Partha Dasgupta, a Cambridge economist, recently wrote a sympathetic yet critical book review of Jared Diamond‘s book Collapse: How Societies Choose to Fail or Survive in the London Review of Books. In it Partha Dasgupta critiques the book for its failure to adress tradeoffs and advances the concept of inclusive wealth.

Dasgupta critiques Diamond for not being more explict about tradeoffs among ecosystem services:

The more important reason why Diamond’s rhetoric doesn’t play well any longer is that it presents only one side of the balance-sheet: it ignores the human benefits that accompany environmental damage. You build a road, but that destroys part of the local ecosystem; there is both a cost and a benefit and you have to weigh them up. Diamond shows no sign of wanting to look at both sides of the ledger, and his responses to environmental sceptics take the form of ‘Yes, but . . .’ If someone were to point out that chemical fertilisers have increased food production dozens of times over, he would reply: ‘Yes, but they are a drain on fresh water, and what about all that phosphorus run-off?’ Diamond is like a swimmer who competes in a race using only one arm. ‘In caring for the health of our surroundings, just as of our bodies,’ he writes at one point, ‘it is cheaper and preferable to avoid getting sick than to try to cure illnesses after they have developed’ – which sounds wise, but is simply misleading bombast. Technology brings out the worst in him. At one point he claims that ‘all of our current problems are unintended negative consequences of our existing technology,’ to which I felt like shouting in exasperation that perhaps at some times, in some places, a few of the unintended consequences of our existing technology have been beneficial. Reading Diamond you would think our ancestors should all have remained hunter-gatherers in Africa, co-evolving with the native flora and fauna, and roaming the wilds in search of wild berries and the occasional piece of meat.

Here I should put my cards on the table. I am an economist who shares Diamond’s worries, but I think he has failed to grasp both the way in which information about particular states of affairs gets transmitted (however imperfectly) in modern decentralised economies – via economic signals such as prices, demand, product quality and migration – and the way increases in the scarcity of resources can itself act to spur innovations that ease those scarcities. Without a sympathetic understanding of economic mechanisms, it isn’t possible to offer advice on the interactions between nature and the human species.

And presents the idea of inclusive wealth:

An economy’s productive base consists of its capital assets and its institutions. Ecological economists have recently shown that the correct measure of that base is wealth. They have shown, too, that in estimating wealth, not only is the value of manufactured assets to be included (buildings, machinery, roads), but also ‘human’ capital (knowledge, skills health), natural capital (ecosystems, minerals, fossil fuels), and institutions (government, civil society, the rule of law). So development is sustainable as long as an economy’s wealth relative to its population is maintained over time. Adjusting for changes in population size, economic development should be viewed as growth in wealth, not growth in GNP.

…

A state of affairs in which GNP increases while wealth declines can’t last for ever. An economy that eats into its productive base in order to raise current production cannot do so indefinitely. Eventually, GNP, too, would have to decline, unless policies were to change so that wealth began to accumulate. That’s why it can be hopelessly misleading to use GNP per head as an index of human well-being. Recently the World Bank published estimates of the depreciation of a number of natural resources at the national level. If you were to use those data (and deploy some low cunning) to estimate changes in wealth per capita, you would discover that even though GNP per capita has increased in the Indian subcontinent over the past three decades, wealth per capita has declined somewhat. The decline has occurred because, relative to population growth, investment in manufactured capital, knowledge and skills, and improvements in institutions, have not compensated for the decline of natural capital. You would find that in sub-Saharan Africa both GNP per capita and wealth per capita have declined. You would also confirm that in the world’s poorest regions (Africa and the Indian subcontinent), those that have experienced higher population growth have also decumulated wealth per capita at a faster rate. And, finally, you would learn that the economies of China and the OECD countries, in contrast, have grown both in terms of GNP per capita and wealth per capita. These regions have more than substituted for the decline in natural capital by accumulating other types of capital assets and improving institutions. It seems that during the past three decades the rich world has enjoyed sustainable development, while development in the poor world (barring China) has been unsustainable.