Fresh and hopeful.

Tip for a productive reading: read the original ideas in Chapters 1 and 7. Read the rest following your curiosity.

After reading Less is More, I was feeling depressed. When trying to find a more nuanced and less ideological book, I stumbled upon Doughnut Economics. It fulfilled my need for a clearer and more nuanced understanding of where things are heading. It provides hopeful solutions. Best, it also highlights many initiatives that are already in motion that, unbeknownst to me, were already working towards a new economy.

The freshness comes with the core idea of replacing the obsession of GDP growth with an all-encompassing metric that takes into account, at a minimum, social equity boundaries and at a maximum, our planet’s boundaries.

The author does not accuse or blame anyone. Instead, she contextualizes the problems that our current classic models were trying to address, in their time and place. The author feels credible and trustworthy. It does not read at all like an activist’s manifesto.

I also appreciate how the author gives a few lessons of humility to her peers: economy is not a hard science and is mostly social and conventional, the “rational man” is a cartoon character that does not exist in real life and human activities follow dirty complex patterns rather than elegant mechanistic ones.

The author revives the dignity of “the commons” and the government, without crossing the line of idealism. Market, households, commons and government all have strengths and weaknesses and thus all have a role to play.

On the writing itself, it is accessible, clear and it flows well. I just found that sometimes the author was trying too hard and some literary devices felt a bit tacky. When she compares the economic actors to a play, she pushes the metaphor too far and the book feels slightly gimmicky.

Finally, I am happy that the book has now a few years behind its cover. This hindsight allow us to appreciate its positive influence, as reported in this Times article on the city of Amsterdam’s adoption of the core concepts of the book: https://time.com/5930093/amsterdam-doughnut-economics/

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Doughnut Economics makes a powerful argument for a fundamental change of the western way of life. Yet, it feels repetitive in its criticism and incomplete in its probe for solutions.

More than anything else, the book is a critique of capitalism. According to the author, capitalism prioritizes GDP growth over everything. Raworth fails to acknowledge that the prospect of growth has enabled investments into education, health, and welfare. Thus, in 'welfare states', capitalism and GDP growth acted as tools to achieve a higher priority: the wellbeing of citizens. Now we need to move the goal towards achieving this wellbeing in a sustainable fashion.

Perhaps my expectations were misaligned with the purpose of the book. I was hoping to find a comprehensive discussion of the options we have for going forward. On this front the more interesting parts were discussions about: Demurrage, the decoupling of GDP growth from the growth of resource use(which the author sees as unrealistic), EDI or Evergreen Direct Investing and Regenerative Economics. I wish the author would have examined these more in depth.

The gripe I have is when someone deconstructs and criticizes, but avoids analyzing alternatives. For the credibility and sincerity of 'change', we need to be willing to engage in a deep and open-minded exploration of alternatives. This includes discussing the negative externalities of the changes we want to see.

Despite its shortcomings, the book is a good introduction to the challenges we face, and some of the possible areas of going forward. ( )

A very interesting look at that, at times, somewhat dry topic of economics and in particular whether the traditional approach is fit for purpose in the 21st century, particularly in the context of climate change, dwindling resources etc.

Raworth thinks that the traditional approach is outdated, particularly in its seemingly single minded focus on a desire never-ending increase in GDP/GNP as the answer to all ills, such as poverty. At the same time, Raworth notes that the traditional approach under appreciates (if not ignores) the (adverse) impact of the past hundred or so years on the environment and the increasing need for more and more (scarce) resources (minerals, hydrocarbons, fertile land, water amongst others).

Raworth explores the history or economic theory, and concludes that modern economics has become too far removed from reality, having made many assumptions (the rational economic man; perfect market knowledge etc) in order to make various economic models 'workable', and provide almost science like predictions.

Indeed, reliance on some economic models or thinking influences how people think and act. Raworth cites 2 studies (pp100-101):

- third year economics university students rated altruistic values (eg helpfulness, honesty and loyalty) as being far less important in life than their 1st year equivalents;

- having published what became known as the Black- Scholes model (for predicting the likely price of options (derivatives) on the Chicago Board Options Exchange (which at the time was one of the most important derivatives exchanges in the world), the predictions initially made by the model deviated widely (by 30-40%) from the actual market prices. But after a few years, the model (without there being any changes to it) began to produce predictions which deviated by a mere 2% from actual market prices. A study by economic sociologists interviewing traders in the market demonstrated that the improvement came about because the traders had started to behave as if the theory/ model was true and were using the model's predictions as a benchmark for setting their own bids and bidding patterns. A variant of a self fulfilling prophecy.

Leaving behind traditional economics, Raworth asks that if we are not to act and run our economies in accord with traditional economic theory, how might we go about answering economic questions. And this is where the doughnut comes in.

In Raworth's words:

'The essence of the Doughnut: a social foundation of well-being that no one should fall below [in order that no person or peoples suffer critical human deprivation], and an ecological ceiling of planetary pressure that we should not go beyond [in order to avoid critical planetary degradation]. Between the two lies a safe and just space for all.' (p 11...words in [ ] added from the diagram on that page)

Raworth does not suggest that this is a prescription that is easy to implement, nor one as to which there are obvious answers when it comes to real life decisions, but spends the balance of the book making suggestions as to how we might change our ways of thinking in order to implement the Doughnut. Examples include:

- moving towards regenerative design ie approaching every decision as to design (eg as to physical artefacts) from the perspective of making every element of that artefact most adaptable to re-use, re-purposing, amenable to resource recovery and ultimately regeneration

- moving from being addicted to (GDP/GNP) growth to being agnostic about growth. That is not chasing growth, but being comfortable if growth does (or does not) come from time to time.

I have read that, at a personal level, Raworth who is based at Oxford and consults widely in Europe does not use air travel, but rather uses rail. An exception was apparently a trip to Australia with her family to visit her (Australian) husband's family. It is an example of asking, at every opportunity "do I need to consume this [given the resources that will be used/ the environmental impact of the consumption]?

In these few comments I have not done Raworth's thesis its proper due. But the book is very readable and does not require any particular economics background in order to understand.

I have not come across much discussion as to Raworth's thesis, in particular those critical, apart from one academic who posited that there was little prospect of implementing the Doughnut as (in my words) people's natures were so entrenched as being selfish that no one would ever give up anything for the common good.

That is a sad indictment if true.

Big Ship

1 July 2023 ( )

Author Kate Raworth proposes that economics should be illustrated with a doughnut shaped diagram: too little growth and we fall into the hole in the middle of the doughnut. On the other hand, uncontrolled growth can catapult the economy off the doughnut altogether with increased waste and depletion and degradation of resources.

She believes that the new economy should be distributive (lessening wealth gaps) and regenerative (product recycling instead of the current model which is more like a worm with natural resources in, production and then waste as the final end product).

Each chapter focuses on one of her seven points.

I read this book with no economic background at all, and found it very interesting and readable. I recognize that economics will play a pivotal role In the acceptance of sustainability. ( )

In this book, Kate Raworth synthesizes various economic ideas which update the limitations of classical economics. The book is structured around 7 key ideas. Each chapter addresses one of the ideas in moderate depth.

Before getting into the details, I'll note two things about the book that I did not like. First, Raworth is rather overfond of gimmicky presentations of ideas. For example, she spends over long discussing the importance of imagery in communicating ideas. Second, the writing style tends to fall into the "hero vs. villain" framing, with traditional economics taking on the role of villain. I look at this in contrast to a book like The Origin of Wealth which is just as critical of traditional economics but which leaves the reader feeling both respect for the true insights that went into traditional economics as well as seeing its limitations.

What I like about the book is that it synthesizes ideas from different areas: complexity economics, regenerative and distributive economics, and more. While none of the ideas are really new—even the author's doughnut is a visualization of existing ideas—bringing them together in one place creates connections that might not be as obvious when we experience the ideas separately.

So what are these ideas? Well, you could just read the table of contents. It's a pretty good summary. But for the sake of the review, I'll note them:

Change the goal: We need to move from growth as a goal for its own sake to a goal of staying within the zone where human rights are met universally while staying within global limits of sustainability. As the author says, we need to achieve, "human prosperity in a flourishing web of life."

See the big picture: Instead of looking at the market economy as a system separate from others, we should see it as embedded within a broader context. The household provides the foundation of the economy. It is supported by the market, the state, and the commons. Each of these can solve different types of problems, and they work best when they work together. These are embedded within society which is embedded within the earth. Seeing the market economy as embedded opens us to the possibility that markets are only one tool for solving problems, and not always the best.

Nurture human nature: Humans are not perfectly rational or focused only on narrow self interest. We are social and adaptable. We have fluid values that vary by context. We are interdependent. We approximate. Finally, we are embedded in nature. Accepting human nature as it is changes the shape of the problem economics needs to solve.

Get savvy with systems: The economy is not a static equilibrium system. It is a complex adaptive system. As such, we need to apply the tools of understanding complex adaptive systems to understanding the economy. One way we can do this is by changing the way we think about the economy from a mechanical metaphor to a more ecological metaphor, such as gardening. This highlights ideas such as stewardship, experimentation & adaptation, diversity, resilience, healthy hierarchy, and self-organization.

Design to distribute: Meeting the needs of everyone means reducing inequality. Inequality has often been assumed as an intermediate state on the path to prosperity. However, we have found that inequality doesn't reduce automatically. Instead, we should think about designing distribution into the system. By this, Raworth does not mean that we should focus on taxation, although it has a role to play. Rather, we should think about how to create wider access to the means of wealth creation. The systems we have in place around, for example, enterprise ownership or technology and knowledge distribution build in many constraints and assumptions that lead to inequality down the line.

Create to regenerate: Most industrial processes today are linear, going from resource use to dump with consumer usage in between. However, the cycle does not need to be linear. We can imagine cycles where waste products are utilized and where products are refurbished and modified and eventually recycled.

Be agnostic about growth: Growth, and in particular, GDP growth, is seen as the goal of modern economies. Instead, we should be agnostic about growth. We should focus our goals on maintaining at least a minimal standard of living for everyone while remaining within the bounds of sustainability (the doughnut). If that involves growth, that's fine. If that doesn't involve growth, that's fine too. As the author puts it, "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."

Overall, while this book is not as profound as it presents itself, it contains a solid summary of many interesting ideas.