Doughnut Economics

Doughnut Economics Plot Summary

Introduction

The 21st century presents humanity with unprecedented challenges that our current economic thinking is ill-equipped to address. Traditional economics has failed to provide adequate frameworks for tackling climate change, biodiversity loss, extreme inequality, and other pressing issues that threaten human wellbeing. These failures stem from outdated economic models developed in the 19th and 20th centuries that prioritize unlimited growth on a finite planet and view humans as rational, self-interested actors disconnected from society and nature. A radical reimagining of economics is needed to create a world where humanity can thrive within planetary boundaries. This reimagining requires replacing the dominant metaphors and models of economics with new ones that recognize the economy as embedded within society and the living world. By shifting from mechanical equilibrium to dynamic complexity, from rational economic man to social adaptability, and from growth addiction to regenerative design, we can create economies that are distributive and regenerative by design. These new economic frameworks don't just critique the status quo but offer positive visions for how economies can work in service to human flourishing while respecting ecological limits.

Chapter 1: The Doughnut: A New Economic Framework for the 21st Century

For over 70 years, economics has been fixated on GDP growth as its primary measure of progress. This narrow metric has justified extreme inequalities and unprecedented environmental destruction. The 21st century demands a far bigger goal: meeting the human rights of every person within the means of our life-giving planet. This goal is encapsulated in the concept of the Doughnut. The Doughnut provides a visual framework defining a safe and just space for humanity. Its social foundation sets out the basics of life on which no one should be left falling short - from food and water to gender equality and political voice. Its ecological ceiling comprises nine planetary boundaries beyond which lies unacceptable environmental degradation. Between these two sets of boundaries lies the Doughnut itself - the safe and just space where humanity can thrive. GDP growth emerged as an economic goal after the Great Depression and World War II, when getting economies moving again was paramount. The metric proved useful for wartime planning and became entrenched as the primary indicator of economic success. However, its creator Simon Kuznets warned that "the welfare of a nation can scarcely be inferred from a measure of national income." Despite this caution, GDP growth shifted from being a policy option to a political necessity. The cuckoo goal of GDP growth has hijacked economics, pushing aside deeper questions about the purpose of economic activity. When politicians feel obliged to prop up GDP growth with qualifying terms like "sustainable," "inclusive," or "green" to give it legitimacy, it's clear this metric is ready for replacement. The challenge now is to create economies that help bring all of humanity into the Doughnut's safe and just space. Current data shows humanity is falling far short on both social and ecological counts - billions still lack life's essentials while we've already crossed at least four planetary boundaries. Getting into the Doughnut's safe space will be influenced by five factors: population, distribution, aspiration, technology, and governance. The Doughnut transforms our vision of progress from endless growth to thriving in balance, replacing the metaphor of "forwards and upwards" with one of dynamic equilibrium.

Chapter 2: Beyond GDP: Redefining Progress Within Planetary Boundaries

The Environmental Kuznets Curve emerged in the early 1990s when economists Gene Grossman and Alan Krueger discovered what appeared to be a striking pattern. Analyzing data on GDP alongside local air and water pollution metrics across approximately 40 countries, they observed that pollution initially increased with economic growth but eventually declined as nations became wealthier. This inverted U-shape curve quickly became a powerful narrative: economic growth would naturally clean up the environmental problems it created. This narrative has proven to be a dangerous myth. While some local pollutants may decline as countries grow wealthier, this often happens because pollution is outsourced to poorer countries, not eliminated. More fundamentally, when countries' global material footprints are calculated - including resources used abroad to produce their imports - the promised decline rarely materializes. Even if it did, the peak would require resources equivalent to several planet Earths if all countries followed the same path. Recent advances in natural resource flow accounting have further undermined this narrative. When calculating a nation's global material footprint - including all biomass, fossil fuels, metal ores, and construction minerals used worldwide to create imported products - high-income countries show consistently increasing resource consumption as they grow wealthier. From 1990 to 2007, material footprints grew by more than 30 percent in the United States, UK, New Zealand, and Australia, and by over 50 percent in Spain, Portugal, and the Netherlands. The explanations supporting the Kuznets Curve have not withstood empirical scrutiny. The claim that citizens must wait for GDP growth to care about environmental quality was contradicted by research showing that environmental quality was higher in places with more equitable income distribution, higher literacy rates, and stronger civil rights, particularly in low-income countries. This suggests people power, not economic growth itself, drives environmental protection. Similarly, industries adopt cleaner technologies primarily due to regulation and citizen pressure, not merely increased wealth. The fundamental problem lies in treating environmental degradation as an externality rather than a core design flaw in industrial systems. The linear "take-make-use-lose" model of industrial production runs counter to the living world's cyclical processes. While economic theory recognizes potential environmental damage through "negative externalities" and proposes market-based tools like quotas and taxes to address them, these approaches fall short both in practice and theory. A more fundamental redesign of economic systems is needed to create progress indicators that account for both human wellbeing and planetary boundaries.

Chapter 3: Embedded Economy: Markets Within Society and Nature

For seventy years, economics has been dominated by a single diagram - the Circular Flow - which depicts the economy as a closed loop between households and businesses. This limited view has set the stage for a neoliberal script that casts the market as efficient, business as innovative, finance as infallible, and the state as incompetent. Meanwhile, it has relegated the household, commons, society, and Earth to minor roles or excluded them entirely. This narrow framing has had profound consequences. By ignoring the economy's dependence on the living world, it has pushed us toward ecological collapse. By overlooking the core role of unpaid care work, it has perpetuated gender inequality. By treating the commons as tragic, it has justified their enclosure. And by dismissing the existence of society, it has undermined our sense of interdependence. A new picture is needed - one that embeds the economy within society and the living world. The Embedded Economy diagram reveals the economy as nested within the Earth's life-supporting systems, with four realms of provisioning: the household, market, commons, and state. Earth, far from being an inexhaustible resource, is recognized as life-giving with boundaries that must be respected. The economy depends on Earth as both source and sink, extracting materials and expelling wastes. As Herman Daly observed, we've moved from an "Empty World" where economic activity was small relative to the biosphere to a "Full World" where it exceeds Earth's regenerative capacity. Society, rather than being non-existent as Thatcher claimed, is foundational. The trust, norms, and reciprocity created within social networks enable cooperation and collective action. These social connections build cohesion and help meet fundamental human needs for participation, leisure, and belonging. The economy itself comprises four provisioning realms, each with distinct qualities. The household provides "core" goods through unpaid care work that sustains all other economic activity. The market, when properly embedded, can efficiently coordinate billions of decisions but requires regulation to prevent exploitation. The commons, far from being tragic, can triumph when communities develop clear rules for stewarding shared resources. Elinor Ostrom's research identified eight design principles for successful commons management, challenging Garrett Hardin's influential "tragedy of the commons" narrative. The state, when accountable, provides essential public goods and enables the other realms to flourish. This new economic picture prompts different questions. Rather than focusing solely on market efficiency, we can ask which realm of provisioning is best suited for meeting different human needs. Instead of treating power as irrelevant, we can examine how it shapes economic outcomes. By seeing the big picture, we gain a more complete understanding of how the economy works and how it might be transformed to serve human flourishing within planetary boundaries. This embedded view recognizes that markets are powerful tools but they exist within society and the living world, not separate from them.

Chapter 4: Human Nature: From Rational Economic Man to Social Adaptability

At the heart of mainstream economics stands rational economic man - a solitary, calculating, competitive and insatiable figure. This cartoon character, drawn over two centuries, has shaped not only economic theory but also how we see ourselves. Like a portrait that influences its subject, this depiction has encouraged self-interested behavior and undermined our capacity for cooperation. The evolution of this character reveals much about economics' blind spots. Adam Smith recognized humans as complex moral beings with both self-interest and concern for others. But subsequent economists, seeking scientific credibility, gradually stripped away this complexity. John Stuart Mill reduced humanity to "a being who desires to possess wealth." William Stanley Jevons added constant calculation of utility. Frank Knight endowed this character with perfect knowledge and foresight, transforming a caricature into a cartoon. Research now shows that studying this model actually changes behavior. Economics students become more self-interested than their peers in other disciplines. The Black-Scholes model for pricing options initially failed to predict market prices, but traders began using it as a benchmark, causing reality to mimic theory. Even our language shapes behavior - when people are called "consumers" rather than "citizens," they identify more strongly with materialistic values. A new portrait is emerging, revealing five shifts in how we understand ourselves. First, rather than being narrowly self-interested, we are social and reciprocating. Experiments across cultures show we typically practice "strong reciprocity" - cooperating with cooperators while punishing free-riders. Second, instead of fixed preferences, we have fluid values that respond to context. Shalom Schwartz's research identifies ten basic values present in all humans but activated differently as we move between social roles. Third, instead of being isolated individuals, we are deeply interdependent. Our choices are influenced by social norms and networks, explaining everything from fashion trends to financial bubbles. Fourth, rather than calculating perfectly, we use heuristics - mental shortcuts that often serve us well in uncertain environments. Finally, far from having dominion over nature, we are embedded in the web of life, dependent on Earth's systems for our survival. These insights have profound implications for policy. When monetary incentives are introduced in social spaces, they often "crowd out" intrinsic motivation. In Colombia, a cash transfer program for school attendance unexpectedly increased dropout rates among siblings not selected for the program. In Tanzania, offering payment for community service reduced participation compared to villages where no money was mentioned. Alternative approaches that tap into values, nudges, networks, and norms can be more effective. Text message reminders significantly increased medication adherence in Kenya. Green footprints painted leading to trash bins reduced littering by 46% in Copenhagen.

Chapter 5: Systems Thinking: From Mechanical Equilibrium to Dynamic Complexity

Economics has long been trapped in the metaphor of mechanical equilibrium, modeling markets as if they were governed by the same laws that explain falling apples. This approach, pioneered by economists like William Stanley Jevons and Léon Walras in the 1870s, sought to make economics as "scientific" as Newtonian physics. The result was a theory built around the famous supply and demand curves, which promised that markets would naturally find equilibrium like a pendulum coming to rest. This mechanical view requires heroically simplifying assumptions: perfectly competitive markets, diminishing returns, fully informed actors, and rational behavior. When these assumptions fail to match reality, economists have too often blamed the world rather than their models. The 2008 financial crash dramatically exposed the limitations of equilibrium thinking, as mainstream economists failed to see it coming because their models overlooked the role of banks, debt, and financial instability. A more useful approach is to recognize the economy as a complex adaptive system - one characterized by feedback loops, emergent properties, and non-linear change. At the heart of systems thinking lie three deceptively simple concepts: stocks and flows, feedback loops, and delay. Stocks (like water in a bathtub or money in a bank) change based on their inflows and outflows. Feedback loops come in two varieties: reinforcing loops that amplify change (like compound interest) and balancing loops that counter it (like a thermostat). This perspective illuminates economic phenomena that equilibrium models miss. Financial markets, far from being efficient, are inherently unstable due to what George Soros calls "reflexivity" - the pattern where market participants' views influence events, which then influence their views. Hyman Minsky recognized that stability breeds instability as periods of calm encourage greater risk-taking, eventually leading to crisis. Systems thinking also explains why inequality tends to increase over time. The "Success to the Successful" dynamic means that initial advantages - whether in Monopoly or in real economies - tend to compound. Computer simulations like Sugarscape show how even small initial differences between agents can rapidly amplify into extreme inequality through system dynamics, challenging the notion that income disparities primarily reflect differences in talent or effort. Climate change similarly demonstrates the importance of stock-flow dynamics. Many policymakers mistakenly believe that stabilizing annual emissions would stabilize atmospheric carbon concentrations. But as John Sterman's "carbon bathtub" analogy shows, the atmosphere is like a tub where water flows in faster than it drains out - emissions must fall below the rate at which carbon is removed from the atmosphere before concentrations will decline. These insights call for a metaphorical career change for economists: from engineers with wrenches to gardeners with pruning shears. Rather than trying to control the economy through precise adjustments, economists should adopt an evolutionary approach that embraces experimentation. As Donella Meadows advised, we should "watch and understand how the system currently works" before intervening, paying attention to leverage points where small changes can lead to big effects.

Chapter 6: Distributive Design: Creating Economies That Share Value

For decades, economists and policymakers have been guided by a powerful myth: that rising inequality is a necessary phase of economic development that will eventually reverse itself as growth continues. This belief was crystallized in the Kuznets Curve - an inverted U-shaped graph suggesting that as countries grow richer, inequality must rise before it eventually falls. The message was clear: no pain, no gain. This narrative has been thoroughly debunked. Simon Kuznets himself admitted his theory was based on "5 percent empirical information and 95 percent speculation." When sufficient data became available in the 1990s, researchers found "the pattern is that there is no pattern" - countries followed diverse inequality trajectories as they developed. Some, like the East Asian "tiger" economies, achieved growth with equity through land reform, public investment, and industrial policies that raised wages. Thomas Piketty's landmark research revealed that Kuznets had studied an exceptional period when world wars and depression had destroyed capital, while post-war policies like progressive taxation and public services reduced inequality. The normal tendency under capitalism is for wealth to concentrate as returns to capital exceed economic growth rates, creating a self-reinforcing cycle of inequality. The consequences of high inequality are severe. More unequal societies suffer higher rates of mental illness, drug use, obesity, imprisonment, and lower life expectancy. Democracy is undermined when wealth buys political influence. Ecological degradation increases as social capital erodes. Economic stability is threatened, as demonstrated by the 2008 financial crisis where inequality contributed to unsustainable household debt. Even economic growth itself is hampered when purchasing power is concentrated among the few. The solution is not to wait for growth to reduce inequality but to create economies that are distributive by design. This requires moving beyond the pyramid or rollercoaster metaphors to envision the economy as a network of flows. Just as nature's networks distribute resources through branching patterns that balance efficiency and resilience, economic networks can be designed to distribute value more equitably. Distributive design must address not only income but also the ownership of wealth-generating assets. Five opportunities stand out. First, land ownership can be more equitably shared through community land trusts, land value taxes, and protection of indigenous land rights. Second, money creation can be democratized through state-issued digital currencies, public banking, and complementary currencies like Kenya's Bangla Pesa that enable community trading during cash shortages. Third, enterprise ownership can be transformed through cooperatives, employee ownership, and new corporate forms that prioritize stakeholder value over shareholder returns. Fourth, technology ownership can be distributed through open-source design, digital commons, and ensuring that automation benefits workers, not just capital owners. Fifth, knowledge can be shared through the commons rather than enclosed by excessive intellectual property rights.

Chapter 7: Regenerative Economics: Moving Beyond the Growth-Will-Clean-It-Up Fallacy

The "growth will clean it up" narrative suffers from a fundamental conceptual error: it misidentifies the problem. Industrial activity based on the degenerative linear design of take-make-use-lose depletes natural resources and overwhelms Earth's waste sinks. This design runs directly counter to the living world, which thrives through continuously recycling life's building blocks like carbon, oxygen, water, nitrogen, and phosphorus. Industrial processes have fractured these natural cycles, extracting resources faster than they regenerate and producing waste beyond what ecosystems can absorb. When businesses first confront the scale of pressure that degenerative industrial design places on planetary boundaries, their responses typically follow a predictable pattern. The most basic response is simply to do nothing, continuing business as usual until regulations force change. The next level involves doing what pays—adopting eco-efficiency measures that cut costs or boost brand value. While this represents progress, it often amounts to little more than being "less bad" than competitors or previous performance, falling far short of what's needed for true sustainability. More ambitious companies commit to doing their "fair share" in making the transition to sustainability or pursue "mission zero" initiatives for net-zero energy buildings, water-neutral factories, or zero-waste production. However, as architect William McDonough notes, "Being less bad is not being good. It is being bad, just less so." The most transformative response involves being generous by creating enterprises that are regenerative by design. Rather than merely taking nothing, regenerative businesses actively give back to living systems. This regenerative approach requires moving beyond the linear "caterpillar economy" of take-make-use-lose toward a "butterfly economy" that harnesses the endless inflow of solar energy to continually transform materials into useful products and services. The circular economy concept embodies this shift through cradle-to-cradle thinking, running on renewable energy, eliminating toxic chemicals, and designing out waste. It recognizes that "waste equals food"—the leftovers from one production process become source materials for another. The circular economy operates through two distinct nutrient cycles, represented as the butterfly's wings. Biological nutrients (soil, plants, animals) are consumed and regenerated through living systems. Technical nutrients (plastics, synthetics, metals) are designed for restoration through repair, reuse, refurbishment, and recycling. From coffee grounds used to grow mushrooms before becoming animal feed and eventually soil, to mobile phones designed for disassembly and material recovery, these cycles transform last century's wasteful industries into regenerative ones. Practical implementations of these principles are emerging worldwide. Park 20|20 in the Netherlands demonstrates cradle-to-cradle business park design, featuring recyclable construction materials, integrated energy systems, and roofs that collect solar energy, store water, and provide wildlife habitats. In California, Newlight Technologies captures methane emissions from dairy farms, converting them into carbon-negative bioplastics. In South Australia, Sundrop Farms uses seawater and sunlight to grow produce in arid coastal regions. In Ethiopia's Tigray region, farming communities have regenerated over 220,000 hectares of desertified land through terracing and planting vegetation.

Summary

Doughnut Economics presents a revolutionary framework for economic thinking that is fit for the 21st century challenges we face. By replacing outdated metaphors and models with new ones that recognize the economy as embedded in society and the living world, it offers a positive vision for creating economies that are regenerative and distributive by design. The seven ways of thinking presented - changing the goal from GDP to the Doughnut, seeing the big picture of the embedded economy, nurturing human nature in all its complexity, getting savvy with systems, designing to distribute, creating to regenerate, and being agnostic about growth - together form a coherent alternative to mainstream economics. This paradigm shift enables us to move beyond the false choices of market versus state, efficiency versus equality, and growth versus environment, opening up creative possibilities for meeting the needs of all within the means of the planet. The evidence consistently shows that waiting for economic growth to solve social and ecological problems is a dangerous fantasy - we must intentionally design economies that share value and work with nature's cycles. By reimagining economics as a discipline in service to human flourishing within planetary boundaries, we can create a world where prosperity is shared while respecting Earth's ecological limits. This transformation is not merely technical but deeply political, requiring us to challenge entrenched power structures and reimagine what constitutes true economic success.

About Author

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Kate Raworth

Kate Raworth is a renegade economist focused on exploring the economic mindset needed to address the 21st century’s social and ecological challenges, and is the creator of the Doughnut of social and planetary boundaries.Her internationally acclaimed idea of Doughnut Economics has been widely influential amongst sustainable development thinkers, progressive businesses and political activists, and she has presented it to audiences ranging from the UN General Assembly to the Occupy movement. Her book, Doughnut Economics: seven ways to think like a 21st century economist is being published in the UK and US in April 2017 and translated into Italian, German, Spanish, Portuguese, Dutch and Japanese.Over the past 20 years, Kate’s career has taken her from working with micro-entrepreneurs in the villages of Zanzibar to co-authoring the Human Development Report for UNDP in New York, followed by a decade as Senior Researcher at Oxfam.

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