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LSE: Public lectures and events
Can natural capital be replaced? How the weak versus strong sustainability divide will shape our common future
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Podcast Host
Welcome to the LSE Events Podcast by the London School of Economics and Political Science. Get ready to hear from some of the most influential international figures in the social sciences.
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Hyun Vang Shen
Welcome to the London School of Economics and Political Science and thank you for joining us for this public event tonight. My name is Hyun Vang Shen, professor of Geography and Urban Studies and also the Head of Department here at the LSC for the Department of Geography and Environment. I'm very pleased to welcome Professor Eric Neumeyer, both to those joining us online and to everyone here in the Sheikze Theater. Before I introduce Eric, a word about the occasion. First of all, tonight's lecture is part of our Department Sustainability Public Lecture series and it also sits within a very special year for us. The 202526 academic year marks the 130th anniversary for LSE and also the teaching of Geography at the lse, which started in the same year as the foundation of the school. So it's a good moment to reflect on how the sustainability questions we ask have only become more urgent. And I promise 130 years of geography does not mean the lecture is going to be 430 minutes, so it's going to be much shorter. This event is hosted by the Department of Geography and Environment, together with the Global School of Sustainability and the Grantham Research Institute on Climate Change and the Environment. Many thanks to all three for their support. Professor Eric Neumayer is LSE's Deputy President and Vice Chancellor and also Vice President and Pro Vice Chancellor for Planning and Resources. He is also professor of Environment and Development in the Department of European Environment, where he has been a faculty member since 1998 and previously served as Head of Department on Economist by Training. Eric's research spans environmental economics, sustainable development, international political economy and quantitative methods, and his work is internationally recognized for its rigor and policy relevance. And I'm very proud to say this, he's also among the world's most cited researchers, According to the 2025 Stanford Elsevier Global Rankings is listed within the top 5,000 worldwide. Tonight's lecture explores the foundational question in sustainability. Can natural capital be replaced by other forms of capital? Or are there critical limits beyond which substitution simply doesn't work? It also celebrates this wonderful book that I have here, the fifth edition that came out, weak versus strong sustainability, which was first published in 1999 and having gone through five different editions, the fifth edition having come out last year, which is also available as open access, so you can go to the publisher's website and you can see the Entire chapters downloadable, but you're more than welcome to get a hard copy if you want one. A couple of housekeeping notes for social media. The hashtag for today's event is LSE Event. And this event is being recorded and will hopefully be made available as a podcast, subject to no technical difficulties. After Eric's talk, we'll have time for Q and A. And if you are joining online, please use the Q and A function and include your name and affiliation. We are especially very keen to hear from students and alumni of lse. And if you are here in the theater, those of you at LSE now, I'll let you know when we open the floor. And please, when you do so, please raise your hand and wait for the microphone to arrive. And when you ask a question, please begin with your name and affiliation. And please do not make statement, just a simple straightforward question so that we can accommodate as many questions as we can from the floor. And with that, it's my great pleasure to invite Professor Eric Naumer to deliver the evening's public lecture. Eric.
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Professor Eric Neumayer
Well, thank you. Thank you, Hien. Thank you for the department. It is supposed to be my department, though I've just been up there. Huen has a better office than I have in the center buildings. I wish I were still a member in the department. I saw your common staff common room. That's a dream. It's full of drinks and snacks and everything. I think I'll have to ask Estates to look into how resources are dispatched there. In the Department of Geography and Environment. No, but thank you for the department. Thank you for Grantham Research Institute on Climate Change and the Environment and thank you also to the Global School of Sustainability.
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I could start with a story, but.
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I want to start with some statistics that I think almost amount to a story, as you will see. So this will happen over the course of all of the 90 minutes it will take for this event to run about 7 million more tons of CO2 emissions, including land use change. There will be between 1 and 27 species will become extinct in those 90 minutes. Why 1 to 7? Because we have no real clue. We have no real clue how many species there are, nor do we have really a clue how many are lost day in, day out. About 1000 football pitches of primary tropical rainforest will be lost in these 90 minutes alone and about 1,400 people will die prematurely from air pollution induced illnesses. The list could go on and on. This lecture is about whether what you see there on the slide, whether that matters or not. There is a certain line of thought that shrugs this off and at worst, says those 1400 people, that's just the price to be paid for all the goodies that we are getting with economic development. There's a different line of thought that looks at this and thinks, this is incredibly sad, it's incredibly shocking and it is something we absolutely have to do something about. So this lecture is all about does it matter or not? I think I have been interested in this topic in this issue. Does this matter or not? Ever since I sort of, you know, at the age of 13 or 14, I started thinking about the world. But seriously, I've only really covered it in my PhD thesis. And weak versus strong sustainability is essentially my PhD thesis with some sort of revisions and modifications. The first edition came out in 1999, I think one year after my PhD. The second edition, 2003, the third edition, 2010, the fourth edition 2013. And then it took a really long time because I was really busy doing other stuff, but I was very keen to do one. I'm about to say last, but never say last, maybe, but because I thought it could be the last, I made sure it was open access. So if you need any proof that the LSE is non corruptible. The library, I asked the library, you know, would you pay for the edition to be open access? They said not really. We may give you some money, but you have to pay for the rest. And so I did. Because even if it costs a few thousand pounds, it was important to me. It's kind of a legacy, if you like. It's by far my most highly cited book. I know many liked reading it. So I wanted to just to make it open access for everyone to have access to, not behind a barrier. Not that you have to pay 50 pounds to get a hard copy, I should say. You know what you see here? This nice sort of scrolling through. It's all down to my wife here, Simone Ferreira. Well, she did it on an early morning, in half an hour. I could not have done it on my own. Okay, so the stats that you have seen, does it matter? We need to take a step back and look at what is sustainable economic development. Economic development is sustainable if current development does not diminish the capacity of future generations for their own development. And in economics this capacity is called capital. We typically. Sorry, it should not say forms of natural capital. It should say forms of capital. There's a spelling error there. We typically distinguish four types of capital. Man made capital, human artificial capital. I'll talk about that in a moment. Natural capital and Social capital. So let's look at that man made capital. What is it? It's machines, factories, the physical infrastructure. It's essentially the hardware on which the economies run. What is human capital? It's knowledge and skills. It's knowing what to do with the hardware, if you like. It's the software, if you like. It's called human capital. But with AI you could say it's human artificial, artificial intelligence capital, because that's essentially what it is. It's also knowing what to do. Right. It has enormous skills and it is actually something that I think we will really have to grapple with because the artificial intelligence is just like no other that we have seen in our lifetime. And just as a side remark, it does go to the very heart of what a university is for, what we educate our students for, and how they enter the job market. But that's an entirely different lecture. Natural capital is everything in nature that provides human beings with utility. And I stress with utility, because they are parts of nature that are parts of nature, but they don't form part of natural capital. Think of the SARS CoV2 virus as an example. It's part of nature, but it does not provide utility. So it is not part of natural capital. Social capital is very tricky to define. It's sometimes defined as trust and social network. It's sometimes defined at the more macro, at the aggregate level, as the quality of institutions. It's very, very difficult to measure and therefore almost invariably in any kind of measure that you can find. And I actually will not talk about measures of sustainable development here in the public lecture though I have two chapters on measuring weak sustainability and measuring strong sustainability in the book, if you're interested in. Invariably the social capital is neglected, is ignored. It is just too difficult to measure, particularly to monetize it, to put a monetary value on it. So what is then? Weak sustainability? The book is called Weak versus Strong Sustainability. What is weak sustainability? It is an economic view on the world in which all forms of capital are essentially substitutable for each other. If that sounds abstract, let's make it concrete. It is entirely okay to run down one form of capital, for example natural capital. It is totally alright to extract non renewable resources, to over harvest renewable resources, to destroy ecosystems, to pollute the environment beyond nature's absorptive capacity. As long as, if and only if one sufficiently builds up other forms of capital in exchange and in compensation for it. So as long as one invests in physical infrastructure, one invests in education and knowledge and skills, that is the fundamental idea of weak sustainability. It is therefore also called the substitutability paradigm, because the idea is all forms of capital are essentially substitutable for each other. Here we put a particular focus on natural capital. What is strong sustainability, if you like? It's the opposite of this view. At least to some extent, not all forms of capital are substitutable for each other. There's something special about natural capital. In particular, natural capital, or at least specific critical forms of natural capital are regarded as non substitutable. And this is why strong sustainability is also called the non substitutability paradigm, because of this idea pushing back hard against the idea of weak sustainability, that it's all substitutable for each other. So to make it more concrete, here are three sort of basic, if you like, management rules that would follow from strong sustainability. Use renewable resources such that their stock does not deteriorate. Do not overfish, right? Do not. Do not take out more wood than naturally grows back. And if it can't easily restore itself, do not touch it at all. Do not have constant and large scale default those 1,000 football pitches that are gone of primary tropical rainforest in 19 minutes alone. That is totally against the fuel of strong sustainability. You can pollute, but use the environment as a sink for pollution only to the extent that its natural absorptive capacity does not deteriorate over time. Now, clearly, and I will put put some emphasis on climate change later on, clearly this is not what we have done for a really long period of time when it comes to carbon and other greenhouse gas emissions. But that's just one example, right? There's air pollution, there's water pollution, there's many forms of pollution. And that, if you like, guiding principle or management principle would apply to each and every one of them. Protect nature resources that provide environmental amenities and recreational opportunities. Do not drain wetlands. Do not destroy ecosystems, right? All of these things are regarded as critical forms of natural capital that are non substitutable. It is not all right, in the view of strong sustainability to do all of these things and think it's all fine for future generations because we have more universal universities, because we built these high rise buildings. And the economy that sustains all of this, the physical infrastructure, the man made capital and the human capital, and that we get those data centers now that will produce the human capital that is called the artificial intelligence, because at the end of the day it's nothing else but an artificially generated human capital. Why would one want to go for strong sustainability? Here are three reasons we are largely uncertain and ignorant about the detrimental consequences of depleting natural capital, particularly on a very large scale.
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So I think.
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One of the errors that the proponents of weak sustainability often do is they look at it at the margin and they say, well, but come on, this mangrove here, or this swamp here, or these species here, it does not really matter, does it? And how do we know? Well, we've done that so many times and nothing much has happened. But that's just looking at it from a marginal perspective. I think what strong sustainability proponents are worried about is when this gets into very large scale territory. I'll show you later on estimates when the Amazon rainforest might be doomed. And that is not close to 90% of its destruction. Actually estimates are probably well below a third of degradation of the tropical rainforest will be enough for it to switch over into a quasi savanna state. But we are very uncertain about this, right? We don't know and we are ignorant about many of the detrimental consequences of depleting natural gas. If we don't know how many species there are, we don't know what their value is. We don't know what is lost when we destroy them. We think we can just continue exactly the way we have done before. But what if in South America the climatic conditions change totally? Then I want to see the acrobusiness lobby in Brazil, see what they are going to do then. If those rains never come anymore and moisture, the soybean farms and so on, natural capital loss is often irreversible. We know this from species extinction with my students. And I still teach environmental economics and sustainable development, albeit only in the summer school. I always say, But Jurassic Park 5 or whatever, a species lost is lost forever. We will not get them back. We know if climate change is on its way, and we are already seeing it starting to be on its way, much of it will be irreversible even if at a later stage we really reach net zero and even if we take greenhouse gas emissions already out because we have irreversibly changed the geochemical cycle of the atmosphere. Some forms of natural capital provide basic life support functions, ecosystems, biodiversity, the stratospheric or zone layer, the climate. The weak sustainability proponents do not as such doubt that this is true. They would just argue we are far away from the point where it really gets problematic. At these margins, they say the value of destruction, the value of conversion is just higher and it's not really a problem. And to some extent they are true. They are correct, right? I mean, we see the agriculture still flourishing in Brazil and in other South American places. But of course we don't know whether that will still be true if the Amazon rainforest essentially disappears, just as an example. So let's look at the evidence. I haven't much talked about non renewable resources, but here is what I call the quintessential non renewable resource, namely oil. Greek sustainability argues there is essentially no problem in the availability of non renewable resources. It's a bit complicated what strong sustainability has to say on that. If you ask me later on in the case Q and A session, I might talk about it. But in principle it's kind of yes, you can use but build up renewable energy resources at the same time. In a gist, the evidence would suggest that there are enormous reserves of non renewable resources. Of course they're non renewable resources and by definition we would run out at some point. That's in the definition of being non renewable. But not anytime soon. In fact, if anything, there's so much carbon in the ground because of oil, gas and coal, if you extracted it all, we would easily get 5, 6, 7 degrees centigrade. Global warming.
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Audience Member / Questioner
Warming.
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Professor Eric Neumayer
I've just been to Bahrain. I told my guide I want to see the oil and the gas fields. He said, of course, let's go south into the desert. I told him that 20 years ago I had this student who said, Eric, you don't understand all of these figures. It's just about to come down. We've reached peak oil. My guide, he just laughed. He said, look over there, this has just come up. You see that gas field over there? We have just opened that one. And he hadn't even shown me the offshore ones. Yes, there will be peak oil at some point, but it will be because of demand is going down. Hopefully because we are going to restrict hopefully our fossil fuel consumption. It's not at all because we are hitting anywhere near peak fossil fuels on that. I think the weak sustainability proponents are absolutely right. There's no risk of running out of non renewable resources anytime soon. What is true for oil here you can see non energy, essentially metals and minerals. And you can see similarly here, very large reserves. Now don't get me wrong, I'm not saying the extraction of these non renewable resources is without environmental problems, far from it, loads of them.
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Okay.
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But if you just look at the availability of non renewable resources to fuel the economy, I can't really see how that is a problem for the foreseeable future. And of course, eventually one could run the entire world economy on renewable resources. Potentially nuclear, potentially nuclear fusion. So I Can't really see why that would put a binding constraint on economic development, the sheer availability of non renewable resources. Let's look at renewable resources. So I don't have much time, so I can't show you fish and species on what have you. I just picked one. This one here shows you tropical primary forest loss and each between 2002 and 2024. And each year we're losing more of primary tropical rainforest. 2024 was a particularly bad year because of fires. Fires are not necessarily just, ooh, they happen, we don't know. Fires are often human induced, they are set right, they are done with a purpose, with the purpose of deforesting. So what you can see here is that it's essentially a one way street, at least as far as tropical rainforest is concerned. We're seeing more and more and more, not necessarily accelerating at an accelerating speed, I'm not claiming that, but we are far away from mitigating it, from reducing it down to zero. Far away from it. That's not necessarily true for forests in more temperate climate zones where we do see some small afforestation, which is good news for the climate. But certainly as far as tropical rainforests are concerned, it is an unmitigated disaster if you look at it from the perspective of strong sustainability. Pollution. Now, I could talk about air, I could talk about indoors air pollution, I could talk about outdoors air pollution, I could talk about water pollution, I could talk about all sorts of things. But I only have another 10 minutes or 15 minutes or so. 15, 15. So let me just pick one. Climate change. What you see here is the relentless rise in average temperatures in 2023 was the hottest year on record back then. What you see here is the relentless rise in carbon dioxide levels which are now higher than at any time in the last 800,000 years. And what you can see here is that the world is far off track for the 1.5 centigrade, 1.5 degrees centigrade target. Where does the 1.5 degrees centigrade come from? From the, the Paris Agreement, from the Climate Change Agreement. That said, we aspire for 1.5 degrees centigrade. You can just forget about that. I give you everything that I have as a guarantee that we will never ever be able to stick within 1.5 degrees centigrade. In fact, later on I will make the prediction that we will easily get up to 3 or 3.5 degrees centigrade. That would be my best, my best guess. There's just no way. You can see here what it would Take what you can see what it would take, which is very traumatic reductions in emissions to bring us down to that 1.5 degrees centigrade target. And I can't see that happening. Things are leveling off. China may be close to peak admissions soon. I admit all of that, but I don't see the green happening. The blue is what current policies would do. You can see sort of a confidence interval as we, as we call it, because it's just all the uncertainty around what that will do. And in my view that's an optimistic scenario because I think it underestimates the relentlessness of the fossil fuel lobby of boycotting, combating any policies. I think it underestimates negative feedback loops when the permafrost will emit methane and will further enter the atmosphere and will accelerate the warming. I hope I'm wrong. I'm not a climate scientist, I would be so happy to be proven wrong. But that would be my best prediction, that even the 2.5 degrees to 2.9 degrees centigrade is probably an optimistic, overly optimistic scenario. It's not all bad news, obviously. This, this one here shows you just how the cost of providing solar has fallen though. I've just been to Bahrain, to a very sunny place. You barely see any solar panels. I asked my guide why not? The cat ate my homework. I heard the panels, they don't like the dust, it's always dusty. It's just so much cheaper to burn the oil. We burn the oil. That's what he told me. I was a bit disappointed because otherwise it's quite, it's an interesting country and it's not a backward country at all. I was disappointed. So what is the weak versus strong sustainability view or its clash on climate change? Did you know that Donald Trump is the world's foremost proponent of weak sustainability? He truly is. Because drill baby drill is exactly what weak sustainability would call for. Take it all out, burn it and put it into man made capital, human capital. Build those data centers, build those, whatever, all the infrastruct infrastructure that you want and the world will be better off. I think he truly believes it, right? He truly believes that this is actually in the interest of future generations because he is a weak sustainability proponent. He believes totally in the substitutability of all forms of capital. Because given substitutability, any damage from climate change is, is simply dwarfed by the build up of man made and human capital that comes with unfettered exploitation of carbon intensive natural resources. The view of strong sustainability is the Exact opposite. Decisive and immediate. Drastic action now. But why? Most of the academic research and Simon is here, he's done a lot of work on that, has focused on the discount rate. It's a bit technical, I probably don't have the time to explain to those who are non economists here, but essentially the discount rate that we use in.
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Our models to balance the costs of.
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Climate change versus the benefits of, of reducing greenhouse gas emissions, those costs and benefits, they are, they occur over a period of time into the long term future. We bring them all to present values, we use the discount rate. And the discount rate makes a huge difference because of the strong asymmetry of costs of emission reduction, which essentially now if you want to mitigate the against climate change, you have to cut emissions now, but then the benefits from the emission cuts, they occur far in the future. So you have this very stark asymmetry in benefits and costs, which means you apply a very high or high, let me not call it very high because it actually doesn't need to be that high. 4 or 5% is enough. A high discount rate. You find in your cost benefit analysis that Lynn, emission reduction is optimal. You apply a low discount rate and significant emission reduction becomes optimal. So it does depend on the discount rate. So we're going to tell the world this future which looks very different from that future. It's all a question of the discount rate and we have no idea what is the right discount rate. But hey, we're just economists after all. The problem is simply the following. Under the substitutability assumption, it is entirely unclear to me why one would deviate from the relatively high discount rates one can observe in current markets. Current markets would suggest a discount rate of 4 or 5%. If you apply those discount rates, essentially the answer is you do a little bit of emission reduction, but essentially otherwise it is weaker. Sustainability is optimal. So this can't really be it in my view. What else could you argue? Some economists, together with climate scientists and Martin Weitzman is very famous for this, have talked about extreme outcomes, the so called fat tails of the damage distribution function. So these are horrendous question consequences that have a very small probability even with significant warming, but if they did happen, would just be catastrophic, okay? And we know they do exist. I mean imagine as just one example, imagine if the Gulf Stream that keeps the British Isles relatively moderate in terms of temperature were totally depleted and would no longer bring this warm swath of water to northeastern Europe. Temperatures would probably drop by, I don't know, 10 degrees centigrade or something like this, it would make it almost uninhabitable. It's just an example. Okay. As one of those extreme outcomes, I think that is a very good argument. It's an argument worth considering. The problem is that there are other threats that similarly exhibit extreme outcomes and fat tails of the damage distribution function where we similarly don't deal particularly well with them. And if you invested quite a lot of money to mitigate against climate change on the basis of extreme outcomes, then the question would be why wouldn't you need to do the same on these other things? I'll have some here for you. Nuclear war. It's actually astonishing how we have avoided.
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So far.
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Nuclear war. And sometimes it is literally because some colonel in the Soviet army when the computers in 19, somewhat in the 1980s told him launch, launch, he said this doesn't look right. I think this is not an attack by the Americans. This is how close we got to Armageddon. Okay? It is a real issue. It is a real example. Extreme outcome. By the way, I can't remember his name. You don't know his name? He died in poverty, in oblivion. He saved the world. He wasn't even meant to be on service that night. He was called in, right? When the computer said launch, launch because they thought the Americans had sent over rockets, he said no way, I'm not going to do this. Nuclear war pandemics, not the corona pandemic that we saw. That's kindergarten stuff. A much more severe pandemic which can easily happen in our lifetimes. Terrorists with nuclear or biological weapons, artificial super intelligence. These things can also help each other. Even the sea CEO of Anthropic Claude for education that all of you and I have access to. I've just read his essay. He is extremely worried about how superhuman, how artificial superintelligence can help rogue actors to get access onto biological nuclear weapons and create a huge catastrophe. So all, all of these things, we don't deal with them very well. If we deal with climate change on the basis of extreme outcomes, we would then have to take these other threats also much more seriously and would have to devote a lot more attention and resources to those as well. Which brings me to another argument which I think is the most persuaded persuasive argument, namely that climate change destroys critical non substitutable natural capital. Now I could run through is a long list from ecosystem degradation, biodiversity loss, rising sea level, storm surges, desertification and trouts, melting glaciers, the increase of salinity of estuaries, the coral bleaching the heat waves, the floods, the increase in infectious diseases. I probably haven't captured it all. You get the gist of it now. I am not one of those who argues it is very likely that because of these things hundreds of millions, potentially billions of people will die. That is not my argument. I think that is an exaggeration. I think this is really really bad. Don't get me wrong. And this is so not a world I would like to live in. But I don't think it's the end of humankind or close to the end of humankind as extinction, rebellion. Perhaps those representatives would argue you don't have to go this far to look at this and say because strong sustainability is as much a normative paradigm as it is a simply descriptive paradigm, this is not a world we should bequeath to future generations is my view. So it is of Nicholas Stern, chairman of LSE's Global School of Sustainability. This is a quote from one of his more recent articles. In my view, the risks, including the.
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Possibility of the loss of life of.
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Billions there is a risk, extended and severe conflict, destroyed biodiversity and profound loss of quality of life, livelihoods and well being are not well captured in narrow utility based approaches. Neither the standard objective functions in economics nor indeed the underlying models capture the challenges at issue. I'm really glad that Nick made that move away from thinking about it in terms of CBA towards this. I think he recognizes as many of us who work on these issues and are present here today, this breaks the toolbox of standard economics of cost benefit analysis. We need to come with a different frame of mind towards this problem. So in sum, can natural capital be replaced? Weak sustainability easily wins it on non renewable resources. As far as the availability of non renewable resources for fueling the economy is simply concerned. But strong sustainability in my view at least wins it on everything else. But that does not mean that we will therefore get a strong sustainability future. In fact here some predictions since I don't like academics who never make predictions so that they can never be held accountable in decades to come I do predict that with we will see large scale tropical deforestation together with some temperate afforestation I'm less sure about, but I would say more probable than not in my lifetime we will see the complete and utter collapse of the Amazon tropical rainforest. Currently about 14 to 17% is deforested and a lot of scientists believe 20 to 25% of deforestation will be enough to set in motion an irreversible process of degradation where what is called the flying Rivers, the moisture that goes over the trees and moves into far away places, places will come to a halt and essentially the rainforest will turn into a savanna type vegetation. We will see very significant loss of mangroves, wetlands and ecosystems with resulting very significant loss of species and biodiversity. We, we will see further improvements in outdoor air and water quality in rich countries together with further deterioration in air and water quality in poor countries. It's dirty to be stuck in the middle. Environmental Kuznets curve For those of you who are taught in the church geography and environment department, at least I hope we are still teaching, still teaching that I think we will see indoor air pollution improvements and it's one of those examples that we shouldn't underestimate that for a lot of poor people climate change is not their top priority. Indoor air pollution very often is the top priority. When I traveled in Madagascar, we were fortunate that we were allowed into a home of a family in remote countryside little more than a hut really. As we got closer to her kitchen, the plaque sued everywhere. Clearly huge indoor air pollution that she and her family were suffering from. I think we will see an increased focus on plastics pollution, on microplastic and the forever chemicals. And I appreciate this is a very pessimistic prediction, but I stick to my guns. I think we will easily see 3 to 3.5 degrees centigrade warming, possibly even more as the negative feedback loops, well, positive feedback loops if you call it, if you look at it in terms of emissions kick in and the policies that we all hope for, imagine more than anything, just don't come to fruition. I mean, I like Nick and I like his optimism, but he's the eternal optimist, right? And that's great because people, we absolutely need someone like Nick Plessim with his optimism, but I just can't share it.
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It's not what I observe.
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I see, of course leveling off, but leveling off is not enough. Every coal fired power plant that they're still building that will want to run for 30, 40 years to amortize the capital investment. So I just can't see it happening to go down rapidly anywhere near what we would need for the 1.5 degrees or the 2 or even the 2.5 degrees centigrade.
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It is also ironic, right?
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Materially speaking, we've never had it this good. We could easily afford strong sustainability. I haven't much talked about nature. How much would it cost to invest in strong sustainability? It wouldn't cost the Earth. The problem is also not lack of science, technology, engineering and math. In principle, a lot of the technologies we know, we know what is needed. But it's the social sciences, stupid, right? How do we invest for the future in a world of polarized short sighted politics? I have just come back from the us. It is unbelievably polarized. You mention anything on the environment, sustainability, you are a hard left socialist immediately branded. Okay, that is terrible news. If the world's foremost country is caught up in a politics that essentially regards all of the things that we would need for strong sustainability as a sort of communist plot. How do we collaborate internationally and overcome the free rider problem? When the bully in chief, and I think you know who I mean, brings us back to the chaos of an era seemingly long forgotten, Namely a world without a rules based war. How do you solve climate change, the quintessential collective action problem in a world without a rules based order? I have no idea. But aren't we social scientists? Viva lse. Viva Grantham. Viva the global school of sustainability. And lastly but not least, viva 130 years of the Department of Geography and Environment. Thank you very much.
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Hyun Vang Shen
Thank you so much. And in fever Eric. Well given the time, but I thought I would start by asking question couple of questions and it'll be up to you to take as much time as you want, but probably concise enough so that we can actually go back to audience for collecting more questions. So one question is a bit more general and a bit basic just to recap what you were saying and also for those who are a little less familiar. So in thinking about the weak and strong sustainability, and I think you mentioned uncertainty and ignorance in your talk, what will be the defensible criteria for deciding when substitution can be accepted versus when we. When substitution can be accepted versus when we should treat natural capital as critical and non substitutable?
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Professor Eric Neumayer
So let me give you a very general answer on this because it is.
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At the heart of.
- [48:40]
The book as well. I haven't much talked about, but essentially I argue in the book that the two paradigms are non falsifiable, meaning it is not possible to prove that weak sustainability has, it has, is right or is correct on whatever aspect you look at or strong sustainability, you have to make a persuasive case for it. Too much is uncertain, too much is ignorant, too much. You can always find a solution. I'll give you one example. Take weak sustainability is not only a substitutability paradigm, it is also the paradigm of eternal technological optimism. There's always a technological fix to everything, to everything that matters. For them. So if the water becomes scarcer and scarcer, you desalinate and you pump it from afar. If it gets hotter and hotter, you have the agriculture indoors, you do artificial things, you have the aircon on everywhere. Every time you try and make the argument that, look, I mean, it's proven you're wrong, they have a counter argument. And it's impossible, impossible to tell. It's impossible to falsify either one of the paradigms, which is why I never looked at it in terms of right or wrong, but in terms of making a. Making a persuasive argument in favor of.
- [50:34]
One or the other.
- [50:37]
Hyun Vang Shen
The other question I have is based on your expertise not only in environmental economics and sustainable development, which are very much central to the writing of this book, but you're also an expert on international political economy. And think about here in a strong sustainability and thinking about late industrializing economies and mineral exporting economies in a. And if you start thinking about this strong sustainability kind of perspective, all these economies are trying to really industrialize and get into the resource extraction and export for the sake of job creation, for the sake of income generation, poverty reduction, strong state capacity enhancement, and so on and so forth. So we make these arguments to.
- [51:32]
Professor Eric Neumayer
To.
- [51:32]
Hyun Vang Shen
Pursue such strategies of development. But when you kind of think about strong sustainability, then you come into this kind of narrative where this strong sustainability emphasis can be acting as a defective constraint. And it comes down to the question of the usual recurring issues of who bears the cost and who bears the opportunity cost, and so on and so forth. So what would be the kind of industrial development strategy that can be thought of from that in a strong sustainability perspective?
- [52:04]
Professor Eric Neumayer
Absolutely.
- [52:05]
It's a very good observation because what makes collective sense does not necessarily make egoistic national sense, at least not in the short run. And of course, still relatively po. Poor countries absolutely make this argument. You know, why should we restrict our own economic development? Why should we restrict our fossil fuel consumption? You have extracted all the, you have consumed, you have consumed all these fossil fuels in the past. You have gotten rich this way. Now you're telling us that can no longer go on. I mean, this is essentially what a country like Brazil that I know well because my wife, who is here today, is Brazilian. I know it quite well, which is why you need, you need a collective action, right? This idea that you could overcome these sort of issues without countries coming together and overcoming that free rider problem is absolutely spot on. I mean, take climate change. The problem is that greenhouse gas emissions. Look at it from the perspective of the Americans it kills, if we just look at people, it kills people elsewhere. Far in the future. What's the incentive to do something about it in a four year cycle? It doesn't kill Americans right now.
- [53:47]
Right?
- [53:47]
Doesn't kill Americans and doesn't kill them right now. Don't get me wrong, you do see some action. Actually we've just been to the, that's why I was in the US We've just been to Arizona State University and their long term president told us forget about that guy, okay? Forget about it. Look at all the stuff that is happening all over the United States in the cities, in certain states. So stuff is happening, okay, because some like here in Western Europe have taken it seriously, have taken it on, but have taken it on to a very large extent against sort of narrow minded rationality. I mean we've still, you know, we are still doing it, but we're now getting, we're now getting big flack as well from the, from reform uk. Right. I mean Richard Tice has already said all this net zero is absolute nonsense. That the first thing that's going to go once we seize power, so this goes back, you know, it doesn't kill Brits right now. So what's the incent to do something about it? So you have to, you have to be a bigger and better person to do something about this. Which is a huge challenge for any politician. Which is why you know, when I sat there in a polarized world of short term politics that's devastating for a long term collective action problem like mitigating climate change, the air pollution that we see on the street, streets that I'm less worried about because there's clearer the incentives for politicians to do something about it because it has immediate, maybe not immediate, but you know, it has tangible positive consequence that you can point towards. You know, vote for me because I will bring down. And even if there's initial, initial opposition against it, like against Sadiq Khan's ultra lower emission zone, now the evidence comes out how good this has been, how air quality has improved and therefore how fewer people have died as a consequence or have been debilitated by it. And I think politicians can run on such arguments, can run on such evidence and can win elections with such evidence, but it's really hard to do with something like climate change.
- [56:19]
Hyun Vang Shen
Well, we can open it to the floor to the audience here and we perhaps collect two questions at once. So maybe one in the middle here, post row and maybe one at the very back and there. So here in the center. Yes, thank you.
- [56:38]
Podcast Host
Hi I'm interrupting this event to tell you about another awesome LSE podcast that we think you'd enjoy. Lseiq asks social scientists and other experts to answer one intelligent question like why do people believe in conspiracy theories? Or can we afford the super rich? Come check us out. Just search for lseiq wherever you get your podcasts. Now back to the event.
- [57:05]
Audience Member / Questioner
Hello, thank you, thank you for talk. My name is Diana, I am an Alessia and I want to ask you what is the best way to operationalize strong sustainability without being a communist? What is the best way to integrate natural capital in economic models when we have a lot of uncertainties, not only in the discount rate, but also in the elasticity of substitution between factors? Also, the economic valuation of ecosystem services is still very low. If we continue, compared with the gdp, it's in some countries it's almost nothing. So how we can make sure that policymakers are going to consider natural capital if it's very difficult to demonstrate in economic models that it is important?
- [57:51]
Hyun Vang Shen
So let's click one more. Another question there at the back. Yes, green short sleeves.
- [58:00]
Audience Member / Questioner
Thank you very much for the talk. I would like to come back to the part of the talk when you talked about the discount rate and you had this very good quote of one of your colleagues who said that all the models that have built on the discount rate and on the cost and benefit analysis should go. And essentially, if I understand you correctly, what you're saying is that not everything can be measured in terms of money, which is what is discounted. And to someone who is not an economist, it's quite an obvious thing. But probably for economists, people are used to measuring everything with one thing, money. What kind of models and what kind of analysis do you think would be possible there? Thank you.
- [58:51]
Hyun Vang Shen
Maybe start with those two and then.
- [58:57]
Professor Eric Neumayer
Two very, very good questions. I'm not entirely sure I totally got the first question, but let me try.
- [59:05]
And paraphrase it and then hopefully you'll tell me whether I got to the gist of it.
- [59:11]
If I understood you correctly, you asked me whether a capitalist market economy's competitor compatible with strong sustainability. And the answer is in principle, yes. At least it can be made perfectly compatible in the sense of we absolutely do not need any planned economy or anything that remotely sounds communist to get to strong sustainability. We have all the tools, market based instruments, from carbon taxes to tradable pollution plan permits that would work, that could achieve strong sustainability, that would have the enormous advantage that if the incentives are set right, let all those people who relentlessly search for profits now, search for things that are profitable in the service of strong sustainability. I have zero problem with that. In, in fact, I think if we could get there, that will be the solution. Because whilst I said it's not stem, I exaggerated. We still need a whole range of new technologies. We still need whole new ways of decarbonizing and so on. And these technologies, they will only come if the incentives are right. The incentives are not right. If at one point there's the Inflation Reduction act with all sorts of incentives, not good ones, subsidies, more than taxes. But hey, it's the U.S. right? That was the only thing that Biden could get through Congress. And then four years later it is drill baby, drill. And he's three more years to go, right? I met you supposed to the EPA still exists because he could just abolish it, okay? He's already made very clear left, right and center. All that environmental nonsense, all that climate change hoax, all of this needs to go right. That's not conducive to strong sustainability. But it's not an argument against the capitalist market economy as such. The trick is to get the political system to do these policies and then the market system would adjust to it. And in fact not only would it adjust to it, it would be its best.
- [61:36]
It would be its best engine.
- [61:38]
To achieve the strong sustainability. But you don't get it without the framework policies in place, taxes, pollution permits and so on. I have no doubt we don't need to go into a communist scenario which by the way doesn't work work anyway, has been tried time and time again at all sorts of levels, is totally defunct, as you can see, all over.
- [62:01]
All over the world.
- [62:03]
What can economics do? Is a really good question. So in my view we should stop pretending we know what is optimal. We know we do. We put everything into a cost benefit analysis and we come out with the optimum answer. That to me is pointless, not in general, but when it comes to something as big as climate change, because it just breaks the toolbox. It's too many, too big, too uncertain, too unknown, too little that we can actually model really well. So what can we do? We can still do, absolutely. We can do as economists, okay, tell us what, what sort of warming you want, what greenhouse gas emission stock you want. We will tell you a the most efficient policies to get there, the most market friendly policies to get there. And we can estimate, roughly speaking, how much that costs. And then you can make up your mind whether you are happy to invest this money or not. We can also Try and think about, is this not just a cost, but could this actually be a benefit to the economy? I mean, again, Nick Stern is the internal optimist. He says we should absolutely have drastic and immediate climate action now. And actually it will be good for the economy. Right. It will be another industrial or post industrial revolution, if you want. I'm a bit on the fence there. I can see his argument. I'm not so sure. But every estimate that we have is since we're going to be unbelievably richer in the future anyway, what is the problem of investing? I mean, other than political economy problems. Don't get me wrong, it's a huge problem. But if you look at it simply from where we would be, materially speaking, what is the problem if we even had to invest, I don't know, 3 to 4% of GDP every, every year to prevent. To get us to the 1.5 degrees centigrade.
- [64:22]
Right.
- [64:22]
So instead of being double as rich as we are now in, I don't know, 40 years, we would be. So in 43 years. Is that a big, Is that a big thing?
- [64:33]
Clearly it is not. Right?
- [64:35]
I mean, surely in my view, future generations would welcome that having a world of 1.5 degrees centigrade rather than the 3.5 degrees centigrade and having to wait another four or five years until they are double as rich as we are now instead of four or five years earlier. But that does not mean it's easy to get there. But these are all the things that economics could do. I have to keep my answers shorter. I know. Here I do.
- [65:03]
Hyun Vang Shen
It's for the sake of more audience members to ask a question. So let's do another round of kind of questions. Maybe three this time. So maybe take one from here and another here in the front row or second row and then over there. Yes, at the very end. Go ahead.
- [65:21]
Audience Member / Questioner
Thank you. My name is Emily and I'm an undergrad student in the department. I just wondered you've kind of grappled with this idea of collective action, but from recent COP summits, failed UN goals, like where is this kind of spur of action going to come from? And is it ultimately just down to the nation state governments to figure out their own plans?
- [65:46]
Hyun Vang Shen
Okay, another one here in the second row.
- [65:50]
Audience Member / Questioner
Thank you. I'm Rohit. I am Program Director for Climate and Environment at UBS Optimus Foundation. I couldn't have noticed the time series that you showed on carbon emissions. Around the same time the Bretton woods system was dismantled, the world moved away from Gold standard to fiat currency which meant capital available in the market is not limited to the quantity of gold a currency country holds. And if we look historically, capital was related to land. So people went to war over land. That led to land based empires and now after that industrial revolution, sea based empires because gold was the measure of capital. Now we. Do you think there is a correlation between the amount of money that is in circulation and the amount of money that the planet can sustain? That is, is there a carbon limit to economic growth which is counter to what many economists would believe, and I'm not one, that there is potential for unlimited growth and that influences economic policies, fiduciary duties of pension funds, for example, because they have to keep growing and to recognize that is there a planetary limit to economic growth? Thank you.
- [67:10]
Hyun Vang Shen
Maybe one more. The third or fourth row in the center over here. Yes, yes. Raising the hand just now. Yes, that's right.
- [67:24]
Audience Member / Questioner
Good evening sir, My name is Ashish and I am an aerospace engineer. So as per my limited knowledge, I believe the industrialization was first begin from Britain. So industrialization was first begin from Britain. So countries like Britain is I think more responsible for the climate change. So what Britain is doing and I think they should come ahead and contribute and help to the poor nation to tackle the climate change. So what Britain can do.
- [68:00]
Hyun Vang Shen
Thank you.
- [68:02]
Professor Eric Neumayer
Three extremely astute questions. Again, let me start with the collective action problem. So there was one international treaty with.
- [68:11]
Binding emission reductions of sorts, the Kyoto.
- [68:14]
Protocol though it only binded essentially. Well, essentially it only bound Western European, western developed countries. The eastern Europeans were in there, but they were selling hot air to the western Europeans. And that was not successful in the sense that there was never a post Kyoto treatment despite the conference of parties meeting every, I don't know, do they meet every year or every other year? I mean it's pointless anyway. Biggest waste of everything happening there.
- [68:54]
So that clearly didn't work, right?
- [68:55]
Which is why the Paris Agreement, the Paris Agreement essentially says well, we'll never have collective action as such in terms of binding emission reductions. Let's just see what we can voluntarily achieve, okay, by each one being a good guy. And we remind each one when you're no longer the good guy, we say oh, that wasn't very good. Can you come back into the camp of being the good guys that had some modest progress given that the collective action wasn't feasible. But of course the US is the biggest problem in some sense. If it weren't for the US then I think there would be hope because at the end of the day. You don't need to bring 200 nations, sovereign nation states on board. You need to bring a dozen, maybe two dozen of the big emitters on board. Right? China, India, Brazil, Indonesia, I could list a few more. Europe and North America. When you have, however, the problem that the foremost country, the most powerful country in the world essentially says, and do not think this is just Trump, this is pervasive in the entire Republican Party, certainly those that are in Congress and in Senate, that it's all a hoax, then you have a real problem because then you have one of the biggest players, though it's not the biggest emitter of China is now the biggest emitter, essentially no longer playing ball. And then I think you find this really, really difficult. I still think there is some hope that the rest of the big players can come together. Much will depend on China and India. Now. I think India, China may have seen peak emissions. I think India is still very much on the upward trend because in per capita terms it still has relatively low emissions. And it essentially makes the argument of you have caused that problem. That's how you've grown rich in the past, now it's our turn. It's really difficult to overcome this argument.
- [71:17]
Audience Member / Questioner
Argument.
- [71:21]
Professor Eric Neumayer
Is there a carbon limit to growth? No, I don't think so. I think you could have net zero and still quite significant economic growth. So I don't think the two are entirely incompatible with each other. Don't believe that one bit. It may be lower economic growth, but not zero or negative. And that's actually a good message because the message is essentially it's not either a safe climate, if I can put it in these terms, or material progress. That is a false trade off in.
- [72:02]
The interest of time.
- [72:03]
Let me leave it at that. The point that you did is a really interesting one and one that I have actually published on many, many, many, many, many years ago, I think maybe three decades ago. Now. That just goes to show how old I am. I have published an article in Ecological Economics called In Defense of Historical Accountability for Greenhouse Gas Emissions, which essentially makes this argument that those countries that have historically caused most of the problem, and keep in mind carbon emissions remain resident in the atmosphere about 100 years. That those countries have a special responsibility to help others in that transition, particularly if that transition means don't do what we have done. Okay, but look at how difficult that is. How will you run against a right wing politician that says this net zero, we can't afford this all nonsense by saying, oh, not only should we do all of this but you know, we should have some extra money that we transfer over to other countries to compensate them for their losses. That's really hard to do when you run on an election ticket. So so many things that make sense from a sort of abstract perspective are really, really hard to do when you deal with actual politics.
- [73:40]
Hyun Vang Shen
Why don't you collect some, probably a couple of questions from the online audience, Maybe two questions at the most.
- [73:48]
Online Moderator
We have a question from Isabel Santana, she's a prospective student from Mexico. She asks, in emerging economies like Mexico and other Latin American countries, ESG frameworks are increasingly used to attract foreign investment. However, ESG metrics often rely on firm level reporting and aggregate indicators. Do you think ESG as currently designed aligns more closely with weak sustainability assumptions? And if so, does it risk overlooking non substitutable natural capital in these contexts? And then we've got one question here from Alison Rusko, a recent master student. She says, aren't all forms of capital underpinned by natural capital? Isn't that where we're going wrong with economic theory?
- [74:46]
Professor Eric Neumayer
I mean, it's just astonishing to see how good the questions are. Again, two very, very good questions on esg. Environment, Richard, what is it? Environment, social and governance. Environment, social and governance. Richard is actually the much better expert than I am. But I would say it is essentially a weak sustainability thing. It's not really strong sustainability. In fact, much of it, the critics would argue, is more or less greenwashing that may be slightly too harsh. It is a way of firms to pretend that they're doing something, oh, look how nice we are, look how good we are. Look how environmentally, socially and governance friendly we are. Buy our products, invest in our stocks. Very often when you open the lid, there's very little in there. And because it makes no real distinction, it all mashes it up just like the United Nations Sustainable Development Goals do. It is a weak sustainability framework because it sort of assumes substitutability. So the other question is another really good one. I think that's what strong sustainability would argue. And that's why it would argue that natural capital is special because it is essentially the basis of everything else. It's the economy that is embedded within the wider ecosystem. And the economists just, or the weak sustainability economists just pretend that is not the case, that we can just continue substituting away, run down more and more and more without large scale consequences. And it is exactly the strong sustainability argument that, that fundamentally misunderstands the nature of natural capital. Because all man made capital, all human beings capital, all Social capital is essentially built on and arises out of natural capital would be inconceivable without natural capital. So that was another very good observation here.
- [77:09]
Hyun Vang Shen
I think we have one last question from the audience to collect. Yes, their hands gone out really quickly sir. One, one last question.
- [77:17]
Professor Eric Neumayer
I've been prefer in my answers.
- [77:23]
Audience Member / Questioner
Thank you very much for your lecture. I wanted to come back to a point in the first half when you mentioned that you were talking about how civilizations work. Now there are a number of civilizations, particularly in ancient Mesopotamia, where humanity did biodegradable our natural environment and the resources available to us effectively wipe out their own civilizations. One of the key things that I've drawn from your lecture is that we need to, besides fundamentally changing how the economy works is it is likely that we need, you know, there needs to be some form of fundamental change to human nature. How would you suggest this might happen?
- [78:10]
Professor Eric Neumayer
Million dollar question. So it's really interesting that you say that. I haven't much thought about ancient civilizations and how some of them, obviously not all of them, but some of them may have almost dug their own grave by over exploiting their natural resource base. And I think if anything that should be a warning to us that we don't commit sort of the same.
- [78:40]
Mistake.
- [78:41]
So it's a really interesting thing to say and it would be interesting to study perhaps some of these civilizations in more detail to see what sort of lessons can be learned. Look, I don't believe at all in social engineering. I don't believe we can make better human beings on a grand scale. But that does not mean that we cannot move closer to strong sustainability even though it faces an uphill battle given its often collective action, problems that are difficult to overcome when so the cards are stacked against it. Okay, so let me give you an example of what I think in the longer term societies can do to.
- [79:39]
Help.
- [79:39]
Prepare for a strong sustainability future. So I very much believe in kind of environmental education in both kindergarten and early schools. I have been to a lot of national parks. Whenever I see a group of school children there, my heart opens up. Because I think unless you see, unless you feel, touch, experience nature and get an appreciation of what it is, you are very likely to discount the strong sustainability arguments because all the material stuff is just so nice to have and you kind of forget about, you don't appreciate sufficiently these other things though. You know again, so much interesting evidence is coming out how having access to green space is so unbelievably good for human well being. How being able to enjoy nature, experience nature Smell nature, see it, touch it, is so good for psychological well being. And I don't think it is a coincidence that we see this massive increase in ill being in mental health problems. But you particularly of young generations who are so focused on the material in the sense of the social media, the phone consumption and everything and not enough on the experience of natural capital, which again evidence suggests can be so liberating and so good for human well being. I think a lot of scientific evidence will still come out there to demonstrate that. Or Sefi is here, you know, I mean his work on how air pollution impacts on cognitive abilities, I think it's hugely underestimated. I think so many politicians still don't have the faintest idea of the damage that they are causing by not recognizing air pollution as an example sufficiently. You know, even if you on things like this, even if you did a cost benefit analysis, it would no doubt suggest that you should massively regulate and bring down outdoor air pollution levels because for so long we have totally underestimated the negative detrimental effects. Likewise for the lead that we had so many years and decades in the fuel and so on. So this is just sort of other examples where the ignorance and the negligence is really detrimental to strong sustainability. I'm going on and on and on and on and he looks at me, I have to stop, I have to finish here.
- [82:47]
Hyun Vang Shen
It'd be great to actually see the six edition of the book in the future we can invite you again to mark the occasion. I have to say as a way of concluding Eric is a rare gem or critical mineral, so to speak. I mean you don't typically have a person who is very good at research and who does it really well and who also knows what it's like to run a university in terms of management and who does it also very well. So you probably out of same say you fall into that strong sustainability where you're non substitutable.
- [83:22]
Professor Eric Neumayer
Thank you, that's so kind of you to say so.
- [83:26]
Hyun Vang Shen
It's been a great pleasure to have the opportunity to listen to Eric and thank you to all of you who are here in person and also who are online joining us this evening for this exciting lecture and this very insightful one to have. Thank you Eric very much for spending time with us, sparing time in your busy, busy schedule. I know you just came back from the US to give this talk and I wonder how you actually managed to remain as bright and as clever without that hint of jet lag. So thank you so much for doing this and thank you so much to everyone and please do join us next time when you host another public lecture by the department. Thank you so much everyone and thank you.
- [84:20]
Podcast Host
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