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KATE RAWORTH – DOUGHNUT ECONOMICS: SEVEN WAYS TO
THINK LIKE A 21ST CENTURY ECONOMIST (2017)
Florian ROSS
Kaposvár University, Doctoral School in Management and Organizational Sciences,
H-7400 Kaposvár, Guba Sándor u. 40.
ABSTRACT
What if we started economics not with established theories, but with humanity´s long-term goals and how to
achieve them? This is the question, Kate Raworth asks in her book “Doughnut Economics”. She criticizes
that our economical acts and decisions are based on the economic theories of the 1960s, which are mainly
focused on a continuous and infinite growth. She suggests an update to the 21st century economy, which accounts
not just for our well- being and prosperity, but for that of our planet as well. To make the missing factors in
classic economies visible, she developed a “Doughnut Model”, which includes twelve aspects of our social
foundation, as well as nine planetary boundaries and explains that the ideal space of our economy is between
these two elements. Her work is a wake-up call to transform our capitalist worldview, which is targeting to
growth, into a more balanced, sustainable perspective that allows both humans and the planet to thrive.
Keywords: New Economics, sustainable development, economic model, ecological
economics
INTRODUCTION
Did you know that global warming will increase between 1.0–3,5 °C until 2100? (Kessel,
2000). An associated rise of sea level is also expected and due to that, the number of people
at risk from flooding by coastal storm surges is predicted to increase from the current 75
million up to 200 million in a scenario of mid–range climate changes. (Patz et al., 2005).
Further impacts of this warming to the planet like nature catastrophies, droughts or
famines can just be estimated. These threats are not new. When Kate Raworth grew up in
the 1980s in London, the problem was already existing and when she saw that bad news
in television, she knew that she wanted to work one day in a profession, where she could
make the world a better place. So, she decided to study economics in Oxford and after
graduating, she started working for the Unites Nations and later for Oxfam. After twenty
years of work for these organizations, she came back to the Universities of Oxford and
Cambridge to work as a professor. In 2017, she published her book “Doughnut
Economics: Seven ways to think like a 21st century economist”. This paper will give an
overview about the book´s key points and will figure out further research questions.
DISCUSSION
From Raworth’s point of view, the current economic market system has three major
weaknesses. The first one is the ecological context, which is not included in that model.
Regional and Business Studies (2019) Vol 11 No 2, 81-86
Kaposvár University, Faculty of Economic Science, Kaposvár
doi: 10.33568/rbs.2409
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Everything is about increasing growth rates but forgets about the planet and its needs.
The second one is work, which is not accounted. This includes all kinds of work which
is invested in parenting or doing the housework. Helping other people without getting
paid is counted to that, too. All that is work and creates value, but does not appear in
any calculation. The last weakness is inequality. As known, the difference between the
richest and the poorest people in the world is strongly increasing and the current market
system intensifies that problem (Davies et al., 2015). Those failures were the motivation
for Kate Raworth to develop the Doughnut Model and the consequential advice.
THE DOUGHNUT
Indeed, the model really looks like a doughnut (Figure 1). The inner circle of the
Doughnut represents our social foundation, which means all the basic needs we have
like water, food or housing. The outer circle represents our ecological ceiling. These
boundaries, like climate change, air pollution or land conversion were not invented by
Kate Raworth, but scientifically evaluated by a group of scientists under the
administration of Johan Rockström and Will Steffen. (Rockström et al., 2009).
Figure 1
The Doughnut model?
Source: https://upload.wikimedia.org/wikipedia/commons/1/12/Doughnut_(eco
nomic_model).jpg
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If we stay between these two limitations, we are in the safe and just space for
humanity, where all people can live in wealth and prosperity and where we do not
shoot over the planet’s boundaries. If we fall inside the inner circle, the people have
to suffer because they cannot cover their daily needs. If the use of resources and
environmental pollution are so high that they hurt the planet, the economy crosses
the ecological ceiling and goes outside the outer circle. At the moment we are outside
of both boundaries. So, how can we ensure that we stay inside the safe and just space
for humanity? Kate Raworth suggests to renew the way of how we think about
economics and comes up with her 7 ways, to think like a 21st century economist.
1. Change the goal
Economics is about consumption and as known, the best indicator of how much an
economy consumes is the GDP. This is probably the most important figure to
measure. It is expected that the GDP grows from year to year up to 5% and if an
economy does not fulfill these expectations, it is deemed bad. Donella Meadows, an
American scientist said: “Growth is one of the stupidest purposes ever invented by
any culture. We´ve got to have an enough.” (Raworth, 2017). Raworth notes, that this
20th century strategy of growth pushed a lot of societies into deep inequality and the
world into an ecological collapse. A high quantity of people falls short with their daily
needs, but at the same time, we are pushing too much pressure to our planet and our
liv–sustaining systems, which led to climate changes or the breakdown of
biodiversity. It is time to get into the sweet spot of the Doughnut and to replace the
goal of endless growth for a new one, a 21st century goal. This goal is clear from
Raworth´s point of view: To cover both, our as well as our planet’s needs and to live
in balance with our environment.
2. See the big picture
Traditional economics describes the economy always with the same picture, the
circular–flow diagram between companies and households. In that description,
economy is an isolated system without any relations to other systems. That theory
presumes that the markets are so efficient to let them run free, the state is too
incompetent to meddle, everyone benefits from trade and that the society quasi does
not exist. So, the triumph of the markets was almost inevitable and have been driving
us to financial and ecological crises. Also, the statement that the financial markets
cannot fail was clearly disapproved in the global financial crash, which puts the first
theory into question, too. Raworth says, it is time to draw the economy in a new way,
where it is embedded in larger systems like the society, the earth or the solar system
with the goal to put it in service to life.
3. Nurture human nature
In the focus of economics is the Homo Economicus. According to definition, it is a
rationally thinking person. To visualize the Homo Economicus, he can also be
described as a person who stands alone, with the money in his hand, the calculator
in his brain, knows every price and has the nature at his feet. It can be observed that
the more economy students study, the more self–interested the Homo Economicus
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becomes. Kate Raworth says, we cannot keep living in that way, we have to change
ourselves from self-interested to socially reciprocating, from fixed preferences to
fluid values and from isolated to interdependent ones. That will give us the
opportunity to nurture human nature, and due to that, more chances to get in the
safe and just space of the Doughnut.
4. Get savvy with systems
Raworth shows that economy is a complex, constantly changing system and not a
simple, stable one like the economists in the 19th century invented. Those economists
were inspired by Newton’s laws of physics of how the planets were moving, so they
were looking for laws to describe the market movements. The result was that they
were trying to transform their ideas into maths and developed models, which are
based on equilibriums. The fault in this calculation is that economy is too complex
and depends on too many factors. Furthermore, equilibriums do not always exist.
Systematic thinking is more helpful to understand the dynamics of economics a,
which can be summarized in a pair of feedback loops. Because of that, Raworth says
that 21st century economists do not see themselves as engineerswho control the
economy, but as gardeners who take care and shape it.
5. Design to distribute
The basic for that way is the Kuznet curve, which says that when an economy
develops, market forces first increase and later decrease economic inequalities. It
means that the income per capital first rises to a maximum and causes inequality,
until it can decrease it. Raworth criticizes that the economic inequality is not an
economical need, it is more a design error. 21st century economists have to recognize
that a lot of possibilities exist to design economies with the result of more equality
when distributing their created values. It means that it is much more, than just
distributing incomes, but wealth. Especially when that wealth comes from possessing
land, companies, and technologies or from the creation of money.
6. Create to regenerate
Economics regarded a clean environment for a long time as a luxury good, which
was just available for the higher classes. That way of thinking was forced by the
environmental Kuznet curve, which indicates that the environmental pollution has
to increase first, until the economic growth can decrease it. Raworth disagrees with
that theory because there are no proofs that this will happen. She says that the
environmental damage is a result of a degenerative orientation of the industry and
that we need a new economical thinking in the next century, which has a regenerative
orientation and a more circular approach. We should change our business model
which eats up the planet’s resources and spits out just waste into a system, which
turns waste back into valuable goods.
7. Be agnostic with growth
Traditional economists regard constant economic growth as essential, but in nature
nothing grows infinitely. We have to realize that the economic growth must
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eventually reach a limit. Kate Raworth suggests that the traditional exponential
growth curve has to be replaced by the s curve, focusing on a level where we can
cover both, our as well as our planet’s needs to live in harmony with our environment.
CONCLUSION AND FURTHER RESEARCH QUESTIONS
Kate Raworth offers with Doughnut Economics a completely new way, a 21st century
way of economical thinking. The interesting point is that her ideas are not that new
as they seem, it is much more back to the economic roots, which we might have lost.
Economics comes from the Greek words oikos (household) and nemein (manage or
distribute) (Singer, 1958). That definition leads inevitably to the question if it is really
householding what the 20th century economics stands for because householding is
about working with the resources which are available and not overshooting them.
But how to avoid an overshoot when the economies are aiming for infinite growth
rates on a finite planet? Is that even possible?
Kate Raworth doesnot recommend concrete actions, how to transform her
theories and to apply them, but after reading that book, a thinking process is started
and that is probably one of the author’s goals. But how can we ensure that the book´s
results will influence our future economies? From my perspective, there is just one
way. We will not be able to change economics overnight, but we can change it in the
future, when we realize that the students of today are the decision makers of
tomorrow and due to that fact we should rethink, what we teach at universities,
because the key to change lies in education.
REFERENCES
Davies, J., Sandström, S., Shorrocks, A., Wolff, E. (2009): The Level and Distribution
of Global Household Wealth. [online] <URL
https://www.nber.org/papers/w15508.pdf> doi: 10.3386/w15508
Kessel, D.G. (2000): Global warming – facts, assessment, countermeasures. In:
Journal of Petroleum Science and Engineering, 26. 1-4. 157-168. p. doi:
10.1016/s0920-4105(00)00030-9
Patz, J.A., Campbell-Lendrum, D., Holloway, T., Foley, J.A. (2005): Impact of
regional climate change on human health. In: Nature, 438. 7066. 310-317. p. doi:
10.1038/nature04188
Raworth, K. (2017): Doughnut Economics: Seven Ways to Think Like a 21st-Century
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1603586740
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Singer, K. (1958). Oikonomia: An Inquiry into Beginnings of Economic Thought
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Correspondent author:
Florian ROSS
Kaposvár University
Doctoral School in Management and Organizational Sciences
H-7400 Kaposvár, Guba Sándor u. 40.
e-mail: ross.florian@gmx.de
