousness of people. But nature is not merely a fragile entity requiring protection; it is also a generative source of value that merits cultivation. As both exploiters and beneficiaries of nature, people should be incentivized to invest in the ecosystems that sustain them.
Ecological Production
Environmental policies are generally focused on reaching some form of nature “neutrality”: carbon neutrality to mitigate climate change, land degradation neutrality to combat desertification, plastic neutrality to address health risks, and so on.
These are vital objectives that can better situate humanity within a finite and increasingly tempestuous planet. However, the diverse forms of nature neutrality are only a baseline. The economic transformation toward planetary stewardship should also be motivated by achieving nature positivity. The negative case for environmentalism has been well made; empowering future efforts requires the crafting of an expansive positive vision.
While neutralizing nature-negative bads such as greenhouse gases is about managing the economy to alleviate environmental damage, promoting nature-positive goods means managing the environment to improve economic outcomes. Alongside the agenda of harm reduction based on environmental abatement, there should be new goals of value creation through ecological production, integrating the diverse benefits of nature into economic processes.
“We need to cultivate ecological production rather than mourn its loss and count the costs after industrialism has made a wasteland where nature once thrived. ”
For instance, alongside efforts to slow the manufacturing of plastics, ecosystems can be managed to provide substitute materials. A “bamboo-for-plastics” initiative was recently launched by China’s economic planning agency to commercialize the fast-growing plant’s versatility as the basic material for a range of consumer and construction goods.
Similarly, the European Union has promoted the substitution of fossil-based fibers by plant-based alternatives in an effort to green its textile industry. Not only do these approaches alleviate the impacts of carbon- and waste-intensive industrial processes, they incentivize investments in nature as a productive asset.
Ecosystems also produce non-material services, including the experiential benefits and aesthetic values that societies have endowed nature since time immemorial. A bamboo forest is not just a source of fibers, but also a venue for leisure and culture. Recent scientific findings have even identified unique health advantages from nature exposure, including the alleviation of psychological and emotional disorders and support for somatic healing.
Beyond their material and non-material benefits, ecosystems undergird economic security and prosperity through regulating services. These include nature-based cooling in cities, the protection from storm surges offered by mangroves, floodwater reduction by lakes and wetlands, and air and water purification through phytoremediation by flora such as bamboo. As a recent report by the Asian Infrastructure Investment Bank, the world’s second largest multilateral development funder, plainly states: nature is infrastructure.
Ecosystem functioning is also upstream — sometimes literally — of many critical industrial processes. Hydropower generation, for instance, is dependent on consistent water flows while turbines are negatively affected by loose sediment. These hydrological dynamics are to a very large extent determined by upstream ecological conditions. A denuded watershed reduces water supply, thereby lowering electricity generation, and discharges sediment that can damage turbines. The economic implications are even broader when factoring in energy grid-level effects.
Promisingly, efforts to institutionalize nature as a driver of development have expanded in recent decades. Some of the boldest experiments have occurred in “emerging economies,” especially Asian and Latin American countries that have been engaged in a process of catch-up development for several generations. And crucially, these earnest and sometimes desperate efforts at economic convergence are occurring on an overheating and overexploited planet, circumstances in which ecological production has become increasingly vital for securing and improving human well-being.
Revealing Nature’s Infravalue
Most of nature’s economic contributions are like infrared radiation: Although felt by people, they lie outside the visible spectrum of existing metrics and markets. A new metric, gross ecosystem product (GEP), is meant to bring economic visibility to this “infravalue” so its sources can be sustained and enhanced.
This nature-based GDP parallel seeks to break the tyranny of single-indicator rule and its perverse environmental consequences. It contributes to what Guterres and others have begun to champion: a dashboard of sustainability-relevant indicators, bringing previously invisible dimensions of development into the light. If the agenda of climate neutrality is headlined by the decrease of greenhouse gases, the nature-positive agenda could be oriented around the increase of GEP.
Defined as the economic value of final ecosystem services produced within a given area — be it a city, province, country or even watershed — GEP represents ecological production as a form of economic production. Just as GDP aggregates the value produced by human-made capital such as factories, hospitals and railways, GEP does the same for the stream of benefits generated by forests, mangroves and other forms of natural capital. At the same time, GEP does not seek to replace GDP; rather, it is an environmentally sober companion to an indicator that is too often drunk on excessive industrialism.
China is the leading adopter of GEP worldwide. Over the past decade, local governments across the country have implemented it to promote nature-positive goods. The technology hub of Shenzhen was one of the earliest to do so, which may help explain why the dense metropolis, one of China’s largest cities, has managed to retain nearly half its land for nature, even as conventional development headlined by GDP has continued apace.
The municipal government of Beijing has also sought to bolster its ecological infrastructure — those regulating services that mitigate flood and heat, among other growing stresses. Using GEP as the rubric, it allocates public investment to districts based on their relative contributions to the city’s natural capital. To refine and generalize the approach, China’s planning and statistics ministries released national accounting guidelines in 2022.
“As both exploiters and beneficiaries of nature, people should be incentivized to invest in the ecosystems that sustain them.”
Since achieving industrial modernity under the sign of GDP, China is now navigating toward sustainability with GEP as a compass. It is perhaps no coincidence that while GDP emerged in the U.S. at a time of economic and geopolitical crisis, GEP has emerged in a new superpower of the 21st century as it confronts the myriad challenges of the Anthropocene. If successful, this transition will make nature’s infravalue not only visible but actionable, and in the process transform the theory and practice of development.
The Economics Of Nature
We do not know the price of nature’s bounty. This is precisely why policy and business leaders tend to neglect its value and the costs of its destruction are mostly hidden from our decision-making. Ignoring the economic value of ecosystems has not impeded their degradation; it has in fact valorized and institutionalized that degradation.
The protection and restoration of nature have many powerful, non-instrumental arguments. But a century of entreaties to conscience has not halted planetary breakdown; that breakdown has in fact accelerated. And while appeals to material interests and calculations may seem disagreeable to many, appeals to sentiment, sanctity and nostalgia have their own limitations and even dangers. Becoming a structural feature of public and private decision-making requires compelling economic rationales, the pecuniary language of practical sense.
The goal of mitigating climate change and pollution has long found policy expression in efforts to price, however imperfectly, nature-negative emissions. Most notably, these include “cap-and-trade” schemes, taxes and fines. While the implementation of these policies has often been halting, they have nonetheless become widely accepted as legitimate interventions. Just as urgently, we also need to price nature-positive ecosystem services and mainstream them into economic incentive structures.
The price system may not be the conscience of a free society, but for better and for worse, its mediation of supply and demand, costs and benefits, remains a meta-rationality of modern life. The signals sent by prices remain the most effective mechanism for influencing economic decisions. After all, even the most well-funded governments and well-heeled investors are constrained by budgets and the expectations of stakeholders and shareholders.
Pricing nature does not condemn it to the maw of capitalist exploitation. An indicator like GEP can be as sure a guide for public investments as for private transactions. Notably, the proliferating applications of GEP and other natural capital approaches in China have been an indispensable means of provisioning key public goods, especially those regulating services that comprise ecological security, an ideal that has taken its place next to digital and even national security in policy discourse.
Nature is not a sacralized object that can be safely curated behind glass walls. Nor is it a minor and replaceable component whose disappearance would be, as Solow’s remark had it, simply an event and not a catastrophe. The value of nature, and much else, is refracted imperfectly through the prism of prices. But making the economic case for nature is an essential task for securing development in our planetary age.
The Nature Of Economics
In advancing the economics of nature, we gain fresh insights into the nature of economics. In naturalizing the economy by recognizing its embeddedness in the biosphere, we also, in the other sense of the term, de-naturalize many conventional assumptions separating humanity from nature that have long influenced how we measure production, target investment and regulate exchange.
This appears to be a daunting intellectual, not to say programmatic, leap. But practical attempts and appreciable results already exist: In emerging markets such as China, natural capital has steadily transformed from a metaphor of economic value to an instantiation of it. Perhaps it shouldn’t be surprising that the most promising policies have emerged in places that had little historic influence on mainstream economic theory — and in many cases even resisted it.
In recent decades, the Western heartlands of mainstream economics have also witnessed changing assumptions about what an economy can and should be. But this has been more in reaction to unnerving technological change than to unprecedented planetary breakdown. These mostly digital innovations, pioneered in particular within the U.S., have often been in a contrasting direction: ideas of value that are less grounded, literally and figuratively.
Today, in economies worldwide, cryptocurrencies summon trillions of dollars from digital mining by energy– and water-intensive computing centers. Markets for monetized attention channel hundreds of billions of dollars, driven by content producers whose digital output bears little resemblance to traditional ideas of production. Machine learning is problematizing the very role of human labor across a range of what were once considered secure white-collar jobs.
“Ignoring the economic value of ecosystems has not impeded their degradation; it has in fact valorized and institutionalized that degradation. ”
All the same, such immaterial value creation is duly recorded in GDP while their all-too-material impacts are left off the balance sheets. Furthermore, they have been readily endorsed by investors and governments. Even while public lands are opened for (physical) mining and drilling and budgets for environmental protection are shredded, a “strategic bitcoin reserve” has been established in the U.S., underwritten by the authority and finances of the federal government itself.
Whatever the particular politics of the moment and country, it has nonetheless become a piety across much of the world that digital services are services, that artificial intelligence is intelligence, that automated labor is labor, and that all of the above should be promoted as a matter of policy. In this light, and given the urgency of the Anthropocene’s challenges, it is hard to imagine a principled reason for denying that ecosystem services are economic services and should also be promoted as a matter of policy.
The future is clouded with risk, whether from the uncertain blessings of AI or the certain curses of climate change. But it is nonetheless encouraging that, however belatedly, growing numbers of people are beginning to view nature as our most precious asset. While not without pitfalls, recognizing the economic value of ecosystems is a major advance in how societies conceive and coordinate their development.
GEP may never achieve the ubiquity and influence of GDP. But should the simple premise that the development of trees is integral to the development of people be accepted within economics, then this flawed but indispensable discipline will have undergone a much-needed transformation — one that is critical to ensuring the possibility of civilization.
