Rethinking economics: putting human and nature wellbeing first

“It’s fascinating to see that the push for new ways of thinking about the economy isn’t coming from mainstream economists,” says Eveline van Leeuwen, professor of Urban Economics at Wageningen University & Research. “Instead, it’s sociologists and environmentalists who are leading the change right now.” As an urban economist and scientific director at the Amsterdam Institute of Metropolitan Solutions (AMS), Van Leeuwen’s work focuses on reimagining economic models. “In a city like Amsterdam, people are not only interested in economic figures—that’s like driving down a one-way street toward a dead end. They also consider people’s well-being and their connections to communities and nature. How can we thrive without being trapped in a single-minded focus on growth?”

Measuring progress beyond GDP

That rigid focus on growth is exactly what Francisco Alpízar, chair of the Environmental Economics and Natural Resources group at Wageningen University & Research, wants to challenge. “We’re addicted to using GDP as the sole measure of progress,” he says. “But even Simon Kuznets, who introduced GDP in 1934, warned that it was not meant to be used that way. It’s like being a baker who only measures how much bread he sells, ignoring the flour and labor used to make that bread.” As an environmental economist, Alpízar emphasizes the need to account for environmental costs when analyzing economic growth. “There’s a lot of debate right now about which economic theories should lead the way—green growth, degrowth, post-growth—but it’s not about the theories. The real issue lies in how we measure. Right now, we fail to factor in environmental and social costs, and that’s leading us straight into a deadlock.” Van Leeuwen concurs completely with this view, asserting, “When considering the economy, our priorities should be people and the planet. This shifts the focus from mere economic growth to more pertinent questions: Are people in our society happy and healthy? Are we respecting environmental limits?”

For Alpízar, new economic theories fail to tackle two factors: the time available to make the adjustment, and the reaction of people to the adjustment. “The pace at which we are crossing planetary boundaries is unprecedented,” he explains. “We simply don’t have the luxury of time to follow slow transitions, like those advocated by the green growth movement.” Alpízar also cautions against the overly idealistic views of human behavior often embedded in degrowth and postgrowth theories. “From a Western perspective, it’s easy to envision people willingly giving up a bit of prosperity to transition to a more sustainable system,” he says. “But outside that context, the discussion becomes much more complex—what defines poverty or wealth, and where does the key to redistribution lie?” Van Leeuwen partially disagrees and highlights the need for Western societies to critically assess their consumption patterns: “It's undeniable that we in Western societies consume far beyond environmental limits, so let’s start here. Studies have shown that increased consumption doesn't lead to greater happiness. Therefore, reassessing what truly enhances our wellbeing is a crucial step we need to take."

The need for more normative decision-making

Both van Leeuwen and Alpízar highlight that with the adoption of new, more efficient technologies, such as clean energy, there is often an increase in consumption that offsets the intended benefits—a phenomenon known as the Jevons paradox. Van Leeuwen emphasizes the need for more normative decision-making processes in society. “It’s not merely about increasing green or sustainable investments,” she explains. “Consider, for example, car restrictions in urban areas. To achieve safer and less polluted cities, we should not just focus on electrifying cars but also on reducing car access and providing alternative transportation options.”

Van Leeuwen and Alpízar advocate for a shift in economic thinking to prioritize the ways we measure progress. “We shouldn’t look at the economy as an ‘end’ but as a means to achieve a certain goal, such as human wellbeing and planetary health,” says van Leeuwen." “And thus, our system needs to account not just for outputs, like GDP, but also for inputs such as human and natural capital,” adds Alpízar. “If we link the value of different types of capital—human, natural, and beyond—into our measurement systems, we automatically integrate the much-discussed elements of green growth, post-growth, degrowth and broad-wellbeing into our economies.” However, this is no easy task. For example, there is still no comprehensive measurement system for the ecosystem services that nature provides, such as crop production, livestock, carbon absorption, pollination, and recreation. Developing this system, Alpízar argues, is one of the great challenges for the years ahead.

Bridging economy, nature, and society

When discussing economic models, big data, and the challenge of integrating sustainability, Hans van Meijl stands at the forefront. As the chief economist at Wageningen Social and Economic Research and special professor in Macroeconomic Assessment of the Circular and Bioeconomy at WUR, van Meijl leads a team of economists who utilize the MAGNET model. This powerful tool, employed by governments, international, and financial institutions worldwide, provides insights into how shifts in one part of the economy affect the entire system. It allows for the assessment of future scenarios and quantifies the impacts of changes in technology, consumer preferences, and various policies across all dimensions of sustainability. It also takes into account indirect effects such as the Jevons paradox

MAGNET builds upon the GTAP (Global Trade Analysis Project), a vast database offering insights into bilateral trade flows, value added production, and consumption across countries and regions. Think of GTAP as a “big picture” library of the global economy. MAGNET takes this a step further by integrating detailed tools to analyze agriculture, land use, emissions, sustainability, and other aspects of the (emerging) bioeconomy, including sectors like biobased materials and chemicals, bioenergy, and biofuels. “For years, we have been incorporating sustainability, food systems, the bioeconomy, and climate policy into these models,” explains van Meijl. “Unlike traditional macroeconomic equilibrium models that focus solely on economic data, we have long tackled the challenge of integrating biophysical data, including carbon emissions. Currently, we are extending our models to include health and biodiversity impacts.”

Measuring beyond economics

Incorporating environmental and social factors alongside traditional economic data is a tough cookie, but Van Meijl and his team demonstrate that it’s possible. “We measure things like food affordability across regions, access to food, income disparities among farmers and workers, and price developments—can people still afford food?” he explains. “On top of that, we track agricultural emissions, deforestation caused by farming, pesticide use, and overall carbon emissions.”

For Van Meijl, the priority isn’t developing new economic theories but, as Alpízar highlights, improving how we measure and act on the data we already have. “Even traditional neoclassical theories argue that the polluter should pay and that unsustainable practices must align with system outputs. The real issue is that we’re not following those principles in current policies,” he says.

To make meaningful progress, Van Meijl argues, these principles need further development in the form of financial and other instruments. “We’re advancing in integrating natural and human capital data into models like MAGNET, though there are still many hurdles to overcome, and the process is far from complete,” he says. Yet, without government action to introduce effective financial incentives and cost-balancing measures, ensuring that sustainably produced food and energy—though inherently more costly—remains affordable for ordinary people, existing inequalities will only worsen. “It’s not just about moving the system to a place that’s environmentally safe but also socially just, with fairer income distribution and less inequality,” van Meijl says with determination. “Comprehensive policy packages are essential to achieve these goals.”

The undercurrent of sustainability

Van Meijl warns that the rhetoric of green growth and sustainability movements has been too narrowly focused on the environment and nature, overlooking societal concerns and income disparities. “We need to address the undercurrent—the feeling that many people have of being left behind,” he emphasizes. “It’s not enough to talk about saving the planet; we need to address real-life issues: taxing polluters, ensuring affordable healthy food and clean energy for consumers, creating fair pricing for farmers, and compensating those who will inevitably lose out during the transition to a sustainable economy.” Van Meijl thinks recent undertakings such as the EU Green Deal, though successful in setting stricter ‘green growth’ standards, have failed to focus on these aspects. This was reinforced by the high energy and food prices following the war in Ukraine.

He points to the rise of right-wing politicians who tap into these societal frustrations without offering solutions. “They ride the wave of discontent with promises, while the green movement has failed to connect with these concerns in a meaningful way. If we want a greener economy, we need to counterbalance this narrative with actionable solutions that resonate with people’s lives.”

Harnessing the power of finance for a greener economy

Although the global rise of right-wing governments might seem like a setback for sustainable economic transitions, Eveline van Leeuwen, Francisco Alpízar and Hans van Meijl point to a different driver of change: financial institutions. “These institutions are becoming increasingly aware of the enormous risks that climate change and biodiversity loss pose to their clients and assets,” says Alpízar. “Climate-related hazards can wipe out their investments. Over the past decade, we’ve seen their focus on these issues grow significantly. Unlike governments, which often work within short four-year election cycles, financial institutions take a longer view and can clearly see the cumulative risks appearing on the horizon.” “Financial institutions, therefore, need stable policies that they can rely on for crafting and investing in financial products,” says van Leeuwen. “Many are eager to support a more sustainable society, yet hampered by frequently changing policies and the economic allure of investing in more polluting and inequitable business cases. We should enable them to shift from a mere business case approach to a society case approach.”

Launching a new green investment initiative

Van Meijl echoes these observations. He and his colleagues are launching a major public-private initiative to link biodiversity-related risks to green investment solutions for institutional investors. This project aims to provide concrete pathways for financial institutions to align their investments with sustainability goals while safeguarding their assets. “For many companies, this shift aligns with their pursuit of greater efficiency,” explains Van Meijl. However, he emphasizes that the biggest hurdle lies in integrating ecosystem services, human capital, and inclusivity—essential data, but harder to quantify—into the predominantly quantitative systems used today. Collaborating with financial institutions, insurance companies, and accountancy firms, his team is tackling this challenge. “We’re making progress,” he says, “but to truly create a breakthrough, we need more public and private partners to join the effort.”

Next to financial institutions, international trade agreements play a pivotal role in shaping a more sustainable economy from a financial perspective. The EU has taken the lead in raising standards for trade and sustainability—with measures such as the Corporate Sustainability Reporting Directive (CSRD), that enhances corporate transparency on environmental impacts, including potential deforestation risks within supply chains. “But being at the forefront also makes the EU vulnerable in the global arena,” says Alpízar. He highlights the challenges posed by shifting global politics, referencing changes in trade policy under leaders like Trump. “Given these developments, it’s crucial for the EU to focus on consolidating these directives rather than advancing too aggressively. That’s also what the recent Draghi reports show us. You don’t want to overplay your hand.” Instead, he suggests fostering a movement driven by frontrunners and influential financial institutions. “The key is to create an attractive pull for sustainable practices, rather than a push that risks resistance or backlash.”

To flourish instead of grow

On a more localized instead of global scale, Eveline van Leeuwen sees similar shifts taking place in the city of Amsterdam. “The fundamental mistake of current economic systems—and populist parties—is their singular focus on financial gains,” she explains. “What we observe is that people, across all levels of society, prioritize wellbeing above all else. They want to feel healthy and happy, and economic prosperity alone doesn’t fully address that.”

In the AMS project ‘the Ideal(s) City, Eveline van Leeuwen with colleagues examines how cities can enhance wellbeing while adopting more sustainable practices. This work aligns with a broader realization: to build a resilient future, financial and societal priorities must converge with environmental goals—also in urban environments. “What we see is a shift in mindset,” Van Leeuwen explains. “People are no longer solely focused on growth, which has a natural endpoint. Instead, they aspire to flourish. Flourishing is a process that can occur at any stage, fostering a sense of wellbeing and fulfillment that goes beyond mere economic expansion.”

Van Leeuwen is also leading a new initiative examining the circular economy and consumer participation. “This project emphasizes the repair café concept,” she notes. “Participants in this movement develop a greater appreciation for the products they possess and shift their focus away from acquiring new stuff.” This insight is consistent with broader research findings: “Purchasing new products doesn't lead to long-term happiness; it merely provides short-term gratification. True happiness comes from experiences, such as spending time with friends and family or traveling."

Pioneering new measures of economic progress at WUR

Economists and social scientists at Wageningen University & Research are eager to ‘reimagine economics’. “WUR is uniquely positioned because it integrates knowledge from the environment, economics, society, and technological advancements,” says van Leeuwen. WUR is good at approaching economic theory from a systems perspective, and has a clear understanding of the key actors driving change. “These actors are not only governments and businesses but also consumers and citizens,” van Leeuwen emphasizes, “whose behavior changes will be crucial in driving the most significant transitions toward a more sustainable economy.”

Van Meijl highlights the extensive resources available at WUR: “We have access to a wealth of economic data and powerful tools like MAGNET to analyze it. Moreover, we can integrate these socio-economic models with robust biophysical models covering plants, animals, food safety, and the environment. What’s more, WUR blends fundamental research with the practical applications from our institutes, creating a foundation for solutions that make a real difference.”

As Alpízar works on a forthcoming paper exploring new economic paradigms and leverage points to act on, Van Meijl and Van Leeuwen are looking ahead to practical applications. “I’m keen to collaborate more with financial institutions, policymakers, and economic scientists to tackle challenges in data and decision-making,” says Van Meijl. Meanwhile, Van Leeuwen envisions exploring grassroots solutions: “My passion lies in harnessing the power of social innovation and community-driven approaches. Ultimately, it’s society—each one of us—that holds the key to a more sustainable and equitable future.”