RI long read: Can ESG grasp what ecology says?

Duncan Austin argues that ESG is caught in the middle of a deep struggle between economics and ecology, but that we may all be ‘economist’ and ‘ecologist’.

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The following article is an excerpt from a longer essay, ‘Can Economics Grasp What Ecology Says?’ available here.


A delightful story last month: Satish Kumar, the Editor Emeritus of Resurgence & Ecologist magazine, visited the renowned London School of Economics and suggested that his hosts reconstitute as The London School of Economics and Ecology.

Over tea and cake, Kumar enquired about LSE’s ecological offerings, to which he was informed there were several courses which integrated environmental issues into economic frameworks. ‘But environment and ecology are not the same,’ he replied. ‘Ecology means understanding of the entire ecosystem and how the diverse forms of life relate to each other.’ To which the response was: ‘That is too broad a concept. Our courses are much more specialized.’ 

I like the story for two reasons. First, I enjoy the thought of a distinguished guest speaker politely asking his hosts whether they have considered being the opposite of what they are! It strikes me that more guest speakers at more events might usefully ask the question. 

The more serious reason is that Kumar’s provocative idea, and the defensive response, catches the very essence of our ecological sustainability challenge: that economic thinking still fails to grasp the sort of thinking ecology is, particularly ecology’s focus on relation

The significance is less about improving university programs and more because it is exactly this misunderstanding that underlies our continued failure to solve major ecological problems despite the growing attention paid to them.  

Economics and ecology

To begin to explain, I have a proposal for an inscription over the door of any new School of Economics and Ecology: 

‘Ceteris paribus’

(Economic method)

'When we try to pick out anything by itself,

we find it hitched to everything else in the Universe.'

(John Muir, Ecologist)

And so, we begin…

This captures that economics and ecology separate from the very outset by the way in which they attend the world. Any attempt to reconcile their concerns that does not explicitly contemplate these first principles is doomed to fail.  

Central to economics is the act of severance: “‘ceteris paribus’ – ‘assume all else remains equal’ – and now we can proceed.” Economics cuts and reduces to formulate tractable problems that admit elegant solutions, but the process inevitably renders economics a deeply decontextualized body of knowledge.    

In contrast, ecology emphasizes connection, evident not just in Muir’s quote, but also in Garrett Hardin’s proposed first law of ecology: ‘you cannot do just one thing.’ 

In other words, ecology denies the legitimacy of ‘ceteris paribus’, while economics views ecology’s desire to hold everything in mind as impractical. Their difference is ultimately a difference in how to ‘see’ the world. The economist implicitly chooses to see parts, the ecologist to see patterns. Each choice is valid, but different. They are complementary, but in tension.

Figure 1: Parts or patterns? Ceteris paribus or everything connected? A part-biased view (left) privileges discrete entities, while a pattern-biased view (right) privileges relationships between and within parts. Neither is categorically ‘correct’, but economics and ecology lean on – and so reinforce – a part-view or pattern-view, respectively. (Adapted from Capra, 1997)

‘Economics’ is the older term derived from the Greek oikos (home or dwelling) and nemein (to manage). It is the ‘management of my home’. In contrast, ‘ecology’ was coined by Ernst Haeckel in 1869. He combined oikos with logos (the study of) but conceived of oikos as our entire planetary home – so, ‘the study of Nature’s house’. Economics and ecology exist in a nested relationship. Economics is the management of just a small niche of Nature, whereas ecology is just the study of all of Nature.

The two terms differ not just in scope but also in stance – managing versus studying. A way of seeing not only changes what is seen, but also invites a different way of being. Seeing the world as separable invites the economist to think that its parts might be better allocated than they are. In contrast, seeing the world as connected leads the ecologist to ponder why it has come to be connected as it is. 

In other words, a putative LSEE would have a job on its hands. The challenge is not just about blending the different domains of study under the same mindset – combining plants and profits in a single analysis – but about training students to become fluent in complementary, but conflicting, ways of seeing. 

ESG caught in the middle

It may now be clearer why our visions of ‘green growth’, ‘win-win’ and ‘sustainable capitalism’ continue to struggle. They are the vehicles by which we have embraced ecological concern, but still resist the accompanying mindset to which those concerns points. 

While ‘environmental economists’ argue that we can easily correct markets by pricing carbon emissions and other pollutants – no matter that we barely have, in practice – the larger issue is that many of our ecological challenges are not amenable to such a commodification approach, which relies on treating the environment as parts. 

This issue comes to a head in the question of whether we should impute a dollar value for ‘ecosystem services’ – to put a price on the Amazon, say. The question is not whether we can impute such a value, but rather whether it is wise to do so. In this critical matter, which has divided ecologists, is the issue of whether ecology should yield to a dominant economic way of thinking or make a stand for its different way of seeing – a different way of appreciating and valuing – that challenges economics’ monetary default. 

The pragmatic view has been to impute monetary values because we cannot afford for ecosystems to be valued at zero, which is otherwise the case. However, something important is lost by doing this because it forfeits the opportunity to challenge the idea that monetary valuation can adequately reflect the connectedness of ecology. 

Of course, this has been an almost impossible line for ecologists to advance because, today, we find ourselves in a profoundly market-centric culture, for reasons that long predate awareness of our global ecological challenges. 

The point is not that markets are inherently good or bad, but that today’s market primacy may be detrimental. With markets so privileged – and non-market institutions debased – government has been unable to ‘correct’ the market’s omission of so many recognized externalities. Less than 1 percent of total global emissions are currently priced at a level consistent with achieving the temperature goals of the Paris Agreement. 

There has been a ‘double capture’ of the ecological mindset by economic thinking. First, economics can only readily accommodate those ecological concerns, such as carbon emissions, which are discrete and separable. Second, the realpolitik of a market-centric culture, based on the primacy of economic thinking, means that current market actors wield real political power to prevent the internalization of even those ‘externalities’ which economic thinking can stretch to! 

At the heart of this lies the flourishing ESG movement. In a market-centric world, efforts to protect our ecology have had to fit into the larger neoliberal narrative, and the emergence of a burgeoning ESG movement is in many ways a consequence. ESG aims to be a solution to our environmental and social challenges but is really a symptom of deeper cultural trends set in motion long before the Great Acceleration commenced. 

As a market-based movement, it has had to uphold a market-friendly narrative, evident in some of its key refrains: ‘win-win’, ‘doing well by doing good’ and more. But this narrative – that protecting the global environment must be profitable, and consistent with growth and market primacy – increasingly seems implausible. ESG does not constitute ‘ecological’ thinking but rather the appropriation of some ecological concerns into thinking that remains steadfastly economic. 

Effectively, a long-gestating neoliberalism met a nascent environmentalism, and the result is the modern ESG movement, which may simply not be enough. It is increasingly urgent that we comprehend that such a movement is limited not by the sincerity or enthusiasm of its proponents, but by the form of thinking it constitutes and so reinforces. Certainly, the ESG community can play a key role here, but it will require considerable reappraisal of the business plans and theories of change of the last two decades. 

Our economic and ecological brains

Now for some better news! 

We are all both ‘economist’ and ‘ecologist’.

Evolution has granted us an ‘economic’ left brain and an ‘ecological’ right brain because both are beneficial, even if they must be in tension. So, the issue is whether we have got the balance right.

I believe this is one conclusion of Iain McGilchrist’s landmark work, The Master and His Emissary. McGilchrist, both neuroscientist and humanities scholar, argues not only that our left and right brains perceive the world in fundamentally different ways – complementary, but in tension – but also that the long arc of human history reveals left-brain ways of thinking inexorably asserting themselves over right-brain ways. 

Though McGilchrist bases his argument primarily on developments in the humanities, today’s primacy of economic thinking over ecological thinking – even in the face of a deteriorating global ecology – appears to be yet another manifestation of left-brain ascendancy. Our left, ‘economic-like’, brains are ‘crowding out’ our right ‘ecology-like’, brains, creating overshoot problems our left brains cannot remedy because they uphold the sort of cognition that created the problems in the first place! 

In other words, the real solution to our sustainability problems may not be ‘out there’, but ‘in us’.

A critical difference McGilchrist identifies: 

‘One of the more durable generalisations about the [brain] hemispheres has been the finding that the left hemisphere tends to deal more with pieces of information in isolation, and the right hemisphere with the entity as a whole.’

Ceteris paribus and John Muir? Our abilities to hold ‘all else equal’ and to perceive that everything is connected appear to emanate from different brain hemispheres. Figure 2: Human brain seen from above. The longitudinal fissure divides the brain into left and right hemispheres. (Not visible is the corpus callosum lower down, which holds the hemispheres together.)

Though the left brain is inclined to see the parts of the world, it also tries to tell itself a coherent story using the parts it is aware of. Hence, the left brain reduces and reconstitutes the world, but its reconstituted world can only be as complete as the parts it has gathered, which may fall short of the more holistic right brain view. 

Yet even though the left brain’s perception of the world is decontextualized, the left brain is highly influential with its control of language and its inclination to ‘do’. Hence, it sets us up to transform the world with blinkered appreciation of the consequences.     

The problem today, McGilchrist argues, is that we are out of balance. In a long review of cultural history, he traces the fingerprints of a steadily more assertive left brain making the world more amenable for it. While the positives abound – medicines and vaccines, planes and trains, warm homes with glowing screens – something is also lost in that we inhabit an increasingly mechanical, fragmented, and uprooted world.  

While the notion of a whole civilization in the grip of a ‘left brain runaway’ may seem fanciful, it is possible because of the reinforcing nature of culture and the fact that minds and culture form a loop of a complex system. The reflexivity between our plastic brains and our plastic culture constitutes a feedback loop in which mind shapes culture shapes mind, a so-called ‘mind-culture co-evolution’. 

Reductionism and systemism

A critical ‘recent’ left-brain advance has been the Scientific Revolution, which vaulted the left-brain’s reductionist perspective to ascendancy. Broadly, left and right brains underwrite our complementary capacities for reductionism and systemism of which economics and ecology are among key respective flagships. 

Reductionism is the idea that we can best understand the phenomena of the world by breaking them into parts, learning how those parts work and then ‘adding back up’ this knowledge to arrive at a superior comprehension of the whole. It is a process of ‘reduce and reconstitute’.  

Reductionism earned its spurs because it proved spectacularly successful at explaining the behaviour of ‘dead’ things that were the dominant objects of enquiry at the dawn of the Scientific Revolution. Alas, those early successes profoundly shaped the way we believed all science should be conducted, so that we applied an intrinsically reductionist scientific method to a more complex ‘living’ natural world, including ultimately ourselves. Reductionism crept up the ‘disciplinary stack’, from physics to natural sciences to social sciences, where it came to have a profound influence on economics. 

We conceived of Homo Economicus and built a logical model of the world around that vision and have ever since been trying to live up – live down, really – to that model. Central to that model – and to our current faith in markets – is the left-brain inspired idea that society can be reduced to rational individual ‘agents’ endowed with entirely independent preferences who exchange parts of the world in a market system that has the magical power to ‘add everything back up’ to arrive at the best of all possible worlds. It sounds exactly like the sort of place the left brain would like to inhabit. But the model denies that the complex system of human society has an emergent ‘public’ nature that might be more than the sum of its ‘private’ monetizable parts. 

Unfortunately, because of politics’ tendency to follow economics with a lag, these ideas jumped into our socio-economic reality and continue to underpin contemporary culture. A sub-plot of our ‘mind-culture coevolution’ has been a ‘mind-market coevolution’ in which minds shaped markets shaped minds. 

A Systemic Spring

The encouraging news is that there is now a ‘Systemic Spring’ under way in which multiple disciplines are racing to incorporate the insights of complexity thinking. As Brian Arthur, the pioneer of complexity economics, articulates: ‘complexity is not a science, rather it is a movement within science.’ If so, it is the complement, with a 300-year lag, to the reductionism that preceded it. 

What is genuinely exciting about systemic science is that it introduces a rigorous way of seeing relation over part, effectively advancing a right-brain view of the world in terms the left-brain can understand. 

As systemic awareness spreads, we can look back upon our recent past and see that we effectively fell into a ‘valley of reductionism’ – not without considerable benefit, but whose cost has been that it postponed or derailed certain advances we might otherwise have made regarding our comprehension of complex ‘living’ systems, such as society and ecology.  

In essence, today’s neoliberalism is what results when you apply scientific techniques suitable for analysing dead things to the living fabric of society and ecology and pursue them to their logical conclusion.

As Gregory Bateson, the early systems thinker, laconically expressed: 

‘Epistemological error is all right, it's fine, up to the point at which you create around yourself a universe in which that error becomes immanent in monstrous changes of the universe that you have created and now try to live in.’

Unwittingly, and through no-one’s explicit design, we reduced ourselves. 

A Systemic Spring, advancing a right-brain perception of the world, may now be a critical remedy for the Silent Spring of which Rachel Carson, the renowned conservationist and author, warned. But it needs to be accelerated.

Where Einstein said you cannot solve problems with the same sort of thinking that created them, what McGilchrist effectively says is that you cannot solve problems with the same brain hemisphere that created them. 

While our sustainability crisis presents as rising sea-levels, shrinking forests and disappearing species, the front line of our struggle is the corpus callosum that divides the human left and right brain. This is where our sustainability crisis will ultimately be resolved, or not.

What to do?

Here are two ideas: 

  • Reverse our perception of primacy; and
  • Create a left brain AND right brain culture, by revitalizing our sense of ‘public’.  

Reverse the Primacy 

Systems thinking suggests we have got the primacy between economic and ecological mindsets the wrong way around. 

In the history of neuroscience, the left brain was long deemed the superior hemisphere – an assumption now forced into reappraisal. It is becoming clear that the left brain can only do its beneficial work within the broader contextual awareness the right brain provides. If anything, primacy lies with the right brain, not the left. 

A similar asymmetry seems to repeat at the level of human culture. Our market-centric culture has granted primacy to the economist, not the ecologist, which may be the wrong way around. Of course, we do have to ‘manage our house’ (economics), but we must also be mindful of the state of Nature’s house (ecology). In getting the nesting wrong, we are stewarding our planet from inside-out rather than from outside-in.

Keynes captured part of this ‘inside-out’ problem in the relationship between the stock market and the broader economy:  

‘When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done.’

This pattern repeats again at the next level up: when the stewardship of our ecosystem becomes a by-product of the activities of the economy, the job is likely to be ill-done. 

Put the layers together and our situation today is that we are managing the planet as a by-product of an increasingly frenzied stock market – one part automated algorithms, one part chat room raiders – that is oblivious to environmental context even as it transmits the signals for how to allocate the financial capital that transforms the physical world. 

McGilchrist remarks: ‘the left brain doesn’t know what the left brain doesn’t know.’ By the same token, the market doesn’t know what the market doesn’t know, but our ability to correct its vision is hampered by our narrative of its infallibility: ‘markets are the solution, government is the problem’. We have talked ourselves into a tailspin.  

We must reaffirm that markets must be nested within a broader conception of human self-organization. Our challenge is not to build a sustainable economy but to develop a sustainable culture that has an economy. 

Rebalance left brain and right brain culture by re-legitimizing ‘public’  

The secular institutions that can most uphold and restore relational aspects of our society and ecology are ‘public’ and public-affirming institutions – from community through civil society to the various levels of government.  

If a left-brain culture has favoured the ascendancy of market over non-market institutions, then we might attain a more sustainable culture by revitalizing the institutions left behind by that ascent. Indeed, before today’s ‘neoliberalism’, there was an ‘embedded liberalism’ in which market and non-market institutions were more delicately balanced. 

Critically, part of government’s real value to society is its potential not to amplify market forces but to modulate them – to correct their many omissions and to curb any dangerous runaway dynamics. 

Of course, today’s story is that government’s proper role is to unleash market forces and stand back. This was premised on the idea that the market was ‘self-regulating’. And often it is. If demand for milk increases, the price of milk rises inducing more supply so bringing the price back down. The market ‘self regulates’ or rebalances, in this way all the time. 

However, the market is not only self-regulating, but also susceptible to positive reinforcement loops that can become runaway problems. Arthur crystallized this in 1990, when he identified that economic systems did not just exhibit ‘diminishing returns’ – or balancing loops – but also ‘increasing returns’ – or reinforcing loops. This has become easier to intuit in a world of ‘winner take all’ businesses and technology platforms. 

Moreover, the possibility of reinforcing loops in the economic system can accumulate to make a reinforcing loop of the whole system! A telling signal is that our biggest problems – global debt accumulation, wealth inequality, climate change and biodiversity loss – all exhibit runaway dynamics. Neoliberalism has effectively become a runaway feedback loop of a human operating system in which large swathes of the global population are now swept up. 

Government is in the loop! 

A key problem is that our contemporary narrative, ‘markets are the solution; government is the problem’, has snared governments in the loop. 

Governments increasingly use economic performance – even stock market performance! – as a measure of their success, which nullifies their ability or interest to counteract markets. Other loops are more tangible. For example, corporations use profits to lobby for lax regulations that enhance profits which can be used to lobby for more lax regulations etc. This dynamic – Friedman’s Feedback Loop, call it – has compromised government’s ability to improve human welfare by leaning against the market system. 

As these loops have run over the past few decades, so our collective capacity to act on any principle that conflicts with profit has diminished. It has been impossible to argue that we ought to value and protect our environment for moral reasons, not just monetary ones. And this larger discourse has ultimately forced an ESG movement into its increasingly implausible ‘win-win’ stance that we only need implement profitable projects to arrive at a sustainable culture.  

Can corporate ‘leadership’ really help? 

Even more trapped in the loops are corporate leaders, in whom such great hope has been placed. 

Yet, corporate leaders are so bound by fiduciary duties, share-based compensation, and business norms that they are now among the human beings least able to lead on global public goods problems even as their prominence makes them the focus of so much courting. 

This is not necessarily a reflection of who CEOs innately are, but rather what culture turns them into. Alas, the ascent to corporate leadership transforms men and women with leadership ability into mere profit-maximizing administrators. Less CEOs, more PMAs. 

These PMAs are just the apex of the larger private sector community which now contains millions of people wondering why it is that business norms require them to make routine decisions at odds with social and ecological wellbeing. ‘Whose dumb idea was all this?’ is the merged thought bubble one can sometimes see forming over the skyscrapers of the City of London.   

Possibly, the transfer of US leadership to a genuine public servant might disturb corporate leaders into recognition of the shackles in which they are bound but breaking out will be difficult. Behind corporations is an investment industry, themselves heavily incentivized, that effectively acts as a global profit enforcement agency, quick to force any public company with dangerous ‘stakeholder ideas’ back into line. 

And behind the investment industry stands millions of savers and pension fund holders who check their quarterly statements hoping for higher, not lower, financial returns. We are all chained into an unsustainable system, but we then expect those most bound by its logic to lead the way out. 

These private sector challenges are a microcosm of the challenges of society writ large. The broader problem is that free democratic societies can only respond to any new ‘global’ threat or emergency if a majority understand – and accept – the situation. This is why the educational work of the IPCC, Al Gore, Cristiana Figueres, Michael Mann, Greta Thunberg and many others has been so critical – even as they have had to suffer insults from those who would shoot the messenger. 

Which brings us back to the key institution that is education and to Mr Kumar’s advice for LSE. For, one way to promote understanding and acceptance is to aggressively accelerate systemic thinking at all levels of society. 


I sincerely hope LSE consider Satish Kumar’s suggestion. It feels as if there is some civilization-bettering leadership up for grabs. For one of the top 10-ranked economics universities to embrace ecology on ecology’s terms might stimulate thinking and action well beyond its walls.  

I might even up the ante and suggest that such a step might soon be a reputational necessity as a systemic reappraisal of 20th Century economics is likely to be harsh. Systemic thinking will not only improve economics’ ability to understand the issues it already cares about – an intra-economic benefit – but it will also force the discipline to comprehend its nested position relative to more systemic sciences – a heightened meta-economic awareness. 

Satish Kumar’s provocative idea was of course good rhetoric for a lecture, but name changes alone cannot achieve much. More meaningful and more actionable is to commit to develop the research and pedagogical capacity to bring ecological thinking not just into LSE but into all economics departments and business schools. Assuming such institutions know something of competition, they might ponder if it is not them who takes up the opportunity of the day, will it be one of their rivals? 

Regardless of when and where this all happens, the first point to impress upon the students at a School of Ecology and Economics is that the two disciplines are different in nature because they represent two different ways of ‘attending the world’, both of which are valuable, but which seem to have fallen out of balance. Neither, in itself, is right or wrong, but what may be wrong is not to pay them equal attention. Until our culture is clearer on the significance of their difference, we are unlikely to be successful stewards of the global ecosystem or to have the long future we might.

‘Ceteris paribus’

'When we try to pick out anything by itself,

we find it hitched to everything else in the Universe.'

And so, we begin…

Duncan Austin has had a 25-year career as a sustainability researcher and investor. In 1996, he obtained a MSc in Environmental and Natural Resource Economics! 

This article is excerpted from a longer essay, ‘Can Economics Grasp What Ecology Says?’, which explores in more detail the reductionist roots of our sustainability predicament and the ‘economic’ and ‘ecological’ characters of our left and right brain hemispheres.