Saturday, February 17, 2018

Book Review: Doughnut Economics


Raworth, Kate (2017) Doughnut Economics: 7 Ways to Think Like a 21st Century Economist. White River Junction, VT: Chelsea Green.

It’s not often anymore that I read a book and start immediately taking notes because the ideas are so helpful. But Kate Raworth has dissected what’s wrong with our old economic theory and proposes an alternative, in language you don't have to be an economist to understand. 

The Doughnut refers to an image she’s created with Planetary Boundaries around the outside (showing the environmental systems upon which we depend and our degree of overshoot for each) and inside, a similar set of societal needs, along with our under-shoot of each. The idea is to pull people who don't have enough from the no-man's-land in the center of the doughnut while staying within the outer boundary of the limits of nature. The space between the inner and outer ring is what she calls "the safe and just space for humanity."

This image is brilliant, but basing the future on an image of junk food is perhaps not the best way to title her book. A round life-preserver would have been a better metaphor. I would have titled the book How Wrong-headed Economic Theory Has Convinced Us All to Destroy Life on Earth and What to do Instead.

Here's the conundrum she tries to solve: 
“We have an economy that needs to grow, whether or not it makes us thrive. 
We need an economy that makes us thrive, whether or not it grows.” p. 227

A couple concepts, along with the Doughnut, are key. One is the power of images. She warns we should all be careful not to internalize a lot of economic images we’ve been fed. Not just economists have done this; these old models are entrenched in politics, international aid, and our view of what it is to be human. 

For example, the Kuznets Curve that seems to imply that emerging economies have to become more unequal for a time as they get richer, is not true but has influenced politics and international relief efforts. Same problem with supply and demand curves, the exponential GDP curve (that no economist wants to finish drawing beyond the point it goes almost verticle...what happens next?).

Worst of all is the stick-figure view of human nature referred to as Homo Economicus. We have been taught that we are selfish, wanting more and more stuff, with perfectly rational decision-making based on perfect information. NOT! Even the inventors of that caricature knew it was flawed and incomplete. 

I remember recently having a conversation with a doctor who told me profit was his main motivation; that universal healthcare would lower his ability to make more and more money; his motivation would stop. I thought he had a cynical and narrow view of human nature. Yes, money drives us, but so do a lot of other things: compassion, love, a desire to make a difference, beauty, spiritual healing. Wouldn't we all be better off if we shared an image of human nature that nurtured our better angels rather than our worst?

Another theme is that entrenched economic thinking and the schools teaching it are stuck in the old way of thinking, and the more prestigious the university, the more resistant to change. She encourages us to be agnostic about whether growth must continue or not and instead focus on redesigning our economy around getting everyone into the circumference of the doughnut.

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