The Economics of Biodiversity

The Economics of Biodiversity: The Dasgupta Review was published in 2021 and commissioned by the United Kingdom Treasury. Led by economist Sir Partha Dasgupta, the comprehensive 610-page report examines how economic systems contribute to biodiversity loss and why this loss threatens long-term human wellbeing, health, and prosperity.

The Review’s central message is that economies are embedded within nature, not separate from it. Biodiversity and healthy ecosystems support food systems, clean air and water, climate stability, and livelihoods. Yet modern economic activity treats nature as if it were limitless, leading to rapid environmental degradation and increasing risks to societies worldwide.

A key problem identified is how economic success is measured. Common key indicators such as gross domestic product track short-term production (output) but ignore damage to ecosystems (collective cost). As a result, countries can appear wealthier while running down forests, fisheries, soils, and local species in the process. The Review proposes measuring “inclusive wealth,” which accounts for:

• Natural capital, including ecosystems and biodiversity
• Human capital, such as health, education, and skills
• Produced capital, including infrastructure and technology

The Review also highlights the health consequences of biodiversity loss and pollution. Air and water pollution are shown to impose major health costs, particularly in low- and middle-income countries, through increased illness and premature death. Biodiversity loss, combined with land-use change and global movement of people and goods, is also linked to a higher risk of infectious disease outbreaks and pandemics.

In contrast, the report emphasizes that high biodiversity can be a critical source of health benefits. For example, many modern pharmaceuticals—including antibiotics, antivirals, and antiparasitic drugs—are derived from natural compounds. A large share of new drugs developed in recent decades trace back to biodiversity. Vast numbers of plant, marine, and microbial species remain unstudied, meaning biodiversity holds significant “option value” for future drug discovery.

The Review also underscores the importance of traditional and natural medicines, which millions of people rely on as their primary form of healthcare. Ecosystem degradation threatens these knowledge systems and the species they depend on, while weak protection of Indigenous knowledge allows economic value to flow away from the communities that have stewarded it for generations.

To address these issues, the report calls for transformative change, including:

• Embedding nature into economic and financial decision-making
• Reforming subsidies and prices so they reflect environmental costs
• Investing in conservation and ecosystem restoration
• Improving education and public understanding of humanity’s dependence on nature

Overall, the Dasgupta Review argues that protecting biodiversity is not only an environmental priority but an economic and public health necessity. Aligning economic systems with the realities of nature is essential for sustaining wellbeing, resilience, and opportunity for future generations.