In 2012, economist Kate Raworth created what is called “Doughnut Economics” where she proposed a new economic framework that renders Keynesian economics passé. Unlike Keynes, Raworth’s framework is “agnostic” to economic growth.
Raworth described the “doughnut” as a way for humanity to thrive while being conscious of the needs of the planet. She said it is a compass for human prosperity in the 21st century.
In https://doughnuteconomics.org/, the Doughnut consisted of two concentric rings, a social foundation and an ecological ceiling. Humanity needs to learn how to live between these two rings to not only thrive as a people but also “protect Earth’s life-supporting systems.” Falling into the doughnut means experiencing social, economic, and other deprivations while living beyond the ecological ceiling means causing or worsening climate change, pollution, and others.
“Doughnut Economics proposes an economic mindset that’s fit for the 21st century context and challenges. It’s not a set of policies and institutions, but rather a way of thinking that brings about the regenerative and distributive dynamics that this century calls for,” according to the Doughnut Economics Action Lab.
“Drawing on insights from diverse schools of economic thought—including ecological, feminist, institutional, behavioral and complexity economics—it sets out seven ways to think like a 21st century economist in order to bring the world’s economies into the safe and just space for humanity,” it added.
Raworth said there are seven ways to think like a 21st century economist. The first is to change the goal of development from a never-ending upward trajectory as suggested in Keynesian economics but to the Doughnut where people and planet can coexist harmoniously.
Another is to see the big picture where markets are self-contained and the economy is an isolated system which does not have links to other systems to an embedded economy in society or the planet. Raworth also said it is important to nurture human nature by envisioning man to be the Homo Economicus who is not just interested in himself but should be “socially reciprocating.”
Raworth also said it is important to “get savvy with systems” and view economics as a dynamic system that “can be summarized in a pair of feedback loops.” Gone were the days, she said, when economics are viewed from equilibriums because these do not always exist.
The fifth way to be a 21st century economist is to view economics as a means of distribution. Raworth argued that economic inequality is a “design error” rather than an “economical need.” The second to the last is “create to regenerate” which highlights the importance of a circular economy that not only creates goods to no end until they become waste but also reuse these goods to contribute to development.
The last is to be agnostic to growth. Raworth stressed that the 21st Century economist needs to realize that while constant economic growth is essential, nature does not design anything that grows infinitely.
“Doughnut Economics recognizes that growth is a healthy phase of life but nothing grows forever and things that succeed do so by growing until it is time to grow up and thrive instead,” the Doughnut Economics Action Lab stated.