Books : reviews

Kate Raworth.
Doughnut Economics: seven ways to think like a 21st-century economist.
Penguin. 2017

rating : 2 : great stuff
review : 31 March 2021

Relentless financial crises. Extreme inequalities in wealth. Remorseless pressure on the environment. Anyone can see that our economic system is broken. But can it be fixed?

In Doughnut Economics, Oxford academic Kate Raworth identifies the seven critical ways in which mainstream economics has led us astray – from selling us the myth of ‘rational economic man’ to obsessing over growth at all costs – and offers instead an alternative roadmap for bringing humanity into a sweet spot that meets the needs of all within the means of the planet. Ambitious, radical and thoughtful, she offers a new, cutting-edge economic model fit for the challenges of the 21st century.

Modern economics is clearly not fit for purpose. It is based on false axioms like unbounded rationality, and individual optimisation. It is too narrow a model, not including many important and linked systems, like the family, the state, and the biosphere. It requires continual exponential growth, which is physically impossible, and is destroying the planet. And its predictions have been repeatedly falsified, from repeated financial crashes to ever-increasing wealth inequalities. So what to do?

Raworth lays out a plan for a better economics, based on the visual image of the doughnut. The outer edge represents an upper level of activity, beyond which activity is unsustainable, due to climate change, biodiversity and habitat loss, pollution, etc. And the inner edge represents a baseline activity, below which people cannot thrive: the need for food, water, shelter, healthcare, education, equality, justice, etc. (I would have liked some acknowledgement that it is necessary to demonstrate that the inner edge is indeed inside the outer edge!)

The doughnut forms a useful image to illustrate the goal of the new economics; Raworth then carefully unpicks the requirements to achieve this, identifying seven facets of the new approach. Each chapter digs into a particular facet, such as the goal of economics, the need for systems thinking, the issue of growth, and more. Starting with a brief review of the historical development of the current theories, Raworth shows how they came about, how that often the originators emphasised they were mere approximations or idealisations, yet that they have subsequently come to be been set in stone. This background serves to demonstrate that changing the models is not somehow going counter to some established truth, but is rather correcting old fundamental errors. So next Raworth outlines how to correct the errors, giving a new model and new requirements. And just when each chapter gets to the point where you are thinking “yes, this is all very well and good, but it would never be possible to make that change”, Raworth gives examples of how that change is already happening in certain (albeit often small and local) cases.

So this is informative, constructive, and hopeful. Everyone should read it, and act on it.