Doughnut Economics: Seven Ways to Think Like a 21st-Century Economist

Kate Raworth's Doughnut Economics has a catchy title, appealing diagrams and has attracted some extravagant praise; George Monbiot has called her the John Maynard Keynes of the 21st Century. Is Monbiot right?

Book cover of the Doughnut Economics by Kate Raworth
Book by ​Kate Raworth

Published by Random House Business Books, 2017

This is an inspiring and highly readable book, enlivened by its insistence on the centrality of diagrams.  The central thesis is that we have to change the objective of economics.  We should no longer pursue growth in Gross Domestic Product to the exclusion of all else, but instead construct an economy that respects both the environment and society – environmental and social justice as many Greens have had it for years.  The economy is conceived of as a ring, the doughnut of the title.  Outside the doughnut is the environment, and the economy has to operate so that environmental limits – on climate change, pollution, freshwater use etc – are not exceeded.  And inside the doughnut sits society, where the economy needs to deliver certain basics to everyone – adequate food, healthcare, education, equalities, decent politics etc.  So it looks like this:

Diagram of the dougnut that the economy has to operate within the environmental limits

From book proceeds by way of seven steps, and the doughnut – this shift to wider objectives – is the first.  The six chapters that follow are an accessible and spirited exposition of most of what has been done in critical political economy and ecology over the last 50 years.  So we set off with a chapter about how the economy is embedded in wider society, and that the market in particular is just one part of material life, which also includes households, the public sector and the commons, and whose contributions are often ignored or treated simply as costs.  The next chapter demolishes that extraordinary creation of the economics textbooks, rational economic man, and points out that human nature is in fact much richer and less calculating.

Then there is a chapter on the methods of economics, and its over-reliance on the notion that economic systems are normally in equilibrium.  Raworth points out that real economies are rarely in equilibrium, and that the appropriate mathematics is that of dynamical systems, opening up the possibilities of sudden change such as the financial collapse of 2008, rather than a stately procession from one equilibrium point to another.  Next follows a chapter on the distribution of income and wealth, and how the expectations of the first 70 or so years of the twentieth century that economic growth would lead to a more equal distribution have turned out to be false in the following 50 or so years, when there has been a sharpening of inequality.  Moreover, as the following chapter argues, growth no more leads to a cleaner, greener economy than it does to a more equal one – only conscious design and regulation will lead to the limits outside the doughnut not being exceeded.  Finally, the last of the seven chapters that comprise the core of the book focuses on growth, whether so-called green growth is possible, and whether growth cannot be questioned because it is fundamental to a liberal democratic political order.

So, apart from the doughnut diagram itself, most of this book is not original, but it is probably the best, most readable and most comprehensive introduction to the whole subject of alternative economics.  It should be required subversive reading for every student beginning a conventional economics course.  But is Raworth the new Keynes?  I don't think she is, and I suspect she would regard Monbiot's praise as exaggerated.  I have two main reasons for saying that.

First, while there is a lot about the objectives of economic management, there are actually no new theories here about how the economy works.  There is an analogy with driving a car; you need to aim to drive the car in the right direction, but also you have to know how the steering wheel, brakes and accelerator affect where the car is going.  Raworth, on p.242, makes the rather extraordinary assertion that it is clearly time for economists to leave behind the search for economic laws of motion. Yet some of the most influential and important contributions from outside conventional economics have done just that.  Think for example of the Club of Rome's original 1970's modelling of the economy where resources and pollution matter,[1] or more recently Piketty's work on how if the rate of profit exceeds the growth rate then the economy will grow more unequal,[2] or Keen's work on creating a macro model with finance included which is a dynamical system and which can, unlike equilibrium models, but like the real world, crash.[3]  All of this is difficult stuff, with equations and numbers, just as Keynes was difficult, but it is essential, and cannot be wished away.

Second, rather surprisingly, two words never appear anywhere in the text, capitalism and patriarchy.  There is some brief discussion of power.  I would expect a comprehensive account like this to have some discussion at least on whether a capitalist economy could ever make the kind of transformation envisaged by the doughnut without fundamental changes to the ownership and control of the economy.  And I would also expect the demolition of rational economic man, for he is a man, to pay rather more attention to the gendered nature of the division in particular into household and market.  I have a suspicion that perhaps Raworth wants to reach as wide a readership as possible and has deliberately avoided these topics for fear of frightening the horses, but I think it would have been a better and a braver book had she addressed them.

So altogether an excellent account of where economics needs to go, but perhaps only a few actual steps down the road.

[1] Meadows D.H., et al, The Limits to Growth, New York, Universe Books, 1972.
[2] Piketty, Thomas, Capital in the twenty-first century, translated by Arthur Goldhammer, Harvard University Press, 2014.
[3] Keen, Steve, Debunking Economics: The Naked Emperor of the Social Sciences, Zed Books, New York, 2001.

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