Book review: Doughnut Economics

This blog has been too quiet. I've been travelling in Europe, but now that I've finally settled (in the beautiful city of Lyon) I can do some catching up, starting with a review of Doughnut Economics, by Kate Raworth. This book is partly a critique of current economic thinking, and partly some of Raworth's ideas on a new model for economics. Any critique of economics hits the zeitgeist right between the eyes, and so this book got a lot of press when it was released in 2017 (e.g. see here), and again in New Zealand earlier this year when Kate Raworth visited the Treasury.

However, I found the book to be quite unbalanced and full of lazy writing. Raworth is a great fan of metaphors and stories, but to my taste they were overdone. Moreover, large chunks of the book were unnecessary in order to make the central argument. The first couple of chapters essentially create a strawman of economics, which Raworth can then set alight. The economics she describes, with GDP growth as its core and only goal, is not an economics I recognise. Her argument is valid in many places, but she doesn't contribute anything new in pointing out that decision-makers are not purely rational. In her desperation to make us believe that economics and economic teaching is not fit for purpose, she far over-sells her argument. For instance, she tells us to:

Search for the word 'power' in the index of a modern economics textbook and - if mentioned at all - it will probably refer you to an analysis of electricity sector reform.

So, I did search for 'power' in the textbook that I use in my ECONS101 class, The Economy (which is available as a free e-text). It doesn't have an index, but it does have a glossary, where power is defined as: "The ability to do (and get) the things one wants in opposition to the intentions of others, ordinarily by imposing or threatening sanctions." That's basically the definition that Raworth uses. The Economy is as modern as modern economics textbooks get, so it's clear that Raworth didn't fact-check her own statements.

Raworth is also very inconsistent. She decries GDP as a poor measure early in the book, but then later breathlessly tells us that 40 percent of Kenya's GDP passes through MPESA. If GDP is a poor measure, then what is 40 percent of a poor measure? She also notes Bill Phillips' MONIAC machine as both "utterly flawed" (p.56) and as a positive example of systems thinking (p.122).

The book also presents a decidedly unbalanced view of the relevant research. Raworth rightly points out the flaws and criticisms of the Kuznets Curve and the Environmental Kuznets Curve, but ignores the equally valid criticisms of The Spirit Level (one of which I discussed here) or The Limits to Growth (on the latter, she notes the ideological arguments against it, but not the severe technical flaws). Both The Spirit Level and The Limits to Growth are used uncritically as positive examples. Similarly, Raworth presents blockchain technology as a solely positive development, with no consideration of the environmental impact of energy consumption of bitcoin miners.

The book isn't all bad though. In fact, I thought the 'Embedded Economy' diagram was vastly superior to the 'Doughnut' diagram around which the book is framed. Here's the relevant diagram:

Systems thinking, and sustainability, are not new ideas for the 21st Century. They are grounded in 20th-Century thinking, but that doesn't make them any less important. We need to recognise all of the trade-offs that we make in our decisions, individually and collectively. The embedded economy model helps to make more of those trade-offs (especially those that occur at an earth-systems level) more explicit. However, we don't need a doughnut to tell us this.

Doughnuts are great for a quick sugar hit, but fail to provide adequate nutrition and we can't live on doughnuts alone. That's an appropriate metaphor for this book.