Finance:Doughnut (economic model)

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Short description: Economic model for sustainable development (created 2012)
The classic image of the Doughnut; the extent to which boundaries are transgressed and social foundations are met are not visible on this diagram

The Doughnut, or Doughnut economics, is a visual framework for sustainable development – shaped like a doughnut or lifebelt – combining the concept of planetary boundaries with the complementary concept of social boundaries.[1] The name derives from the shape of the diagram, i.e. a disc with a hole in the middle. The centre hole of the model depicts the proportion of people that lack access to life's essentials (healthcare, education, equity and so on) while the crust represents the ecological ceilings (planetary boundaries) that life depends on and must not be overshot.[2] The diagram was developed by University of Oxford economist Kate Raworth in her 2012 Oxfam paper A Safe and Just Space for Humanity and elaborated upon in her 2017 book Doughnut Economics: Seven Ways to Think Like a 21st-Century Economist and paper.[3]

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]

Kate Raworth noted the planetary boundaries concept does not take human wellbeing into account[7] (although, if Earth's ecosystem dies then all wellbeing is moot). She suggested social boundaries should be combined with the planetary boundaries structure. Adding measures such as jobs, education, food, access to water, health services and energy helps to accommodate an environmentally safe space compatible with poverty eradication and "rights for all". Within planetary limits and an equitable social foundation lies a doughnut-shaped area which is the area where there is a "safe and just space for humanity to thrive in".[8]

Indicators

Social foundations

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

Ecological ceilings

Main page: Earth:Planetary boundaries

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).
  • Nitrogen and phosphorus loading — inefficient or excessive use of 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.
  • Biodiversity loss — economic activity may cause a reduction in the number and variety of species. This makes ecosystems more vulnerable and may lower their capacity of sustaining life and providing 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

The Doughnut template used for Planet Earth as a whole, indicating errors in red.

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

References

  1. ↑ Raworth, Kate (2012). A Safe and Just Space for Humanity: Can We Live within the Doughnut?. Oxfam Discussion Papers. https://www-cdn.oxfam.org/s3fs-public/file_attachments/dp-a-safe-and-just-space-for-humanity-130212-en_5.pdf. 
  2. ↑ Monbiot, George (12 April 2017). "Finally, A Breakthrough Alternative to Browth Economics – The Doughnut". The Guardian. ISSN 0261-3077. https://www.theguardian.com/commentisfree/2017/apr/12/doughnut-growth-economics-book-economic-model. 
  3. ↑ Raworth, Kate (1 May 2017). "A Doughnut for the Anthropocene: Humanity's Compass in the 21st Century" (in English). The Lancet Planetary Health 1 (2): e48–e49. doi:10.1016/S2542-5196(17)30028-1. ISSN 2542-5196. PMID 29851576. 
  4. ↑ Raworth, Kate (28 April 2017). "Meet the Doughnut: The New Economic Model That Could Help End Inequality". https://www.weforum.org/agenda/2017/04/the-new-economic-model-that-could-end-inequality-doughnut/. 
  5. ↑ Ross, Florian (2019). "Kate Raworth - Doughnut Economics: Seven Ways to Think Like a 21st Century Economist" (in English). Regional and Business Studies 11 (2): 81–86. doi:10.33568/rbs.2409. ISSN 2732-2726. 
  6. ↑ O’Neill, Daniel W.; Fanning, Andrew L.; Lamb, William F.; Steinberger, Julia K. (2018). "A good life for all within planetary boundaries". Nature Sustainability 1 (2): 88–95. doi:10.1038/s41893-018-0021-4. https://eprints.whiterose.ac.uk/127264/1/GoodLifeWithinPB_AuthorAcceptedVersion.pdf. 
  7. ↑ Raworth, Kate (2012). A Safe and Just Space for Humanity: Can We Live within the Doughnut?. Oxfam Discussion Papers. https://www-cdn.oxfam.org/s3fs-public/file_attachments/dp-a-safe-and-just-space-for-humanity-130212-en_5.pdf. Retrieved 22 April 2021. 
  8. ↑ "Climate Change: Understanding Rio+20". 3 April 2012. http://www.irinnews.org/Report/95227/CLIMATE-CHANGE-Understanding-Rio-20. 
  9. ↑ 9.0 9.1 9.2 Raworth, Kate (2017). Doughnut Economics: Seven Ways to Think Like a 21st Century Economist. Vermont: White River Junction. p. 254. ISBN 9781603586740. OCLC 961205457. https://books.google.com/books?id=7A4lDgAAQBAJ&pg=PA254. 
  10. ↑ Molinsky, Andrew L.; Grant, Adam M.; Margolis, Joshua D. (September 2012). "The Bedside Manner of Homo Economicus: How and Why Priming an Economic Schema Reduces Compassion". Organizational Behavior and Human Decision Processes 119 (1): 27–37. doi:10.1016/j.obhdp.2012.05.001. ISSN 0749-5978. 
  11. ↑ Frank, Robert H. (2014). "Does studying economics inhibit cooperation?". What Price the Moral High Ground?. Princeton University Press. pp. 155–178. doi:10.1515/9781400833917.155. ISBN 978-1-4008-3391-7. http://www.aeaweb.org/articles.php?doi=10.1257/jep.7.2.159. 
  12. ↑ Frank, Björn; Schulze, Günther G (September 2000). "Does Economics Make Citizens Corrupt?". Journal of Economic Behavior & Organization 43 (1): 101–113. doi:10.1016/s0167-2681(00)00111-6. ISSN 0167-2681. 
  13. ↑ Bauer, Monika A.; Wilkie, James E. B.; Kim, Jung K.; Bodenhausen, Galen V. (16 March 2012). "Cuing Consumerism". Psychological Science 23 (5): 517–523. doi:10.1177/0956797611429579. ISSN 0956-7976. PMID 22427388. https://ink.library.smu.edu.sg/lkcsb_research/4946. 
  14. ↑ Raworth, Kate (28 April 2013). "What on Earth is the Doughnut?…". https://www.kateraworth.com/doughnut/. 
  15. ↑ 15.0 15.1 Nugent, Ciara (22 January 2021). "Amsterdam Is Embracing a Radical New Economic Theory to Help Save the Environment. Could It Also Replace Capitalism?". Time (magazine). https://time.com/5930093/amsterdam-doughnut-economics/. "In fact, the doughnut model doesn't proscribe all economic growth or development. In her book, Raworth acknowledges that for low- and middle-income countries to climb above the doughnut's social foundation, 'significant GDP growth is very much needed.' But that economic growth needs to be viewed as a means to reach social goals within ecological limits, she says, and not as an indicator of success in itself, or a goal for rich countries. ... Still, some economists are skeptical of the idealism. In his 2018 review of Raworth's book, Branko Milanovic, a scholar at CUNY's Stone Center on Socio-Economic Inequality, says for the doughnut to take off, humans would need to 'magically' become 'indifferent to how well we do compared to others, and not really care about wealth and income.'". 
  16. ↑ Stiglitz, Joseph E. (c. 2009). Report by the Commission on the Measurement of Economic Performance and Social Progress. OCLC 837677596. 
  17. ↑ Living Planet Report. WWF-World Wildlife Fund for Nature. OCLC 271397636. 
  18. ↑ Berger, A. (23 August 2002). "Climate: An Exceptionally Long Interglacial Ahead?". Science 297 (5585): 1287–1288. doi:10.1126/science.1076120. ISSN 0036-8075. PMID 12193773. 
  19. ↑ Young, Oran R.; Steffen, Will (2009), "The Earth System: Sustaining Planetary Life-Support Systems", Principles of Ecosystem Stewardship (Springer New York): pp. 295–315, doi:10.1007/978-0-387-73033-2_14, ISBN 978-0-387-73032-5 
  20. ↑ Cooper, Gregory S.; Dearing, John A. (February 2019). "Modelling future safe and just operating spaces in regional social-ecological systems". Science of the Total Environment 651 (Pt 2): 2105–2117. doi:10.1016/j.scitotenv.2018.10.118. ISSN 0048-9697. PMID 30321732. Bibcode: 2019ScTEn.651.2105C. 
  21. ↑ Sayers, M.; Trebeck, K. (2014), The Scottish Doughnut: A Safe and Just Operating Space for Scotland, Oxford: Oxfam GB 
  22. ↑ Sayers, M.; Trebeck, K. (2015), The Welsh Doughnut: A Framework for Environmental Sustainability and Social Justice, Oxford: Oxfam GB 
  23. ↑ Sayers, M.; Trebeck, K. (2015), The UK Doughnut: A Framework for Environmental Sustainability and Social Justice, Oxford: Oxfam GB 
  24. ↑ Cole, M. (2015), Is South Africa Operating in a Safe and Just Space? Using the Doughnut Model to Explore Environmental Sustainability and Social Justice, Oxford: Oxfam GB 
  25. ↑ "The Amsterdam City Donut: a tool for transformative action.". 2020. https://www.kateraworth.com/wp/wp-content/uploads/2020/04/20200406-AMS-portrait-EN-Single-page-web-420x210mm.pdf. 
  26. ↑ Cooper, Gregory S.; Dearing, John A. (15 February 2019). "Modelling Future Safe and Just Operating Spaces in Regional social-ecological systems" (in en). Science of the Total Environment 651 (Pt 2): 2105–2117. doi:10.1016/j.scitotenv.2018.10.118. ISSN 0048-9697. PMID 30321732. Bibcode: 2019ScTEn.651.2105C. 
  27. ↑ Roy, Ajishnu; Basu, Aman; Dong, Xuhui (January 2021). "Achieving Socioeconomic Development Fuelled by Globalization: An Analysis of 146 Countries" (in en). Sustainability 13 (9): 4913. doi:10.3390/su13094913. ISSN 2071-1050. 
  28. ↑ Fang, Xuening; Wu, Jianguo; He, Chunyang (1 February 2021). "Assessing Human-environment System Sustainability Based on Regional Safe and Just Operating Space: The case of the Inner Mongolia Grassland" (in en). Environmental Science & Policy 116: 276–286. doi:10.1016/j.envsci.2020.12.007. ISSN 1462-9011. https://www.sciencedirect.com/science/article/pii/S146290112031409X. 
  29. ↑ Raworth, Kate (8 April 2020). "Introducing the Amsterdam City Doughnut". https://www.kateraworth.com/2020/04/08/amsterdam-city-doughnut/. 
  30. ↑ O’Neill, Daniel W.; Fanning, Andrew L.; Lamb, William F.; Steinberger, Julia (2018). "A Good Life for All Within Planetary Boundaries". Nature Sustainability 1 (2): 88–95. doi:10.1038/s41893-018-0021-4. ISSN 2398-9629. http://eprints.whiterose.ac.uk/127264/1/GoodLifeWithinPB_AuthorAcceptedVersion.pdf. Retrieved 13 September 2020. 



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