“Putting nature on the balance sheet: how to account for the ecological costs of our actions”
Economists should consider forests and wetlands as well as factories and farms.
A book review of “On Natural Capital: The Value of the World Around Us“, Partha Dasgupta (2025)
On Natural Capital recaps the roaring economic advances of the past 75 years, including improved life expectancies and education and fewer people living in poverty. But it also shares how economic progress has benefited from the exploitation of our planet: an ecological debt that conventional accounting leaves off the balance sheet.
Dasgupta starts by vividly portraying the essential workings of Earth’s life-support systems and how living processes regulate the climate, replenish soils and sustain food webs. He notes that one-third of the planet’s remaining wetlands, which are crucial for filtering nutrients, providing flood protection and storing carbon, have been lost between 1970 and 2015 owing to infrastructure construction, urban expansion and other human activities. He also describes how deforestation can create savannah-like conditions in parts of the tropics, because the disruption of moisture-recycling processes decreases rainfall and ecological productivity.
Next, Dasgupta examines why economic principles have long treated nature’s functions as background scenery. He explains that this omission is rooted in the mid-twentieth-century origins of growth and development economics, in which economists constructed models that explained output using only human labour and skills, and physical goods. This was a reasonable assumption back when natural resources seemed abundant, the world wasn’t pressing against planetary limits and forests, soils and fisheries seemed too plentiful to constrain growth. What began as a practical simplification evolved into a blind spot.
As Dasgupta’s writing flows between nature’s processes and economic principles, he stresses the uneasy trade-offs that societies navigate daily. Each tonne of fish landed or cubic metre of water taken for irrigation is a draw on assets that must remain intact to avoid compromising future yields of food, income and ecological stability.
Dasgupta reminds us that these choices are not simply about extraction but also about stewardship. Overfishing might boost a nation’s gross domestic product for one fiscal quarter, yet deplete the reproductive stock that sustains the following year’s catch. Likewise, draining wetlands to generate farmland might bring an immediate harvest, yet erode the flood protection and nutrient-cycling processes that make such agriculture possible.
The constant tension between nature’s bounty and the ecological conditions that make that bounty possible is revealed brilliantly by Dasgupta but left out of the accounting practices that currently define progress. As a result, society perceives the conversion of natural resources as costless profit and celebrates growth figures, but the natural systems that made that growth possible decline quietly.
Dasgupta’s call to put nature on the balance sheet is timely precisely because it indicates a rapidly expanding movement in policy that is beginning to give the natural world the accounting treatment it has often lacked.
Dasgupta suggests a few methods that could be used to factor natural capital into economic assessments.
First, embed ‘inclusive wealth’ — a metric that combines the economic value of nature, human skills and experience and physical goods — into national ledgers. For example, the United Nations’ System of Environmental Economic Accounting and the World Bank’s Wealth Accounting and the Valuation of Ecosystem Services initiatives track not only produced (human-made) assets and human capital — the education and skills of a population — but also natural resources such as forests, soils, rivers and reefs.
Second, he suggests steering capital towards assets that replenish rather than deplete, such as replanting trees that reduce soil erosion along a river bank or investing in wastewater management to promote aquatic life that might otherwise be affected by sewage dumping.
Third, it is important to recognize conservation as an investment in prosperity by treating ecosystem restoration, species protection and pollution control as forms of capital maintenance, rather than discretionary spending.
Yet, it becomes clear when reading On Natural Capital that turning his blueprint into practice will be a challenge that will require political will, fresh valuation methods and accounting systems that make the invisible visible.
Related to this topics is the book of “Becoming Nature Positive”
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