Making an economic case for Ecological Restoration — some alternative formulations: section 1[1]

Nandan Nawn
13 min readOct 19, 2021

[1] Acknowledgement: This is my tribute to Krishna Bharadwaj (21 August 1935–8 March 1992) whom I never met in person. As a part of responsibilities connected with my UGC Junior Research Fellowship during doctoral studies at the Centre for Economic Studies and Planning, Jawaharlal Nehru University, New Delhi I came across to a collection of books that belonged to her and donated by Sudha Bharadwaj, her daughter. I made a catalogue of these books (with help from several other JRF scholars) for the then newly constructed Ex-Im Bank library. These books form what is known today as Krishna Bharadwaj Collection kept at the first floor of the library located in Paschimabad. The predominant school of thought in these books, as readers of Krishna Bharadwaj’s works can immediately recognise, is Classical Political Economy (CPE). It is during this time, my PhD supervisor Prabhat Patnaik, advised me to read the classic texts in full, as Utsa Patnaik — his colleague and companion — does. Prabhat Patnaik and Utsa Patnaik belong to the sextet that started CESP, like Krishna Bharadwaj (with Amit Bhaduri, Anjan Mukherji and Sunanda Sen; see, https://jnu.ac.in/sss/cesp-projects, for more). The result was many references to works of a variety of authors belonging to the era of CPE in the introductory chapter of the thesis (Nawn 2012; DOI: 10.13140/RG.2.2.18983.14246). This was the only chapter that Prabhat Patnaik found to be worth publishing; it was reviewed and revised more than 15 times! Text from a few other chapters found their place in journals and books but not this. It has been nearly a decade since submission of the thesis, yet it could be connected to the most contemporary problem facing the earth today. Such forceful were the insights of thinkers belonging to CPE era.

Students of Environment and Economic Development course (since 2015) in the M.Sc. Economics programme at the TERI School of Advanced Studies, New Delhi, India have been exposed to many strands of thoughts expressed through this paper.

Various drafts of this paper have received the benefit of comments from many. They include TBA. Several former and present students of M.Sc. Economics programme at TERI SAS have shared their comments as well. They include XYZ. The author is grateful to Rukmini Sen for being the first listener of his thoughts on ecology-economy-society interface; the following debates, discussions and disagreements have helped him to gain clarity and in turn finetune his own worldviews, beliefs and value systems.

This paper is being prepared for a “Special Issue exploring cost estimation as a tool for resource-constrained design” in Development Engineering (link)

Funding information: The Project-National Mission on Biodiversity and Human Well-being is funded by a grant awarded by the Office of the Principal Scientific Adviser to the Government of India (Project No. SA/PM-STAIC/ATREE/ Biodiversity/2019 (G)). It was executed by and at ATREE on behalf of Biodiversity Collaborative. The author has been associated with this ‘project’ since November 2018. He has received partial salary support under this grant between October 2020 and September 2021.

“The Method I take to do this, is not yet very usual; for instead of using only comparative and superlative Words, and intellectual Arguments, I have taken the course […] to express myself in Terms of Number, Weight, or Measure; to use only Arguments of Sense, and to consider only such Causes, as have visible Foundations in Nature; leaving those that depend upon the mutable Minds, Opinions, Appetites, and Passions of particular Men, to the Consideration of others […]”

[Sir William Petty, 1662, ‘Preface’ to Political Arithmetick, or A discourse concerning, -, in Charles Henry Hull, ed., 1899, The Economic Writings of Sir William Petty, Cambridge University Press, 2 volumes, vol. 1, p. 244; emphasis as in original].

“All talk of a neutral or above-party political economy is no more than a guise for economists who, defending the interests of the moribund classes, prefer not to reveal their true face.”

[L. Leontyev, 1968, A Short Course of Political Economy, Progress Publishers, Moscow, p. 21]

“The rise of the classical political economy synchronises with the emergence of the capitalist order out of a feudal and mercantalist pat. […] The central question that challenged most speculative minds was: On what does the general progress and wealth of a national depend” The general acceptable answer was: the ‘surplus’ that is available to it. […] The major questions were: (a) what does this surplus consist of and what determines is size, (b) where does it originate, © among whom is it distributed, (d) how, i.e. by what principles, is it distributed, (e) what determines its growth over time, (f) what happens to the relative shares of surplus accruing to the different classes of appropriators as the size of the surplus increases?”

[Krishna Bharadwaj, 1978, Classical Political Economy and Rise to Dominance of Supply and Demand Theories, Romesh Chunder Dutt Lectures on Political Economy, Centre for Studies in Social Sciences, Kolkata, and Orient Longman, p. 6]

“Even in reasoning upon some subjects, it is a mistake to aim at an unattainable precision. It is better to be vaguely right than exactly wrong.”

(Carveth Read, 1914, Logic, Deductive and Inductive, Fourth Edition, Simpkin, London, p. 351)

Keywords: theories of value; surplus; ecological restoration; biodiversity and ecosystem services; institutions.

1. INTRODUCTION

Value is a contested concept. The contestations between the classical or ‘surplus-based theories’ (SBT) and ‘demand-and-supply-based equilibrium theories’ (DSET) in economics is no less serious than the transition from feudalism to capitalism. In fact, the contrasting theories of value are the most fundamental aspect of this debate — the “great divide in economic theory” (Bharadwaj 1986: 1). As it is well known, the younger one dominated almost since its birth in 1860s. Over the years it could gain impossible strides. Today the graduate students in Economics may not even heard about the elder one; it can be found only in some handful of courses taught in a few universities across the world; only a miniscule number of journals consider papers using this tradition.

Yet, the DSET cannot even recognise, leave alone addressing the greatest crisis of contemporary times — the disruptions in and loss of Nature — that is, ironically, questioning the very survival of the most dominant species, namely humans. Neumayer (2013) and several others have shown how the framework following DSET cannot provide a valid argument in favour of making investments in thwarting changes in just two major climatic attributes: rainfall and temperature. It’s a different matter that economists using this framework are still debating on the quantum of investment and then how to make nation-states to commit and actually undertake such investments. It’s not an easy task for any decision-maker across the tiers and layers of (formal) governance across spatio-temporal plains howsoever one is willing and is able to overcome the ‘vested interests’. Equally valuable goals like education and health — with the same temporal distribution of short-run costs and long-run benefits — are in the race to claim a higher share in the budget.

Summits after summits involving heads of States are making claims to find a way in producing these ‘fictitious commodities’ vis-a-vis Nature (a la Polanyi; pun intended), but with almost an identical agenda. All these indicate to a time tested conclusion: “We cannot solve our problems with the same thinking we used when we created them” (commonly attributed to Albert Einstein).

It follows that DSET, the theory that dominates functioning of all the economic systems — from the local to the global — does not have the ‘toolkit’ to even consider the multi-dimensional attributes of Nature, such as biodiversity and ecosystem services covering a variety of things at different spatial scales. In fact, DSET requires quite a high level of precision in the models and variables followed by an impossible demand on the empirical front. These ‘demands’ enables DSET to offer a rigorous framework and provides possibilities for development of sophisticated tools to empirically test the results. Unfortunately, present state of knowledge is mostly limited to the human-human cell of “input-output representation the total economy” as in table 1 in Daly (1968)[reproduced as table 1 here]. DSET has only limited tools to even recognise even the transactions in human–non-human cells leave alone the non-human–non-human cell.[1] Of course DSET is most suitable for contexts where nearly everything can be observed, measured and assessed, even if not valued. Non-human Nature does not and cannot fulfill these requirements. It follows that DSET cannot provide a theoretically grounded argument to restore, regenerate and stabilise Nature. Identifying the requirements of making the process of identifying the locations to carry out such ‘actions’ is a far call.

More precisely, it is the assumption of weak sustainability (high degree of substitution between natural and other forms of capital) of the ‘Accommodating’ strand within the ‘technocratic version’ of the environmentalism (see Box 2.1. in Turner, Pearce and Bateman 1993) that is responsible for the limited insights that DSET can offer here: “If natural capital is substitutable, then there is little compelling justification to very strongly reduce carbon dioxide and other greenhouse gas emissions” (Neumayer 2013, 46), forget biodiversity and ecosystem services.

Sengupta (2013, 36) calls this ‘Capital Theoretic Model of Sustainable Development’. World Bank (2006), and UNEP and UNU-IHDP (2014) and the subsequent works on ‘Comprehensible Wealth’ and ‘Inclusive Wealth’ are empirical expositions of the same. Dasgupta and Maler (2000) provides the theoretical justification (see, Murty 2017, among others, for a critical viewpoint in particular on ‘Accounting Prices’ that are essential to measure ‘inclusive wealth’)

Dasgupta (2021) extends this tradition. Quite correctly, it identifies the fundamental problems, one being the lack of investment in the assets that produces Nature’s services. More important is its acknowledgement of the “wedge between the prices we pay for Nature’s goods and services and their social worth (the [Dasgupta] Review calls their social worth ‘accounting prices’) in terms of what economists call ‘externalities’” (p. 6). Its conclusion is prophetic, even if it is deeply embedded in the DSET:

“Environmental problems also require action that is sensitive to local socio-ecological conditions. In some places, the prime recommendation of a concerned citizen — we have called her collectively the social evaluator — would be to let their communities manage their local ecosystems without external interference, while in other places, well-meaning central governance has weakened the place of local knowledge in people’s lives. Then there are places where, with every good intention, the state has embraced policies that may have worked elsewhere but are unsuitable there. And, of course, societies differ also in their conception of what enables lives to flourish. That is why we do not attempt to produce a blueprint of policies appropriate in different locations” (pp. 485–6; emphasis as in original).

In turn, Dasgupta (2021) recommends several options for change (Figure 21.1), ranging from obvious ones like “conserving and restoring natural assets” to doable ones like “effective institutions involving all levels of society” to difficult ones like “improve decision-making through natural capital accounting” to wishful ones like “a global financial system that supports Nature”. It has stopped just after delineating the broad contours of the ‘Agenda 2021’, in line with its terms of reference (HM Treasury).

Let us consider the most obvious one. Even though the United Nations has declared 2021–2030 as the Decade on Ecosystem Restoration, the economics of ecological restoration is still taking its baby steps. Present state of knowledge in this domain cannot even be compared to level of progress made in the fields of economics of other valuable ‘public goods’ such as education or health. In short, unless there is an economically valid way of showing a comparable ‘rate of return to investments’, ecological restoration will remain only in the agenda papers and not in action plans. This paper is a step towards turning one of many agendas set by Dasgupta (2021) into action. In particular, it offers an alternative formulation based on SBT namely cost of production theory of value to make an economic case for ecological restoration.

As it well known, methodical requirements of a cost-benefit analysis that follow from DSET — based on market values in money terms — is a significant challenge as most of Nature’s services do not have any market. Even if the out-of-pocket cost of a given ecological restoration in money terms can be reasonably arrived at, estimating the potential benefits in money terms is indeed a challenge, if not an impossibility. Not just for a hypothetical post-restoration scenario but even for measuring the present value of productive assets or ‘wealth’ of a country, results using DSET can be speculative at its best, even one leaves aside the debate on the rate of discount.

To address this, UNCEEA (2021) — to account for transactions in ecosystem services — has proposed a mix of methods that follows from both DSET and SBT. Surely, this mix-and-match is theoretically and conceptually untenable, leave alone yielding results of little real value. To be theoretically consistent, only one of the theories of value can be used. The paper argues that it is the cost of production theory of value that will be most relevant be it for national income or wealth accounting or even planning for progress that is economically viable, socially equitable and ecologically regenerative.

Its application in the Comprehensive Scheme for Cost of Cultivation of Principal Crops in India, (since 1970–71, but since 1954–55 under a different name) that form the basis for Commission for Agricultural Costs and Prices, Government of India to arrive at the minimum support prices (MSP), can show a way forward to estimate the value of flow of ecosystem services of a set of locations across temporal boundaries. The early steps have been taken towards arriving at the MSP of minor forest products by the Ministry of Tribal Affairs, Government of India, covering 87 such products till date (link). While it’s a challenging task to arrive at the ‘value’ of every single ecosystem service that are not standardised unlike industrial or even most agricultural products its worth walking the long road. In fact there may not be any other way but to walk on this route. Disruptions and damages to Nature have taken place over a few centuries. It is obvious that reversal will take a while. It is also obvious that it must involve the ‘resource people’

“[…] in the populous tropics, where most biodiversity resides, conservation of our ecosystems will remain elusive until there is a clear demonstration of the relevance of biodiversity to people’s well-being, most of whom live below the poverty line. Although nature-based solutions for addressing our most pressing challenges such as climate change, water scarcity, agricultural intensification, and health are well known (3), the link between biodiversity and human well-being has remained elusive. A major constraint, at least in the tropics, has been the lack of investment in biodiversity science that can build human resources and demonstrate the potential of biodiversity in 1) tackling climate change, natural disasters, stagnating agricultural productivity, water shortages, polluted air, and newly emerging infectious diseases such as COVID-19, 2) increasing human well-being, and 3) fostering future socioeconomic development.” [Bawa, Nawn et al 2020)

It is important to delineate a rigorous and sustainable institutional framework towards this end. The existing one in India at the ground level in the form of Biodiversity Management Committees (BMCs) can be useful in this regard.[2] Their mandate includes preparation of People’s Biodiversity Registers (PBR). The present format of PBR can be easily modified to capture the data required to estimate the potential benefits from ‘bioeconomy’ and not just ecological restoration.

Bawa et al. (2020) provides the general direction towards this end, in the form of an outline of a “National Mission on Biodiversity and Human Well-being [NMBHWB] for India. Bawa et al. (2021) elaborates further the contours of the Bioeconomy program within this Mission:

“The broad aim of this Program is to identify and promote sustainable development pathways that are based on bio-resources, and are both economically viable and ecologically sustainable. Attribution of ‘value’ to nature will be addressed in two ways. […] A second approach envisages actions that are valuable to local communities — namely, livelihoods generation and the realization of biodiversity benefits in a sustained manner. Realization of biodiversity benefits requires planning and monitoring, targeted investments in resource-generating activities such as ecosystem restoration, and appropriate institutional frameworks. […] In the process, the Program will estimate […] (b) cost of stabilising, augmenting and sustaining bio-resource flows in ecosystems faced with a rapid but recent decline in biodiversity and ecosystem services and (c) cost of restoring, stabilising, augmenting and sustaining ecosystems with a rich biodiversity history and/or potential (Fig. 6).” [See, Fig 6 in Bawa et al (2021); a comparable figure is in figure 2 here]

This paper will provide the roadmap of this particular ‘action agenda’ in NMBHWB.

Next section will provide the theoretical justifications for using SBT to make an economic case for ecological restoration. Section 3 will draw upon from the Scheme for Cost of Cultivation of Principal Crops in India to propose the method for valuing an illustrative set of ecosystem services. Section 4 will contrast the method proposed here with the one used for computing Net Present Value of forests in India, following a series of judicial interventions. Section 5 will offer some insights into the institutional framework in India at the level of BMCs in the form of PBRs and on collection of data for arriving at the MSP for minor forest products and propose the broad contours of the modifications that will be required to follow the method proposed here. The final section will indicate some possible challenges and on the ways to overcome them.

[1] Dasgupta (2021) makes a similar observation:

“Many of the processes that shape our natural world are silent and invisible. The soils are a seat of a bewildering number of processes with all three attributes. Taken together the attributes are the reason it is not possible to trace very many of the harms inflicted on Nature (and by extension, on humanity too) to those who are responsible. Just who is responsible for a particular harm is often neither observable nor verifiable.” (p. 6)

[2] As on 09.04.2021, 268639 and 4813 of such BMCs is in place in States and UTs in India as on (http://nbaindia.org/content/20/35/1/bmc.html, accessed on 19.10.2021.)

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Nandan Nawn

An economist by training, and reasonably familiar with political, social, regulatory, institutional, social and ecological dimensions of Nature.