Doughnut Economics: Seven Ways to Think Like a 21st-Century Economist

by Kate Raworth

Economics: The Twentieth-Century Neoliberal Story (in which we go to the brink of collapse) Staging by Paul Samuelson Script by the Mont Pelerin Society Cast, in order of appearance: THE MARKET, which is efficient—so give it free rein. As Adam Smith famously wrote, ‘It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.’8 When the market’s invisible hand is set free to work its magic of allocative efficiency, it harnesses the self-interest of households and business to provide all the goods and jobs that are wanted. BUSINESS, which is innovative—so let it lead. ‘The business of business is business’, summed up Milton Friedman’s influential philosophy in the 1970s. Firms bring together labour and capital to produce novel goods and services and to maximise their profits. There is no need to look at what goes on in their factories and farms, so long as they play within the legal rules of the game. FINANCE, which is infallible—so trust in its ways. Banks take people’s savings and dutifully turn them into profitable investments. Furthermore, according to Eugene Fama’s influential ‘efficient-market hypothesis’ of 1970, the price of financial assets always fully reflects all relevant information.9 Hence, financial markets are ever adjusting but always ‘right’—and their smooth operation should not be distorted by regulation. TRADE, which is win-win—so open your borders. David Ricardo’s ninetee...