Doughnut (economic model)

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The Doughnut, or Doughnut economics, is a visual framework for

The framework was proposed to regard the performance of an economy by the extent to which the needs of people are met without overshooting Earth's ecological ceiling.[4] The main goal of the new model is to re-frame economic problems and set new goals. In this context, the model is also referred to as a "wake-up call to transform our capitalist worldview".^[5] In this model, an economy is considered prosperous when all twelve social foundations are met without overshooting any of the nine ecological ceilings. This situation is represented by the area between the two rings, considered by its creator as a safe and just space for humanity.^[6]

The social foundations are inspired by the social aims of the Sustainable Development Goals of the United Nations.^[9] These are:

• Food security
• Health
• Education
• Income and work (the latter is not limited to compensated employment but also includes things such as housekeeping)
• Peace and justice
• Political voice
• Social equity
• Gender equality
• Housing
• Networks (the latter includes both networks of communities, but also networks of information like the internet)
• Energy
• Water

Ecological ceilings

The nine ecological ceilings are from the planetary boundaries put forward by a group of Earth-system scientists led by Johan Rockström and Will Steffen.^[9] These are:

• Climate change — the human-caused emissions of greenhouse gases such as carbon dioxide and methane trap heat in the atmosphere, changing the Earth's climate.
• Ocean acidification — when human-emitted carbon dioxide is absorbed into the oceans, it makes the water more acidic. For example, this lowers the ability of marine life to grow skeletons and shells.
• Chemical pollution — releasing toxic materials into nature decreases biodiversity and lowers the fertility of animals (including humans).
• fertiliser leads to the fertilizer running off to water bodies, where they cause algae blooms
  which kills underwater life.
• Freshwater withdrawals — using too much freshwater dries up the source which may damage the ecosystem and be unusable after.
• Land conversion — converting land for economic activity (such as creating roads and farmland) damages or removes the habitat for wildlife, removes carbon sinks and disrupts natural cycles.
• ecosystem services
  .
• Air pollution — the emission of aerosols (small particles) has a negative impact on the health of species. It can also affect precipitation and cloud formation.
• Ozone layer depletion — some economic activity emits gases that damage the Earth's ozone layer. Because the ozone layer shields Earth from harmful radiation, its depletion results for example in skin cancer in animals.

Critique to mainstream economic theory

The doughnut model is still a collection of goals that may be pursued through different actions by different actors and does not include specific models related to markets or human behavior. The book Doughnut Economics consists of critiques and perspectives of what should be sought after by society as a whole.^[9] The critiques found in the book are targeted at certain economic models and their common base.

The mainstream economic models of the 20th century, defined here as those taught the most in Economics introductory courses around the world, are neoclassical. The Circular Flow published by Paul Samuelson in 1944 and the supply and demand curves published by William S. Jevons in 1862 are canonical examples of neoclassical economic models. Focused on the observable money flows in a given administrative unit and describing preferences mathematically, these models ignore the environments in which these objects are embedded: human minds, society, culture, and the natural environment. This omission was viable while the human population did not collectively overwhelm the Earth's systems, which is no longer the case. Furthermore, these models were created before statistical testing and research were possible. They were based, then, on assumptions about human behavior converted into "stylized facts". The origins of these assumptions are philosophical and pragmatic, simplifying and distorting the reflections of thinkers such as Adam Smith into Newtonian-resembling curves on a graph so that they could be of presumed practical use in predicting, for example, consumer choice.

The body of neoclassical economic theory grew and became more sophisticated over time, and competed with other theories for the post-mainstream economic paradigm of the North Atlantic. In the 1930s, Keynesian theory was it, and after the 1960s, monetarism gained prominence. One element remained as the policy prescriptions shifted: the "rational economic man" persona on which theories were based. Raworth, the creator of Doughnut Economics, denounces this literary invention as a perverse one, for its effects on its learners' assumptions about human behavior and, consequently, their own real behavior. Examples of this phenomenon in action have been documented,^[10][11][12] as have the effects of the erosion of trust and community on human well-being.^[13]

Real-world economies in the Doughnut perspective

Kate Raworth explains the doughnut economy is based on the premise that "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."^[14]

Raworth states that "significant GDP growth is very much needed" for low- and middle-income countries to be able to meet the goals of the social foundation for their citizens.^[15]

Leaning on Earth studies and economics, Raworth maps out the current shortfalls^[16] and overshoots,^[17][18][19] as illustrated in Figure 2.

The Doughnut framework has been used to map localized socio-environmental performance in Erhai lake-catchment (China),^[20] Scotland,^[21] Wales,^[22] the UK,^[23] South Africa,^[24] Netherlands,^[25] India,^[26] globally^[27] and many more.^[28]

In April 2020, Kate Raworth was invited to join the City of Amsterdam's post-pandemic economic planning efforts.^[29]

An empirical application of the doughnut model showed in 2018 that so far across 150 countries not a single country satisfies its citizens' basic needs while maintaining a globally sustainable level of resource use.^[30]

Criticism

Branko Milanovic, at CUNY's Stone Center on Socio-Economic Inequality, said that for the donut theory to become popular, people would have to "magically" become "indifferent to how well we do compared to others, and not really care about wealth and income."^[15]

See also

• Ecological economics
• Critique of political economy
• Prosperity Without Growth
• The Closing Circle

References