The Economics of Ecological Sustainability

Stanislav Shmelev, the director of Environment Europe Foundation in Oxford, discusses the many dimensions we need to consider when preparing our cities, businesses, and economies to the demands of ecological sustainability.

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Rob Johnson:

Welcome to economics and beyond. I’m Rob Johnson, president of the Institute for New Economic Thinking. I’m here today with a brilliant scholar. Stanislav Shmelev is someone who’s interacted with INET at Oxford through being chosen by INET and Handelsblatt [newspaper] as one of the four most promising young economists in the world. And at least relative to my age you’re young, but quite experienced by this point. He holds a PhD from 2003 at a university in St. Petersburg in ecological economics and mathematical methods. He’s the founder and the director of a group called Environment Europe, which has put out many, many things with some beautiful works, most recently. Sustainable cities re-imagined, ecosystems, the green economy reader. He’s recently written a paper that I found quite fascinating with doctor R. U. Ayres. And he said, “I believe this calendar year of 2021 on the creation of destruction of national wealth our financial collapse is endogenous.” Environmental work, financial work, there’s so many dimensions. And we’re at a time where I will say that I often refer to music and what inspired me was, when I was doing the background, there’s an old song by the Moody Blues called the question. And it said, “I’m looking for someone to change my life. I’m looking for a miracle in my life. You could see what it’s done to me to lose the love I knew. Could safely lead me to the land that I once knew. To learn as we grow old secrets of the soul. It’s not the way you say the things you do. It’s the more, the way you really mean it when you tell me what will be.”

There is so much yearning right now. In other words, the world is waiting for you. There was a paradigm people clung to and all through the pandemic, through the environmental crisis, through the crisis of water and the problems of coastlines and the oceans and through financial instability. I don’t want to get too complicated with a whole lot of people saying, “What is going on?” And I think that sets the stage for someone with your independence, your dexterity capacities with math and modeling are far beyond the traditional paradigm. And I want to thank you for joining me today in exploring this very confusing and very difficult realm in time.

Stanislav Shmelev:

Thank you very much. It’s a great pleasure.

Rob Johnson:

So, Stan, let’s talk a little bit just about what’s on the top of your agenda right now. What issues do you really want to explore, embrace, or for that matter, have explored embraced and want to illuminate for our audience and for the world at large?

Stanislav Shmelev:

I guess the six key topics have been central in my work and still, well, deserve a lot of additional attention. And this is probably what I’m going to be publishing for you in the next few years. These topics are first of all, multidimensional assessment of progress for countries, companies, cities and regions. It’s the subject of ecosystems and biodiversity. As you well know, we are literally destroying the planet and over 60% of our existence have been lost since 1970, according to the WWF. The third topic is smart and sustainable cities. It’s a fascinating subject because a lot of us live in cities. Therefore, cities can be those points of leverage where doing things right, we could help solving half the world’s problems. It’s also a problem of climate change and renewable energy, which I published a few things about. The issue of circular economy and sustainable waste management and the new interest in decision-making and also new sustainable business models. Because ultimately, whether you like it or not, businesses will have to play a major role in getting us out of this mess.

I don’t see it otherwise. And the sooner, the better, they realize that there is a new way. And there are examples, of course. We’re not going to be talking about it in too much detail, but a B-Corporation comes to mind, they are acknowledging and encouraging the work of those businesses that really think outside the box. So not just profit maximization, but other things as well. And I would say that this going or looking outside the box, has been a major paradigm in my whole career. I’ve been looking at interdisciplinary interactions and things that are not explained very well, at what goes or what lies beyond GDP using the metaphor that is currently on everybody’s minds. And starting from the work by Herman Daly, who was one of the first to actually conceptualize the general model of economy environment interactions.

It’s a very early piece, which is always forgotten now. It’s a paper from 1968. And later on, Herman Daly proposed an alternative to GDP where he corrected it for certain things that either shouldn’t be there or should be included and haven’t been. So this was called the index of sustainable economic welfare. And inspired by this I, in fact, went a step further and proposed a new set of methods, which use multicultural decision aid tools and multiple indicators of macroeconomic performance, not just in economic terms, but also in environmental and social terms and bringing it all together to really see what is the true progress that certain countries are making and whether the things are going forward or backward on the balance of evidence.

Rob Johnson:

So in your work, let’s dive in a little bit. Sustainable cities. I live in New York. There’s so many things going on and so much what you might call in the realm of orthodox economic language, extra remedies are pervasive and public goods are, how would I say it? Much needed. But that’s too simple. Let’s go to sustainability, how it relates to environment, how it relates to quality of life.

Stanislav Shmelev:

Well, you can recall Tolstoy, in relation to cities because, truly, “all families that are unhappy, are unhappy in their own ways.” In the same fashion, there are no two cities that are alike, even if they have the same population, the same level of economic development and so on. Because the truth is in the details. There are many, many aspects of urban development that need to be taken into account to truly understand how cities work and what could we do to make them more sustainable. So in our work, we designed a large database, which at some point included about 140 global cities from all continents. So Australia, Oceania, South America, North America, Europe, Asia, Africa. And we describe these cities with the help of 20 plus metrics of their performance, including economic dimensions. So things like gross regional product or unemployment or inflation. Two things, like the social realm, life expectancy, the level of education, the gene index measuring, the disparities between the rich and the poor.

In the environmental dimension, we look at per capita CO2 emissions and the air quality, the amounts of waste being recycled and so on and so on. We also introduced recently the so-called smart dimension where we look at the speed of the internet, the smart infrastructure, and so forth. All these dimensions are interlinked and work in miraculous ways together. So what we’ve done, we created a framework for the sustainability assessment of these cities and figured out which cities perform better than others, everything else being equal. Surprisingly enough, for the set of global cities, these are San Francisco, Stockholm, and Seoul. Not necessarily in this order. But very different cities on different continents that developed different strategies to address these issues. And there could be a whole host of approaches to make a city more sustainable.

Actually, we’re planning to offer some consultancy advice for those cities who are willing to improve their performance based on the knowledge that we’ve accumulated and starting with very simple things. So what determines a city’s per capita CO2 emissions? Actually, there’s a whole range of factors. You could look at the share of coal in the energy mix. That’s the simplest one. We have proven that it’s statistically significant determinant of CO2 emissions. You could look at the renewable energy share in the energy mix. It also plays a role. You could look at policy measures, such as carbon taxes. They also have a role. It might not change a situation dramatically, but the effect is positive and statistically proven. There is a massive factor which people tend to overlook, which is the percentage of all trips that people make using walking, cycling, and public transport.

Actually, I would argue that this measure alone is on the par if not more important than transitioning from coal to renewable energy. This is what people most of the time neglect. So we look at public transport systems. We look at the cycling infrastructure. We’ll look at how city centers are pedestrianized. Some of the earliest examples of pedestrianization come from Swedish and Danish cities, such as Stockholm, Gothenburg, Copenhagen, and a few German municipalities. And actually this shows in numbers because Swedish cities are very high up at the top in the global ranking. So there are other things as well. For instance, recycling rate. Surprisingly enough, and I’ll give an extreme example, the city of Hamburg, where about 50% of electricity is produced using coal has a very high recycling rates. You would think it’s a really good thing, but it turns out that recycling requires more energy and this energy has to be clean.

And if this energy is not zero-carbon, which is most of the time the case, then adding additional recycling, additional percentages of recycling is actually capable of increasing your CO2 impact. Very counter-intuitive result. Most people don’t understand it, but the message is very simple. Clean your energy before increasing recycling rates. This way, you will save the world faster. So that’s just a simple discussion about one specific dimension, the CO2 emissions per capita, that we were able to track. And we’re starting to work on a large sample of European cities and regions going into much more depth in terms of how these things work. The book that you referred to, Rob, Sustainable Cities Re-imagined, was a very collaborative piece because a lot of my former masters students from various universities, Edinburgh and Vienna and other places, have taken part as co-authors.

And we were able to look at a whole range of cities. The cities of the global south. The cities of North America and Europe. The global sample and so on and so forth. So this is a really lovely book. And actually, we were offered a chance to put it together at a UN world open forum in Kuala Lumpur. And excitingly enough, we were just on time before the pandemic hit on another world open forum at the UN to launch the book. So it was officially launched at our last engagement of 2020 in Abu Dhabi after which everything was shut.

Rob Johnson:

Well, I guess the simple question I’d ask before we move on is, if you had a young family, many of our young scholars are thinking about having a family, where would you want your kids to grow up in the country or in one of these cities?

Stanislav Shmelev:

Well, it’s a difficult question. I would probably like to be in the countryside but not too far from the city, to avoid the air pollution, but to be connected by fast high speed railways. If something needs to be done or because if it is also host tremendous cultural pleasures and to avoid this would probably need a one-sided education for the children. But actually, I would say that relocating to Oxford over 15 years ago now, was the right choice, because Oxford is that idyllic place, which is almost a countryside, but not too far from a large capital city where you could enjoy your museums, theaters and everything else.

Rob Johnson:

Yes. There’s, how would I say, there’s cultural pollution as well as environmental pollution that has to be inoculated against. Now, in the anxiety with the present time, many people are saying, well, that’s fine about this city or that city, but some of them may be underwater. Places like Miami or Manhattan in New York. Others are saying the upper atmosphere and so forth may deteriorate. So it doesn’t matter where you live. I have a very strong sense, this UN report that just came out since you and I last talked, that people are saying, it’s coming and we’re not doing enough. It feels like the wakeup call is here. What do you see as the sources of resistance to embracing this challenge, analogous to war preparation?

Stanislav Shmelev:

That’s a difficult one. I would definitely agree with the statement that not enough is being done, because if you look even the most developed countries, you still see that the railways are not running on renewable electricity. You see somehow this [inaudible 17:10]. You see a lot of people still driving their 4X4’s on petrol or diesel. Lots of issues around the degree of complexity and the scale of the problem is often cited as the hindering factor that doesn’t allow people to actually comprehend, because you need to have somehow solved it in your head. At least a preliminary. You need to understand how different energy carriers interact together. What’s the role of renewable energy? What can you do with the transport sector? You have to have a really hands-on experience of these things to actually see how it would play out in the real world.

Of course, there might be an oil lobby hiding away somewhere. It’s also true and just the sheer power of habit. So that human factor, which in some of our education in traditional neoclassical economics, people were trying to avoid as much as possible. It’s always annoyed me a lot because I wanted to see the real human in the economic models, but it’s a great factor of hindrance. People are looking at their neighbors who happened to drive a big SUV or a 4X4 car, and they want to match. They want to be the same. They want to project importance, wealth, financial affluence. I still don’t have a car, and it’s not just because I failed my exam. It’s also out of deep commitment.

I really think that if you can, of course, when you have a large family, it’s a different matter, it’s much more difficult, but you could drive a hybrid car. There’s lots of options around. And there are unnecessary acts of consumption, shall we say. So probably, this would be my answer. So complexity of the puzzle, the sheer scale of the problem, people are always overwhelmed by what’s in front of them. The lock-ins, some lobbying and also situations where people are consuming unnecessarily things that they probably shouldn’t be consuming.

Rob Johnson:

Well, I’m going to smile a little bit, because I bought a Toyota Prius hybrid in 2006 and I still haven’t sold it. It operates wonderfully. There’s no reason to sell it, but it’s been a great car. Though my daughters, now nine and 12 and getting bigger and wanting to bring friends to the movies and stuff. So it’s feeling a little tight. But perhaps will they have electronic cars on the horizon that will alleviate the space constraint while improving the environmental performance. But let me switch. I’m going to come back to something you said. You said something very important about the need to engage business. There are people who demonize, whether it’s the fossil fuel industry or the transportation industry, but I guess the question is how to channel and how to unlock all that talent, all that expertise, particularly given the timeframe for climate change, but having it be what you might call, directed in a constructive arc, constructive pathway.

Naomi Klein, the famous environmental activist, her older brother, Seth, wrote a book, for which I made a podcast, called, The Good War. And he used the analogy between, Canada now, which was both a consumer and a producer of carbon, and the preparation for World War II, where Canada joined before the United States did. But how they shifted gears. Bill Janeway from my board and very involved in scholarship has written lots about the relationship between technology and society, has a new course. And in the end, he’s talking about how do we mobilize, how does the state mobilize and catalyze the transformation of the private sector so that it accelerates how first it redirects its attention, new bullseye. It accelerates the process for implementation. Bill’s father wrote the struggle for survival, which was about FDR and war preparation. So that’s why I bring this analogy up. What do we need from governments, from the state? What do we need to actualize the power and the energy of business that you described earlier?

Stanislav Shmelev:

Well, I truly believe that business has a role to play in all of this, and this role is actually very important. I would probably break it down into several sub areas where I think the impact could be greatest. It is of course, investment and investment using not just the return, but also additional dimensions. My favorite multidimensional approach, which is now called ESG is a new term. Environment, social and governance approach. There is ample research that shows that ESG investments even give you higher financial returns among other things. So what’s not to like there, right? But it’s still not 100% of portfolios of the pension funds and sovereign wealth funds and as investors private investors as well. So not every bank allows you to invest in ESG fund or gives you such an opportunity.

So that probably will need to be changed very fast. There is another major dimension which is to do with the business model. Now, we all know the traditional formulation of the business model, which actually was carried out not so long ago. The famous book, Formulating the Business Models of 2014, I think there is a new approach available, which is called the multi-layered business model. On one level, we’re looking at everything to do with the markets, competition, the unique selling proposition, constraints, costs, and all the other resources and all the other factors that traditionally part of a well-known business model. But at the same time, we have two extra layers. We have the social layer and we have the environmental layer, where we reflect on the impact of our business operations strategically.

We reflect on how we treat our staff. What is happening in terms of the differences in pay between the highest paid and the lowest paid? What are these security mechanisms? The protections. Are we allowing women back to work without destroying their careers, which as we know, sadly, is happening all over the place. And so on and so forth. And the environmental field, we look at where we acquire resources, how we receive our energy, how we use water, how we travel, how we feed our staff and all the other things that happened with our operations. And we try to reconsider the whole principle of offering a good for sale and trying to move towards more of a service centered approach looking longer term, looking at receiving or accepting used products again for a recombination, reshuffle, or repairment those types of things. Because there is a very popular buzzword out there right now, which is circular economy.

For me, circular economy is never going to work unless we’re going to solve the issue of built obsolescence. Because recycling everything forever, when goods like phones, computers, cars are designed for two years maximum, is equally going to destroy the planet, if we don’t recycle and just throw it away. What will be really the solution is focusing slightly more. I’m being deliberately gentle on longer, more durable products. And of course, building in the secularity so that when something goes out of business, you could extract the valuable elements you could recombine and make sure that it works again

Rob Johnson:

As a guy who grew up in Detroit, Michigan, the echoes of planned obsolescence come to mind as I’m listening to you, where, how do I say, having the car wear out means you need a new one and changing the features. It would be the aesthetic features, inspiring people to want to have… You were referring earlier to what you might call the vanities about cars, as opposed to the functionality. And I think planned obsolescence played into that strategy as well.

Let’s talk a little bit about your new paper with Dr. Ayres on finance and how is wealth generation, and which you might call sustainability or resilience created? And when is the system flawed and performs like 2008?

Stanislav Shmelev:

Well, I have to start with the statement that this paper is really a first important step in a much larger grand scheme of things and we’re planning to do a lot more. The idea was relatively simple to try to empirically trace the possibly overlooked factors that either triggered or didn’t protect us from the financial crisis of 2008, 2009. And we were fortunate enough to get a very large dataset on the U.S. economy going back to the first World War. So it’s really is a hundred plus year data set. So a very good starting point. And empirically looking at the data and very much inspired by the research of empirical economists who actually always reminded us that a lot of economic facts take place in space and in time, which sometimes the traditional economists avoided.

What we try to do was to look at various macroeconomic aggregates, various variables that could have played a role. And we found at least two or three interesting things. First of all, we were able to show that Glass-Steagall Act, which prohibited commercial banks from doing speculative operations was actually important. Of course, it didn’t change things overnight. It didn’t increase wealth in the U.S. by a factor of three, but it has a positive statistically significant impact, which is something that we have to bear in mind and put aside because it’s an important dimension. And then we were able to see that the changes in the oil price were also important as a precondition for the collapse that happened. So there was an increase in the oil price that wasn’t anticipated. Plus of course, we tried our very best to look at the derivatives market.

But unfortunately, actually, if you look even today, the full dataset on all the contracts since their beginning of the early ’90s is not available. So you can’t actually trace and empirically check any potential impact, but we know the scale of the derivatives economy. It outstripped the real economy by a huge margins, by several orders of magnitude, which for me was also always a sign of potential risk or concern. Because financial innovation is brilliant, unless it’s capable of triggering a certain collapse. And therefore looking at the cryptocurrency today, I cannot but recall my paper as a third year undergraduate student when I focused on financial pyramids. Because you could build a very simple mathematical model, which will tell you when you should pack your bags and leave.

And sadly enough, with all the good things said about cryptocurrencies, being democratic being a solution against the traditional financial systems and the government led currencies, so far, I have largely failed to see the reason for this incredible excitement. Because I see massive shortcomings. I see the existence of various so-called forks when the digital currency stopped being so secure. I see hyper expansionary dynamics of the prices of the currencies, which are not connected to any real value as opposed to the value being under the radar and transferring large sums of money without being checked. So there’s lots of delays in processing the fees, processing the transactions. When I saw for the first time the laboratories somewhere in China I think, where hundreds and hundreds and hundreds of computers I use day and night just to match a certain code to process the transaction.

I almost cried. And I asked, why on earth, all this computational capacity, which by the way generates CO2 emissions, the size of Switzerland, the whole sovereign country. Why can’t they be linked to something more valuable? The search of exoplanets, the medical research, the climate modeling, you could equally qualify useful computational time and credit it if you want a certain transaction, because so far for me, looking at how cryptocurrencies work, it didn’t make much sense. So cutting the story short, the paper is available. It’s published in a free access journal called Sustainability. Everybody’s welcome to read it, to comment it, to use it in their research. And we will carry on by looking at other dimensions, by looking at CO2 emissions, by looking at life expectancy, by looking at various other metrics that are part of our methodology for assessing progress for countries over time.

Rob Johnson:

Well, I’m listening. Obviously, INET was born in the traumatic birth experience of the great financial crisis. And scholars like Michael Greenberger, Tracy, he’s at the University of Maryland. Tracy, he was a former CFTC commissioner. The growth of derivatives. And like you said, it all went underground and offshore. And the ability to compile the data on the scale of them, though, we know it’s enormous, was not there. Earlier in my life, I was the chief economist of the Senate banking committee at the time of the 87 stock market crash. At the time, there was a fantasy in the derivative realm, called portfolio insurance, which was a way you could handle your downside. But when the interaction between the futures exchange and the stock exchange in New York started to malfunction. It contributed to what you might call the fear that led to the sell-off.

So I think there are a lot of vulnerabilities there and a lot of things. Richard Vague, who’s still on the board at INET, A Brief History of Doom. He talked about what can you see in the data that tells you when to pack your bags, just like you referred to earlier. So I think there’s a great deal of work there. And I know many people are not yet, how would I say, comfortable that we’ve learned the lessons of the great financial crisis. And there are a lot of people who were very concerned about what you might call the political economy that creates a commodification of design and enforcement on behalf of the people who, what you might call, can take advantage of the mother of all moral hazards by being too big to fail. So I think this is an area that you’re driving into that has a great tool to do with social confidence.

And as I think the financial crisis of 2008 illustrates that was the beginning, not just a loss of confidence in financial regulation, but in governance as a whole. Because the financial sector is always considered in those days, very sophisticated at the frontier at times, very prudent and discouraging us for taking off on unsustainable paths. And then they did it themselves, snap their fingers and asked for $800 billion. And so then I find the, how would I say, when I talk to young people now, the sense of urgency about climate, about gender and race inequality, about the cost of education. Those things captured their imaginations more quickly, but this deeper, which you might call foundation stones of a stable and prosperous society. Then Derrick Turner, Between Death and the Devil, the book that he wrote as an INET senior fellow, illustrates that what else which we’re doing is we’re guaranteeing all kinds of people on the promise that capital flows will generate productivity. When much of it is collateralized real estate, it doesn’t have very much to do with productivity, but the guarantees are enormous.

So I applaud you for reaching back into that realm, because I think it’s still what you might call an unresolved aspect of what you might call the coherent society that we all aspire to achieve.

You mentioned to me earlier Global South and environmental transformation in the Global South. I’ve been involved with a group that INET sponsors, called the commission on global economic transformation. And one of the things that came onto our radar screen, the international office of migration was talking about vast increases, between now and 2075, in the population of the continent of Africa.

While we might say the East Asian development model of manufacturing, infant industry protection, and so forth is challenged by global supply chains, machine learning and automation and climate in equatorial regions like South Asia, like Africa threatens, what you might call the viability of subsistence farming. So all of this looks like, I mean, that’s what you might call the frightening side of the ledger that I see people like Chris Kramer at SOAS or Michael Spence, who’s the co-chair of this commission, trying to see how to bring technology and innovation to, let me say, a different development model. But how do you see the Global South in relation to climate crisis? And what kind of things would you recommend? It’s very hard to adopt a Swedish model for a billion and a half people. But there’s got to be clues contained within the successes that you found that would give guidance to that development.

Stanislav Shmelev:

In fact, I was so keen to come close to these people and to the problems that I traveled numerous times as a visiting professor to countries like Kazakhstan and even Colombia and Latin America to teach ecological economics and to learn how the societies operate and how they work. And what I can report is actually what not many people openly understand and acknowledge. There’s a whole range of countries in the developing world that are already today with zero carbon when it comes to the electricity production. A lot of the hydroelectricity is used in countries like Colombia, Brazil, Nepal, Albania, Bhutan, and many others. And actually, well, the developed world somehow fails to see that. There is another problem, which relates to ecosystems as such. Because most valuable ecosystems are located in the tropics, in the belt where you have so-called countries of the Global South. It’s Colombia. It’s Brazil. It’s Indonesia. It’s Sub-Saharan Africa and India, and a whole bunch of other countries. It is absolutely fundamental that we protect and enhance those ecosystem.

And the conflicts that are emerging are enormous. I was witnessing a story unfolding in Colombia where certain groups were aiming for privatized specific lands that are aligned to a little bit higher than the capital city of Bogota, where they aim to explore for gold. Remember, the famous Eldorado story. Lest they know that these particular regions are performing an absolutely unique ecosystem service or function. They are the high altitude wetlands that are accumulating the moisture from the localized clouds in the air and collecting this moisture and providing the drinking water for the capital city of eight to nine million people. So imagine if this exploration for gold, which is extremely valuable, economically would have gone ahead. This whole city of Bogota could have been deprived of the source of drinking water and for all the hospitals, all the kindergartens and all the nine million inhabitants, it of course wouldn’t have been an easy challenge.

So lots of discussions. Lots of discussions about regarding ecosystems conservation and the so-called developing world. When I was giving a lecture at Cambridge once, somebody came up to me and said, “Well, I’m from Ecuador. We want the global community to pay us not to extract oil and to develop our national park.” I said, “Don’t do it.” They said, “Why? We have come up with a massive amount, several billion dollars that our national park is worth.” By the way, when I worked for IUCN, international union for conservation of nature and I was tasked with the job of developing a new tool or method for evaluating ecosystems, I came up with a multidimensional, again, the keyword multidimensional approach, which doesn’t convert the value of nature into money. And this is a fundamental point because even the whole concept of value in many other languages than English are multidimensional themselves.

They point towards something as being valuable because it’s rare. Something being valuable because it’s performing unique functions. Something being valuable because it’s beautiful and not necessarily because you could flog it and sell it and get a good return on it. So that’s the first principle. Now, what happens if you let it run and you create an open market for ecosystem services? Well, there is a very good chance that a few extremely rich individuals or group will privatize the whole tropical belt, and we’re not going to be able to control what happens there. That’s one thing. And this is a global public good. The tropical belt still hosts those valuable plants and animals and processes that without which the whole earth ecosystem will collapse and we’re not going to survive. So my arguments in relation to Ecuador were very simple. I said, “Well, imagine the price of oil changes. Imagine it triples. That will mean that you will have to cut your forest down and destroy your national park, because nothing will save you. You will have a figure stamped in court that some clever economists have calculated for you several billion dollars, but that’ll be it. You wouldn’t be able to object.” So from my point of view, monetary evaluation of nature is not a solution to the problem, right? In another discussion and argument arose, what do you really want? To sell an asset or to protect it? If you want to protect an asset, you might figure out a slightly different set of approaches. And this is actually why I was able to publish this a rather unusual volume. It’s an album of photographs called ecosystems.

I was helped in this difficult task by several good people, including Dr. Joachim Spanenberg, who kindly wrote the introductions to each chapter and some designers from University of Reading who helped to put it together. But the main message is very simple. The world is multidimensional and nature shouldn’t be bought or sold. It performs incredibly complex set of functions, which are humbly illustrated by the images in this book. So each chapter is devoted to a particular ecosystem service and from food, oxygen supply, clean water, pollination, inspiration for artists and the sense of place and other types of ecosystem services that we enjoy. This book goes through them all. The most exciting detail is that we decided to use this book as a sort of leverage point to attract the attention of global policymakers and sent it to a few prime ministers and the heads of state. I’m not going to say much about those who haven’t responded, but among those who have responded, we have very interesting individuals and countries.

We have his holiness Pope Francis. We have a president of France, President Macron. We have prime minister of the Netherlands, prime minister Rutte. We also have a letter from prime minister of India, Narendra Modi, and a handwritten note from David Attenborough himself, who said that he has no doubt that this book could be turned into a BBC documentary. Guess what? When I sent it to the BBC, that’s another copy, they have never replied. But I’m greatly persuaded that you need to use other tools than just financial valuation to trigger people’s interests to reach the hearts as well as mind.

And the book was launched at the club of Rome 50th anniversary meeting. The same club of Rome that was set up at the time when the same as limits to growth report was launched back in the early ’70s that used a very complex, but yet elegant systems dynamics model to show that unless we deal with resource availability, environmental pollution, and the growth of population, we are going to face significant challenges on multiple levels and surprise, surprise, even the old authors of the report themselves confirm now that we are still on the wrong track.

So we managed to organize an exhibition of photographs, accompanied by texts from Joachim Spanenberg, in Oxford, and Oxford University kindly gave us space at the mathematical Institute to do that. Unfortunately, the Oxford Times, the local newspaper referred to this exhibition, that’s too highbrow. And the BBC Oxford said that we need to care for the masses, it’s too niche. So I was puzzled to a great extent because I thought, well, hang on a second. Somebody comes up with an exhibition and invites people to visit free of charge, and you prepare to stand in the way just because you think it’s too high brow. I went to the bar in Oxford and the bar man raised his eyebrows and think he said, “High brows in Oxford?”

Rob Johnson:

Well, I would say many different things. First of all, the idea that logic, numbers, statistics is the only way to connect with people, it’s missing a great deal of the, what you might call, magnetic field the world can generate. I recently made a two-part podcast with a very wise man, Dr. Ervin Laszlo and his connection of the spirituality of India with science and the notion of the importance of the arts was very, very central to his, what you might call the vision of wholeness. And at a time when we have to persuade people to embrace an enormous challenge, we need the, which we might call, the retro rockets of both the mind and the heart to get us over the hill.

I noticed in your work and we had talked about you’ve had an exhibit, I think it was called magical realism, a series of photographs. We’ve talked about, you have an upcoming exhibit in Venice. Why don’t you describe that for us? Because it feels to me like you’re reaching into a dimension that very few social scientists either have the capacity to, or the desire to touch base with, but in terms of filling out the full spectrum of awareness, how would you say it? Your mathematical models are more highbrow. Your arts are for the heart minded.

Stanislav Shmelev:

Yes, I would agree. The exhibition in Venice is really exciting because I’m actually very humbled and very pleased because my art was selected as the creme de la creme of contemporary art of the whole world of 2021. There’s only 120 artworks that were selected for this show. It’s called Arte Laguna Prize. And it’s going to be held in Venice at Nacionale de Venecia, where the famous biennale is held every few years. The private view is on the 2nd of October this year. And the exhibition is going to extend until the 24th of October. And now a little bit about the piece that I’m showing. The piece that I’m showing is a square photograph called magical realism from the magical realism series. It depicts an extremely beautiful terrain in the depths of Colombia, the coffee triangle, which presents a few regional challenges.

On the one hand, you see a beautiful landscape. When you look closer, you suddenly realize that deforestation has happened over the space of probably two thirds of the photograph. In fact, those hills were deforested at a very high pace until the moment in the early 1980s, when a very iconic tree called palma de serra, the national tree of Colombia, was suddenly designated as a protected tree and a national symbol. So the ecosystem is supposed to be extremely lush and wild, with spectacled bears, yellow-ear parrots, falcons, pumas and all other animals. I haven’t seen a single one when I was there, because most likely a lot of the diversity has already been lost. So in the ’80s, there were just about capable of freezing the moment in time. But it hasn’t been fully recovered since. And the whole point about two thirds of the photograph depicting deforestation, echoes very nicely with the stats that I’ve quoted at the beginning of this interview from WWF, which said that we erased over 60% about ecosystems since 1970.

And guess what, did we have 100% of 1970? Well, of course not. It was much less than that. So the photograph is a little bit transformed. So the colors were changed, inspired by some beautiful early 20th century full of artists. Some of the books you see here behind me, people like Matisse and Johan and others. And the colors also shout. So you must welcome to visit my Instagram stream, which is called environmental_artists with an underscore, environmental_artists, and see somewhere, below that a very interesting exhibition in Bristol a couple of years ago. I had a bunch of young kids coming to the piece, and I saw immediately that they were captivated. They were pointing the fingers at the Palm trees, arguing very, very intensely among themselves, which you never see to that extent among the adults.

And I was thinking, oh my God, it worked. It finally worked. So this piece is designed to raise a few more brows, to attract attention to the issues of deforestation and the crisis of biodiversity. To illustrate the point that climate change is a big deal, but it’s not the only issue with facing, there’s more. And simply do it in a form that also has the cultural significance. I should add that at our think tank, Environment Europe Foundation, we require additional funding. And one of our innovative business models was to try to sell environmental art to attract funds for much needed research. So if you can help, this will be the best you can do, acquire a beautiful piece of environmental art, which will provide a colorful point of attraction and a talking point for all your friends for years to come and also help us to do the much needed work that needs to be done.

Rob Johnson:

Well, I started this conversation with the song by the Moody Blues of the questions, and I’ll go back to it here to underscore what I experienced when I looked at magical realism and could see this other dimension of what you’re doing. In this verse it says, “Between the silence of the mountains and the crashing of the sea, there lies a land I once lived in and she’s waiting there for me. But in the gray of the morning, the mind becomes confused between the dead and the sleeping and the road that I must choose. Why do we never get an answer when we’re knocking at the door with a thousand million questions about hate and death and war. Because when we stop and look around us, there is nothing that we need in a world of persecution that is burning and it’s greed. Why do we never get an answer when we’re knocking at the door? Because the truth is hard to swallow. That’s what this war of love is for.”

And I think in this desperate time, the fact that you are able to maintain such a vigorous and constructive and enthusiastic presence, how would I say it? It’s one of those mathematical amplifying feedback loops. You can create a self-fulfilling prophecy. If you can inspire more energy joints, then the likelihood of success increases. But the depth and the breadth of your work. And so I wanted to illustrate for our audience today and I’ll go to one of my favorite songs.

It was actually written by a man named Mike Scott from Scotland of the Waterboys, in honor of Jimmy Hendrix. And Jimmy Hendricks, as you know, was a very, very subtle and innovative and powerful spirit. So the first verse reminded me of you, and that is, “A picture of the rainbow. You held it in your hands. I had some flashes, but you saw the plan. I wandered out in the world for years, while you just stayed in your room. I saw a crescent, but you saw the whole of the moon.”

Stan, you are an example. You’re a beacon. Please keep it up. And yes, whether it’s through your artwork or through illustrating your scholarly work or through your teaching. You got to help us get there.

Stanislav Shmelev:

Thank you so much. Thank you so much.

Rob Johnson:

Thank you. Let’s talk again soon. Perhaps, let’s do a post-mortem on your art exhibit in Venice and the experience that you have, we’ll do another episode at that time.

Stanislav Shmelev:

Absolutely. And if you could maybe help spread the word that we’re looking for volunteers, interns, to carry the research work forward. And the other most important part is about funding this going forward as well, because the Environment Europe Foundation cannot carry on without the much needed help, whether it’s in the form of the art sales or just donations, but we need it.

Rob Johnson:

Yeah. Well, how would I say it, you’ve got many magnets to attract. People can choose from the menu at environmenteurope.eu in order to, how to I say, join the team then the march [crosstalk 01:01:23]. We’ll talk again soon, but thank you for today.

Stanislav Shmelev:

It was a pleasure. Thank you so much.

Rob Johnson:

And check out more from the Institute for New Economic Thinking at ineteconomics.org.

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