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Reported by Paul Michael Brett, CSaP Policy Intern
Wealth Economy attempts to measure ‘what matters’ - the ingredients of economic welfare – such as natural capital. Are there ways in which we can measure the value of so-called natural capital? How does natural capital intersect with other forms?
In the sixth seminar in the ‘Levelling up’ seminar series, Dr Matthew Agarwala delivered a presentation discussing the wealth economy and how it relates to or may inform notions of levelling up.
Dr Matthew Agarwala began by introducing the ‘Wealth Economy Project’ in conjunction with The Bennett Institute, highlighting that the project’s goal is “to bridge the gap between what economists do… and how they think about real world policies.” He continued by describing that the entire world economy operates within the biosphere and that when nature is degraded, it degrades the biosphere and constrains the world economy. In detailing different forms of assets within the biosphere, he stated that “investment in nature is investment in social capital... they increase the returns to all other assets.”
“If you are running a bakery, and you are running out of flour, milk and eggs, tomorrow's pie will be smaller. It is the same with the economy. If you are running out of the core ingredients of economic prosperity, then tomorrow's economic pie is going to be smaller,” emphasised Dr Agarwala.
Dr Agarwala outlined as core economic ingredients - the first of which is natural capital – the ecosystems that mitigate floods, storms, purify air and provide space for outdoor recreation. The second form of capital is human capital, or the health and skills of the population, the third – physical capital, or infrastructure. Going into more detail for the fourth – social capital, Matthew Agarwala discussed it as the trust in governments and the ability of communities to overcome collective social problems He added that where we degrade social capital there is distrust and this is increasingly a problem in the modern would as we head into a digitalized economy. Lastly, Dr Agarwala detailed institutional capital, the quality, reliability, and responsiveness of governance, highlighting that “when we fail to measure these things that really do make up the core ingredients of economic prosperity, then we start making decisions based on badly incomplete information.”
“We know that air quality has a huge impact on cognitive ability and capacity,” Dr Agarwala noted. The natural capital value from the UK is around £1 trillion and can have a positive impact on other capitals such as infrastructure. We should not exclude natural capital from our economic discussions, he suggested. He also noted that environmental investments depend on levels of natural capital, emphasising that “we need to invest in upstream environmental assets that will keep the infrastructure working in the conditions we expect to see in the coming decades.”
Finally, Dr Agarwala discussed the question of the definition of ‘levelling up’ which has been considered previously. He stressed that “whether we call it levelling up or a ‘well-being economy’, what we need to start doing is using these assets to improve people’s lives”.
The 2021 CSaP ‘Levelling up’ Seminar Series aims to bring Policy Fellows from different departments together to discuss the challenges of addressing unequal economic performance within regions of the UK. This year's series is hosted in partnership with the Bennett Institute for Public Policy. This series will help to stimulate the policy debate around levelling up by exploring key areas such as the role of infrastructure, the importance of data and measurement, the relationship between trust, social capital and levelling up, and the impact of a transition to a net zero carbon economy on left-behind places. It will also look outside of the UK for examples of how other countries have managed regional inequalities. You can follow the Bennett Institutes blog series here.