Doughnut Economics: Seven Ways to Think Like a 21st-Century Economist
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a group of Harvard students staged a mass walk-out of a lecture by Professor Gregory Mankiw – author of the world’s most widely taught economics textbooks – in protest against the narrow and biased ideological perspective that they believed his course espoused. They were, they said, ‘deeply concerned that this bias affects students, the University, and our greater society’.
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‘The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood.
Craig Nicol
Keynes
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‘I don’t care who writes a nation’s laws – or crafts its advanced treatises – so long as I can write its economics textbooks,’
Craig Nicol
Paul Samuelson
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Samuelson’s 1948 Circular Flow diagram,
Craig Nicol
Wages work with gravity to keep money flowing, whilst investments can impede business growth? That explains why stimulus cheques to business don't work?
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the heart of twentieth-century economics stands the portrait of rational economic man: he has told us that we are self-interested, isolated, calculating, fixed in taste, and dominant over nature
Craig Nicol
This Software developer will tell you the rational man is a myth. We are a product of our built environment, physical and digital.
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A far smarter starting point for understanding the economy’s dynamism is systems thinking,
Craig Nicol
Economics as a distributed system with emergent behaviours. And the network-is-invisible myths pervade here. https://en.m.wikipedia.org/wiki/Fallacies_of_distributed_computing
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inequality, it turns out, is not an economic necessity: it is a design failure.
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ecological degradation is simply the result of degenerative industrial design.
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GDP is a cuckoo in the economic nest.
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to enable them to provide such a revenue or subsistence for themselves; and secondly, to supply the state or commonwealth with a revenue sufficient for the public services’.
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Adam Smith with the radical idea that workers should be fairly paid and taxes must be raised for public services.
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Mill began a trend that others would further: turning attention away from naming the economy’s goals and towards discovering its apparent laws.
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‘Economics,’ he declared, ‘is the science which studies human behavior as a relationship between ends and scarce means which have alternative uses.’
Craig Nicol
Lionel Robbins pretending that economics is psychohistory, instead of the study of the movement of wealth.
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Though claiming to be value-free, conventional economic theory cannot escape the fact that value is embedded at its heart: it is wrapped up with the idea of utility,
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One person who was willing to risk political suicide was the visionary systems thinker Donella Meadows – one of the lead authors of the 1972 Limits to Growth report – and she didn’t mince her words. ‘Growth is one of the stupidest purposes ever invented by any culture,’ she declared in the late 1990s; ‘we’ve got to have an enough.’ In response to the constant call for more growth, she argued, we should always ask: ‘growth of what, and why, and for whom, and who pays the cost, and how long can it last, and what’s the cost to the planet, and how much is enough?’
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Other flavours on offer? Perhaps you’d like it to be equitable, good, greener, low-carbon, responsible or strong. You choose – just so long as you choose growth.
Craig Nicol
The inevitable result of growth is a morbidly obese economy.
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Back in 1819 the Swiss economist Jean Sismondi sought to define a new approach to political economy with human welfare, not wealth accumulation, as its goal.
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Will Steffen, the scientist who led the study documenting these trends. ‘In a single lifetime humanity has become a planetary-scale geological force … This is a new phenomenon and indicates that humanity has a new responsibility at a global level for the planet.’25
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For over 60 years, economic thinking told us that GDP growth was a good enough proxy for progress, and that it looked like an ever-rising line.
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for a profound shift in our metaphors: from ‘good is forward-and-up’ to ‘good is in-balance’.
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As I explained the Doughnut to the Argentine negotiator, she tapped the picture firmly with her finger and said, ‘I have always thought of sustainable development like this. If only you could get the Europeans to see it this way too.’
Craig Nicol
Not to dismiss the hard work of the author, but how often have "the west" dismissed ideas like this just because it comes from "the rest of the world" See also: COVID-19 preparedness and not listening to the countries who fought SARS.
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British representative spoke up. ‘This is interesting,’ he said. ‘We hear the Latin Americans talk of “Pachamama” and find it all a bit fluffy’ – waggling his hands in the air as if to illustrate – ‘but I can see that this is a science-based way of saying something that’s actually not so different.’
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To put that in context, 30%–50% of the world’s food gets lost post-harvest, wasted in global supply chains, or scraped off dinner plates and into kitchen bins.44 Hunger could, in effect, be ended with just 10% of the food that never gets eaten.
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The trouble, however, lies in what it leaves invisible. In the words of the systems thinker John Sterman, ‘The most important assumptions of a model are not in the equations, but what’s not in them; not in the documentation, but unstated; not in the variables on the computer screen, but in the blank spaces around them.’
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BUSINESS, which is innovative – so let it lead.
Craig Nicol
How could these USA scholars be so ignorant of the East India Company and the destructive corruption of monopoly? Business is driven to survive. Innovation is a risk only taken when the status quo is riskier. Evolution not revolution.
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the price of financial assets always fully reflects all relevant information.
Craig Nicol
All known information? The markets did not react well when the unknown unknown but highly relevant information about bad mortgage debt came to light in 2008
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Beyond defending the nation’s borders and its citizens’ private property,
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Not citizens, just property.
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‘Community connectedness is not just about warm fuzzy tales of civic triumph,’ writes Putnam; ‘In measurable and well-documented ways … social capital makes us smarter, healthier, safer, richer, and better able to govern a just and stable democracy.’
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who cooked, cleaned up, and cleared away to make that possible? When Adam Smith, extolling the power of the market, noted that, ‘it is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner’, he forgot to mention the benevolence of his mother, Margaret Douglas, who had raised her boy alone from birth.
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mainstream economic theory is obsessed with the productivity of waged labour while skipping right over the unpaid work that makes it all possible,
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And since work in the core economy is unpaid, it is routinely undervalued and exploited, generating lifelong inequalities in social standing, job opportunities, income, and power between women and men.
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As the futurist Alvin Toffler liked to ask at smart gatherings of business executives, ‘How productive would your workforce be if it hadn’t been toilet trained?’
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if women were paid the going hourly rate for each of their roles – switching between housekeeper and daycare teacher to van driver and cleaner – then stay-at-home mums would earn around $120,000 each year.
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When the market is unconstrained, it degrades the living world by over-stressing Earth’s sources and sinks. It also fails to deliver essential public goods – from education and vaccines to roads and railways – on which its own success deeply depends.
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Forget the free market: think embedded market. And, strange though it sounds, that means there is no such thing as deregulation, only reregulation that embeds the market in a different set of political, legal and cultural rules, simply shifting who bears the risks and costs and who reaps the gains of change.37
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the basic research behind every innovation that makes a smart phone ‘smart’ – GPS, microchips, touchscreens, and the Internet itself – was funded by the US government. The state, not the market, turns out to have been the innovating, risk-taking partner,
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he justified his caricature, confident that no ‘political economist was ever so absurd as to suppose that mankind are really thus constituted’, while adding that ‘this is the mode in which science must necessarily proceed’.
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Jevons placed utility at the heart of economic theory – a spot it occupies to this day – and from it he derived the law of diminishing returns: the more of a thing that you consume (be it bananas or shampoo), the less you will desire still more of it.
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he admitted that his depiction of humanity was loaded with ‘a formidable array’ of artificial abstractions, resulting in a creature who ‘treats other human beings as if they were slot machines’.
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Experimental research in Germany, for example, found that economics students were more likely than other students to be corruptible – willing to give a biased answer – if it led to a personal payout.
Craig Nicol
I'm sure the same principle applies outside economics, just not about corruptibility. It's about an ego that believes "everyone thinks like me, therefore this is ok". No-one thinks like you, but some may act like it.
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After taking a course in economic game theory (a study of strategy which assumes individual self-interest in its models), US college students behaved more selfishly, and expected others to do so as well.14
Craig Nicol
Reminds me of a study of psychiatrists at a conference where a lot believed that drug adverts affected the decision making of other psychiatrists, but few believed it affected their own decision making.
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One experiment in the US found that after corporate executives were asked to solve simple riddles involving words like ‘profits’, ‘costs’ and ‘growth’, they tended to respond to their colleagues’ needs with less empathy, and even worried that expressing concern for others at work would not seem professional.
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Justin Lewis, ‘Unlike the citizen, the consumer’s means of expression is limited: while citizens can address every aspect of cultural, social and economic life … consumers find expression only in the market place.’20
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The few cases of research carried out in other countries and cultures reveal that those convenient-to-study university undergraduates actually behave quite differently from most people. That may well be because – unlike the vast majority of humanity – they live in WEIRD societies: ones that are Western, educated, industrialised, rich and democratic.21
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Yet in The Wealth of Nations his sharp focus on the role of self-interest in markets overshadowed the rest of his rich observations about morals and motivation, and that trait alone was plucked out by his successors to provide the DNA for economic man.
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Along with being self-regarding we are also other-regarding. We help strangers with heavy luggage, hold doors open for each other, share food and drink, give money to charity and donate blood – even body parts – to people we will never meet.
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Trickle-down economics may be a chimera, but trickle-down behaviourism is very real.’
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one Wikipedia page lists over 160 cognitive biases, like a jumbo-size game of spot-the-difference between rational economic man and his fallible human equivalent.
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Nudge policies, in essence, can be used to encourage us to mimic the way that we would behave if we were as rational as economic man.
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One practical way to address this would be to teach and embody eco-literacy in every school so that coming generations develop a worldview based upon understanding the living world’s interdependent systems that make life on Earth possible.
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Initial evidence suggests that monetary payments often crowd out existing motivations by activating extrinsic rather than intrinsic values. As the case studies described below reveal, there may be far wiser ways – drawing on what we now know about values, nudges, networks and reciprocity – to nurture human nature towards the Doughnut’s safe and just space.
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