Doughnut Economics, by Kate Raworth

Can humanity thrive without destroying the planet? To Kate Raworth, an English economist working at Oxford and Cambridge universities, the visual template of sustainable economics is… a doughnut.

This post belongs to a reading series of Doughnut Economics by Kate Raworth. For quick access to all chapters, please click here.

Disclaimer: This chapter summary is personal work and an invitation to read the book itself for a detailed view of all the author’s ideas.

The financial crash of 2008 revealed a disconnect in economics that runs far beyond the financial sector. A disconnect, says Kate Raworth, “visible in the gulf between the preoccupations of mainstream economic theory and growing real-world crises such as global inequality and climate change.” The revolution in economics to answer these challenges has begun, but its success depends “not only on debunking old ideas but, more importantly, on bringing forth the new.”

The word “economics” itself was coined by the philosopher Xenophon in Ancient Greece, combining oikos (household) with nomos (rules or norms). This could not be more relevant today with our planetary household and the needs of all its inhabitants. The world’s richest 1% owns more wealth than all the other 99% put together, while human activity imposes unprecedented stress on Earth’s life-giving systems. Meanwhile, mainstream economics’ projections in 2015 (shortly before Doughnut Economics was written) expected a 3 percent growth per year until 2050, doubling the global economy in size by 2037 and almost trebling it by 2050.1 No one can seriously pretend that in today’s conditions such a projection is sustainable. The frame of thinking behind the business-as-usual mindset must consequently be questioned and replaced by a constructive one.

***

“Economics is the mother tongue of public policy, the language of public life and the mindset that shapes society.” Unfortunately, “these citizens of 2050 are being taught an economic mindset that is rooted in the textbooks of 1950, which in turn are rooted in the theories of 1850.” This does not invalidate, of course, economics as a whole. “The twentieth century gave rise to groundbreaking new economic thinking, most influentially in the battle of ideas between Keynes and Hayek. But though those iconic thinkers held opposing perspectives, they inherited flawed assumptions and common blind spots that lay unexamined at the root of their differences. The twenty-first-century context demands that we make those assumptions explicit and those blind spots visible so that we can, once again, rethink economics.”

Doughnut Economics

Here is what this change of paradigm comes down to: “What if we started economics not with its long-established theories but with humanity’s long-term goals, and then sought out the economic thinking that would enable us to achieve them?”

It may sound like common sense to laypeople, but it is unheard of to most economists. If genuinely going back to basics, however, one can see that what should be the actual frame of economic thinking resembles a doughnut. “Below the inner ring—the social foundation—lie critical human deprivations such as hunger and illiteracy. Beyond the outer ring—the ecological ceiling—lies critical planetary degradation such as climate change and biodiversity loss. Between those two rings is the Doughnut itself, the space in which we can meet the needs of all within the means of the planet.”

But there is more to this representation than being relevant by its very simplicity. “As the visual literacy expert Lynell Burmark explains, ‘unless our words, concepts and ideas are hooked onto an image, they will go in one ear, sail through the brain, and go out of the other ear. Words are processed by our short-term memory where we can only retain about seven bits of information. . . . Images, on the other hand, go directly into long-term memory where they are indelibly etched.'”2 A picture might well be worth a thousand words, after all. Therefore, beyond its relevance in regard to the boundaries inherent to a sustainable economy, the doughnut has a powerful psychological role to play.

The importance of a clear image cannot be overestimated. As Kate Raworth reminds us, “By depicting the sun—not Earth—at the centre of our solar system, Copernicus’s picture triggered an ideological revolution that would unravel church doctrine, threaten to upend papal power and transform humanity’s understanding of the cosmos and our place in it. It is extraordinary what havoc a few concentric circles can unleash.” From the standpoint of knowledge, “what we draw determines what we can and cannot see, what we notice and what we ignore, and so shapes all that follows.”

Some might dismiss this suggestion about economics, arguing that it is taught not in pictures but in equations and that its tool is maths, not art. But in reality, economics has always been taught with diagrams as well as equations. Moreover, “the diagrams have played a particularly powerful role, thanks to a few maverick characters and surprise twists in the field’s little-known but fascinating past.”

Paul Samuelson (1915-2009)
Paul Samuelson (1915-2009)

Paul Samuelson—heralded on his death in 2009 as “one of the giants on whose shoulders every contemporary economist stands”3—was the one who “decisively placed imagery at the heart of economic thought in the second half of the twentieth century. . . . He was enamoured of equations and diagrams and he profoundly influenced the use of both in economic theory and teaching. But, crucially, he believed they were suited to very different audiences: in short, equations were for the specialists; pictures for the masses.”

Here is how things took shape (pun intended). At the end of the Second World War, hundreds of thousands of ex-servicemen returned home searching for the education they needed to access the good jobs of post-war construction. Many opted for engineering, and their curriculum included rudiments of economics. The abstract way of teaching did not suit such a public, and Samuelson “adopted a visual style that they would have found familiar, drawn in the tradition of mechanical engineering and fluid mechanics.” The resulting book, simply titled Economics, became America’s bestselling textbook for nearly 30 years across all topics and shot its author to lifelong fame.

“Samuelson deeply understood and relished this influence over the college freshman’s mind as a blank slate. ‘I don’t care who writes a nation’s laws—or crafts its advanced treatises—so long as I can write its economics textbooks,’ he declared in later years. ‘The first lick is the privileged one, impinging on the beginner’s tabula rasa at its most impressionable state.'”4 His teacher and mentor, Joseph Schumpeter, had already noted that “Analytic work begins with material provided by our vision of things, and this vision is ideological almost by definition.”5

Circular Flow diagram
Circular Flow diagram, as represented in Economics first edition (1948).

In other words, the way we frame things at the most basic level is never as basic as it seems and decisively influences the resulting thought process. Whether it is called pre-analytic vision, worldview, frame, or paradigm, the most important is to realize that you have one in the first place so that you can then have the power to change it. “There may be no perfect frame waiting to be found, but, argues the cognitive linguist George Lakoff, it is absolutely essential to have a compelling alternative frame if the old one is ever to be debunked. Simply rebutting the dominant frame will, ironically, only serve to reinforce it. And without an alternative to offer, there is little chance of entering, let alone winning, the battle of ideas.”

By “perfect frame,” one can understand a frame of reference that would be devoid of a particular interpretation regarding the reality it is supposed to represent. That simply does not exist. Let’s take, for example, the notion of ‘tax relief’ widely used by US conservatives: “in just two words, it frames tax as an affliction, a burden to be lifted by a heroic rescuer. How should progressives respond? Certainly not by arguing ‘against tax relief,’ because repeating that phrase merely strengthens the frame (who could be against relief, after all?). But, says Lakoff, progressives too often try to set out their own views on tax with lengthy explanations, precisely because no concise alternative frame has been developed.”6

Paradoxically, the importance of mental pictures in general and their influence in mainstream economics in particular places people outside of Academia in a relative position of strength. “The fact that you have never sat through an economics lecture may just turn out to be a distinct advantage after all: you’ve less baggage to offload, less graffiti to scrub out. Every now and then, being untutored can be an intellectual asset—and this is one of those moments.” Let’s then look at what should specifically be scrubbed out.

***

Conventional Economics
Doughnut Economics
Gross Domestic ProductEconomic Doughnut (outer environmental boundary and human needs inner boundary)
Circular FlowEmbedded economy (in society and nature)
Rational Economic ManMan (human)
Mechanical equilibriumDynamic complexity (systems of systems)
CumulativeDistributive by design (network of flows [not just money])
LinearRegenerative (circular)
Growth addictedGrowth agnostic (thriving instead of growing)

First, change the goal. “For over 70 years, economics has been fixated on GDP, or national output, as its primary measure of progress. . . . For the twenty-first century, a far bigger goal is needed: meeting the human rights of every person within the means of our life-giving planet.”

Second, see the big picture. “Mainstream economics depicts the whole economy with just one, extremely limited image, the Circular Flow diagram. . . . This new depiction invites new narratives—about the power of the market, the partnership of the state, the core role of the household and the creativity of the commons.”

Third, nurture human nature. “At the heart of twentieth-century economics stands the portrait of rational economic man: he has told us that we are self-interested, isolated, calculating, fixed in taste and dominant over nature—and his portrait has shaped who we have become. But human nature is far richer than this, as early sketches of our new self-portrait reveal: we are social, interdependent, approximating, fluid in values and dependent upon the living world.”

Fourth, get savvy with systems. “The iconic criss-cross of the market’s supply and demand curves is the first diagram that every economics student encounters, but it is rooted in misplaced nineteenth-century metaphors of mechanical equilibrium. A far smarter starting point for understanding the economy’s dynamism is systems thinking, summed up by a simple pair of feedback loops.”

Fifth, design to distribute. “In the twentieth century, one simple curve—the Kuznets Curve—whispered a powerful message on inequality: it has to get worse before it can get better, and growth will (eventually) even it up. But inequality, it turns out, is not an economic necessity: it is a design failure.”

Sixth, create to regenerate. “Economic theory has long portrayed a ‘clean’ environment as a luxury good, affordable only for the well-off. . . . This century needs economic thinking that unleashes regenerative design in order to create a circular—not linear—economy and to restore humans as full participants in Earth’s cyclical processes of life.”

Seventh, be agnostic about growth. “One diagram in economic theory is so dangerous that it is never actually drawn: the long-term path of GDP growth. . . . Today we have economies that need to grow, whether or not they make us thrive; what we need are economies that make us thrive, whether or not they grow.”

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Footnotes

  1. PwC (2015) The World in 2050: will the shift in global economic power continue?
  2. Visual Literacy: Learn to See, See to Learn, Lynell Burmark.
  3. Reflections on the Great Depression, Randall E. Parker.
  4. Samuelson, P., ‘Foreword,’ in Saunders, P., and Walstad, W., (1990) The Principles of Economics Course: a handbook for instructors.
  5. Schumpeter, J. (1954) History of Economic Analysis. London: Allen & Unwin, p. 41.
  6. See Lakoff, G. The All New Don’t Think of an Elephant
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