Broken Models

Environmental economists have long recognised that great failing of our current economic system is that natural resources are rarely assigned any value. There has been no cost associated with overfishing; wetlands and forests can be depleted without impacting GDP; and there is no cost to using our atmosphere as a CO2dump.

In this collaborative report we have examined whether any heed is paid to ecosystem services by economists at 14 of the biggest investment banks.

The responses were alarming, ranging from ‘The subject is too big to meaningfully contemplate’ to ‘One of the most significant variables we are not capturing is the natural resources with which an economy is endowed and how this drives its relative terms of trade and its bargaining power in the global economy”. So while recognising the importance of ecosystem services to continued economic growth, economists have decide to ignore it as too difficult. But looking away from a train coming down the track won’t make the train go away. We believe that economists who do develop models to incorporate ecosystem services will have a better chance of predicting the future of our economies.

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