DOUGHNUT ECONOMICS- A SWEET MODEL FOR A BITTER WORLD

For too long, institutions everywhere have taught and followed mainstream, neoclassical economic models, like the Supply-Demand Model by Jevons (1862), or the Circular Flow Model by Paul Samuelson (1944). While on the surface, there seems to be no flaw in how these models depict consumer behaviour through mathematics, a closer look at them says otherwise. All these models seem to ignore a crucial aspect – the environment. Humans are a product of their environment – their society, culture, and nature. The lack of research in the past and the need to create facts to predict human behaviour made philosophers ignore these aspects. They failed to accommodate for externalities of environmental degradation. 

In 2012, in a paper titled A Safe and Just Space for Humanity, Kate Raworth came up with the idea, or rather the framework of Doughnut Economics. She elaborated on it in her book –  Doughnut Economics: Seven Ways to Think Like a 21st-Century Economist (2017). She has focused on the Gross Domestic Product (GDP), its ignorance in quantifying housework and ecology, and failure to reduce inequalities. Further, she discredits the assumption of the “rational economics man,” by stating cognitive biases and advocates that we replace it with “social, adaptable humans.” According to Kate Raworth, Doughnut Economics is based on “Humanity’s 21st-century challenge is to meet the needs of all within the means of the planet. In other words, to ensure that no one falls short on life’s essentials (from food and housing to healthcare and political voice), while ensuring that collectively we do not overshoot our pressure on Earth’s life-supporting systems, on which we fundamentally depend – such as a stable climate, fertile soils, and a protective ozone layer. The Doughnut of social and planetary boundaries is a new framing of that challenge, and it acts as a compass for human progress this century.”

Doughnut Economics, thus, elucidates on seven main shortcomings with the present economic systems and presents a model, called the “doughnut of planetary and social boundaries,” which tries to correct these problems. Doughnut Economics essentially tries to change the way we think about economics and tries to instil issues like inequality and climate change into the discipline. But what is the doughnut?

Let us picture a classic doughnut. It consists of two concentric circles – one inside, and one outside, and it has a hole in the middle. 

The hole in the centre represents the population that does not have access to the essentials of life. The “dough” of the doughnut or the crust represents a safe and just place for humanity. It is also the place for a regenerative and distributive economy. The dough has two outer edges. The outer edge represents our ecological ceilings, and the inner one represents our social foundations. 

The ecological ceilings include our natural ecosystem limits, the nine planetary boundaries, given by Rockström and Steffen (2009), namely – Climate change, Ocean acidification, Chemical pollution, Nitrogen and phosphorus loading, Freshwater withdrawals, Land conversion, Biodiversity loss, Air pollution, and Ozone layer depletion. 

The social foundations include goals inspired by the SDGs of the United Nations, namely – 

Food Security, Health, Education, Income and Work, Peace and Justice, Political Voice, Social Equity, Gender Equality, Housing, Networks, Energy, and Water.

If there is a deficiency in the fulfilment of the social foundations and ecological ceilings, we fall into the doughnut hole. An overshoot of these leads to a transgression of our ecological boundaries. Data suggests that we have already overshot in four dimensions – land conversion, biodiversity loss, climate change and nitrogen and phosphorus loading. Thus, quick action through policy changes alongside getting over our obsession with growth, or rather, endless growth is the need of the hour. Raworth argues that growth does not result in environmental regeneration or redistributing wealth, and thus, we should be regenerative and redistributive by design.

Places like South Africa, China PR and the UK have already started using the Doughnut model to evaluate their overshoots and shortfalls and assess their social and environmental performance. In 2020, Amsterdam announced to use the model to boost economic recovery post the COVID-19 pandemic, to focus on green growth. The pandemic has shaken the global economy and has increased inequalities. The doughnut model can be a potential tool that countries can utilise to boost economic recovery post the pandemic, for its primary focus is on human needs without transgressing our environmental boundaries. 

While the model presents a very optimistic picture of how economics can progress, it is still a far cry from being widely accepted, for it comes with its shortfalls. The vision of the model does not offer ways to integrate environment and economics on a political level. It does not provide any practical policy advice. 

The world economy may be too bitter of a place to include doughnuts in today’s time. However, that does not mean we should lose all hope for a circular and regenerative economy. To answer the question of whether we will ever actually change the way we look at economics, and if the world can ever be cupcakes, doughnuts, and rainbows, only time will tell. 

References:

1. Raworth, Kate. 2018. Doughnut Economics: Seven Ways to Think Like a 21st-Century Economist. London: Random House Business Books.

2. ‌Raworth, Kate. A safe and just space for humanity: can we live within the doughnut?. Oxfam, 2012.

3. “Doughnut Economics Summary – Four Minute Books.” 2018. Four Minute Books. June 28, 2018. https://fourminutebooks.com/doughnut-economics-summary/.

4. Boffey, Daniel. 2020. “Amsterdam to Embrace ‘Doughnut’ Model to Mend Post-Coronavirus Economy.” The Guardian, April 8, 2020, sec. World news. https://www.theguardian.com/world/2020/apr/08/amsterdam-doughnut-model-mend-post-coronavirus-economy.

5. “Review of Doughnut Economics – a New Book You Will Need to Know About.” 2017. From Poverty to Power. April 6, 2017. https://oxfamblogs.org/fp2p/review-of-doughnut-economics-a-new-book-you-will-need-to-know-about/.

6. “What Are Donut Economics?” n.d. EcoResolution. Accessed February 11, 2021. https://ecoresolution.earth/blog/donut-economics-explained-in-500-words#_ftn2.

7. “Book Review: Doughnut Economics: Seven Ways to Think Like a 21st-Century Economist by Kate Raworth.” 2018. LSE Review of Books. May 21, 2018. https://blogs.lse.ac.uk/lsereviewofbooks/2018/05/21/book-review-doughnut-economics-seven-ways-to-think-like-a-21st-century-economist-by-kate-raworth/.

8. Rockström, Johan, Will Steffen, Kevin Noone, Åsa Persson, F. Stuart III Chapin, Eric Lambin, Timothy M. Lenton, et al. 2009. “Planetary Boundaries: Exploring the Safe Operating Space for Humanity.” Ecology and Society 14 (2). https://doi.org/10.5751/es-03180-140232.