Book SummaryDoughnut Economics, by Kate Raworth

1-Page Summary1-Page Book Summary of Doughnut Economics

In Doughnut Economics, heterodox University of Oxford economist Kate Raworth argues that traditional economic theory has been too focused on the economy as a measure of GDP, income, and output.

She writes that, in doing so, it has failed to take into account the broader global context in which economies exist—and the ends they are truly meant to serve. According to Raworth, the economy’s purpose is to promote human prosperity and happiness. This means 1) a just and equitable society where everyone has the material resources to pursue their highest dreams, but also 2) a sustainable biosphere that enables the engine of the economy to produce the necessary means for human prosperity but does not deplete vital natural resources.

Raworth proposes redefining how economics is taught and the role that economists play in shaping public policy, shifting from a growth-centered approach to a human-centered approach that harnesses the power of economics for the betterment of humanity.

In the book’s central metaphor, Raworth reimagines the priorities of economic policy as a ring-shaped doughnut. The inner circle represents the zone of deprivation—an economy that does not produce enough of the necessary goods and services to sustain the population with adequate levels of food, shelter, health care, and other essential needs. The outer circle represents the limits of economic growth beyond which the economy begins to outstrip the planet’s natural resources, leading to devastating consequences like global warming and ocean acidification, which threaten life on Earth.

She writes that the economy must therefore stay within the bounds of the two circles, within the “dough” of the doughnut—growing enough to meet the full spectrum of human needs, but not so much that it outstrips the planet’s ability to provide the resources that make human civilization possible.

In this guide, we explore 1) Raworth’s ideas for redefining the goals and purpose of economics to better suit humanity’s needs, 2) how the economy interacts with and depends on human social institutions and the natural ecosystem, 3) how we must reorganize the economy to replenish the resources it consumes and...

Doughnut Economics Summary Redefining the Goal of Economics

Before launching into her exploration of how to redefine the goals and future trajectory of economics, Raworth first guides us through the intellectual underpinnings of the economics field as it currently exists. She writes that, as the field has evolved, economics has developed some core assumptions about human nature, what an economy exists to do, and what the social science of economics is meant to achieve. According to her, if the economy is to better serve humanity’s needs, these core assumptions will need to change.

Utility and Growth

Raworth observes that traditional economics places great stock in the concept of utility: the satisfaction or value an individual receives from goods and services. The utility gained is usually synonymous with the price paid.

In her view, this takes too narrow a view of the full range of human needs and desires, since many of our core emotional and spiritual needs can’t be purchased through markets, nor can their value be precisely quantified in monetary terms. These “goods” like love, empathy, childcare, and all other forms of emotional support are essential to the holistic health of the human beings who provide the labor that...

Doughnut Economics Summary Beyond _Homo Economicus_

Raworth writes that economics has expanded beyond the original set of concerns we described in the previous chapter. Economics, once focused on the study of the production of goods and services, has branched into psychology and now purports to explain the motivations and beliefs of the human beings who produce those goods and services.

Specifically, Raworth writes that traditional economics has a particular model of human beings: The model is homo economicus, and it asserts that human beings are essentially rational, utility-maximizing entities, able to process, calculate, and have perfect access to information to make the optimal choice for themselves in all situations. It is a portrait of humankind rooted in self-interest, unconcerned with deeper moral imperatives like charity or altruism: Rational economic man cares only about increasing his material wealth and will always follow incentives to do so.

Information Asymmetry Leads to Poor Decisions

Raworth and other writers argue that homo economicus is a flawed model for human behavior, in large part because humans are often making decisions with flawed or incomplete information. In...

Doughnut Economics Summary Economy, Society, and Planet: How Systems Interact

Raworth writes that a system is any group of components that interact to form a whole and that, through their interactions, create patterns of behavior. The gravitational pull of bodies in space, the movement of tectonic plates, the actions of buyers and sellers in an economy, and the movement of auto traffic on a crowded street are all systems.

The Economy Is an Open System

To understand how the system of our economy works and how we can make it more responsive to our social and environmental needs, we need to understand how systems interact with other systems.

Raworth observes that traditional economics has a closed-system model for the economy, which operates simply as a series of “inflows” and “outflows” of money, closed off from everything else. This model puts the economy in isolation and treats it as a machine, governed by a simple and predictable set of inputs and outputs.

Raworth argues that this model is deceptively simple and ignores how the economy is actually an open system embedded within larger systems—1) the society and culture within which it...

Doughnut Economics Summary The Distributive Economy

Raworth writes that our economic system fails to keep us inside the doughnut because it produces too much inequality—a small minority of the world population has amassed vast fortunes, while billions of people remain mired in extreme poverty.

She argues that inequality is directly linked to social ills—like crime, drug abuse, lack of educational attainment, and low life expectancy—and undermines democratic institutions and social cohesion. Moreover, inequality fuels a feedback loop that leads to more inequality, as the wealthy can use their outsized political power to lobby for economic policies that make them even richer—all while fueling wasteful conspicuous consumption that harms our environment and depletes natural resources. Meanwhile, the ability of a few large players to shift the flows of capital throughout the global economy makes the entire system fragile, unstable, and vulnerable to shocks and bubbles.

In this section, Raworth proposes some concrete solutions to the problem of our inequitable economy: 1) redistributing land resources, 2) getting the money supply out of the hands of governments and central banks, 3) giving workers greater control over the...

Doughnut Economics Summary The Regenerative Economy

Raworth writes that we need a top-to-bottom redesign of our global economic order: away from an extractive economy and toward a regenerative economy.

We’ve already explored Raworth’s argument that on a global scale, unchecked growth leads to more and more environmental degradation. She writes that this is because our economy is inherently depletive and extractive: It consumes energy and materials to make products, which are then used and discarded, creating waste. The resources used are not replaced.

(Shortform note: The evidence suggests that the problems of our wasteful economy are only getting worse. According to the World Bank, the planet is on pace to generate 70% more waste by 2050—more than doubling the projected growth rate of the population itself during that time. This makes sense, as waste generation is closely tied to levels of economic growth and disposable income—as the world gets richer and the global economy gets more productive, we’re generating more waste per person. This is the dark side of economic development, as governments around...

Doughnut Economics Summary Human Prosperity Over Economic Growth

Raworth’s closing argument is that we need to move beyond economic growth as the primary measure of the health of our economy and society. Human happiness, prosperity, and the health of our ecosystem and biosphere—staying inside the “dough” of the doughnut—are what matter most, whether growth happens or not.

She argues that there must be some natural growth boundary based on an economy’s limited endowments of labor, land, capital, natural resources, space, knowledge, technology, and other factors of production. In other words, growth cannot go on forever. In many respects, this is already happening in rich countries as they grapple with an aging population, slow population growth, and declining worker productivity.

Confronting the Challenges of Population Decline

Other writers have explored the consequences of population decline or stagnant growth, as well as potential solutions to it. One writer notes that global fertility rates are indeed dropping at an unprecedented rate, with nearly every country on the planet on track to have shrinking populations by...

Shortform Exercise: Stay Inside the Doughnut

Raworth writes that the goal of economic policy should be to stay within the inner ring of the metaphorical doughnut—designing an economy that is productive enough to ensure that everyone on the planet has their basic material needs met, but that does not grow so fast as to deplete our natural resources and degrade the environment. In this exercise, explore the tradeoffs between these imperatives, and think about how we might devise the right policy mix that keeps us inside the dough of Raworth’s doughnut.

Do you think it’s possible to provide for the material needs of every human on the planet without sustained economic growth, as Raworth suggests? Explain why or why not.