The fake sweetness of doughnut economics

In recent years, supporters of the theory of degrowth have found an ally in an imaginary “new economic theory” that has become very popular: the so-called Doughnut Economics, for the title of a book by the British economist Kate Raworth, who proposed the model in a 2012 article. Raworth is not really a degrowther, for she rather thinks that economic development can progress until it remains stationary on a “platform” at a level higher than the current one (something with which I quite agree), but her ideas are quite consistent with the main concerns of those who see GDP growth as a disease (or, as he says in the book, an addiction). The concept of the “doughnut economy” – or rather, its graphic design: the colourful circle – has also gained great popularity as it has been adopted to represent the sustainable development goals (OSD) of the UN’s 2030 Agenda.

The fundamental thesis of doughnut economics is that GDP (as a unified measure of economic development) should be replaced by the following representation:

1. Consider a diversity of goals, relatively independent from each other, and divided into two main blocks: on the one hand, what we can call social gals (income, level of employment, education, health, peace, security , justice, housing, energy use, etc.), and, on the other hand, the natural limits (atmospheric temperature, pollution in its various manifestations, biodiversity, deforestation, etc.).
2. Place the social ends forming a circumference, whose line would represent the minimum socially acceptable level of each one of those ends, so that, if we stay below that level, we will be inside the circle, and if we have overcome them, it will be out of the circle.
3. Lastly, we also place the natural limits forming another circumference, concentric with the previous one, but larger. The line of this second circle represents the levels of each one of those maximum limits that would be sustainable in the long term, so that if the level that we have reached in one of them is inside the circle, we will be in a sustainable situation, and if the level is outside the circle, we are in an ecologically unsustainable situation.
4. The superposition of the two circumferences would form a kind of doughnut (hence the name of the model), with lines that would wind around each one, and in such a way that, if these lines go beyond the surface included between both circumferences –either towards the hole in the center, or towards the emptiness on the outside–, then that the economy is not working well enough. The inner space between the two circles would therefore represent “the safe and fair space” in which we should aspire for the economy to move permanently.

This already famous doughnut is as good a way as any to represent how satisfying or unsatisfactory the state of society and the economy is at a given moment, but I think we need to resist the fascination it has aroused in many people, because behind its seductive and somewhat hypnotic appearance, many fundamental analytical deficiencies are hidden, as well as some extremely gross simplifications. The main problem is that the Raworth doughnut, like the real ones, contains too much sugar.

Too much sugar

In the first place, it is absolutely false that “economic policy”, much less “economic science”, has so far ignored the type of concerns that would justify the use of the doughnut as a better representation of the progress of the economy than the indicators. most common so far. Economists have been discussing the validity and usefulness of magnitudes such as the GDP, the consumer price index or the unemployment rate since these began to be used, that is, for around a century. No economics textbook that explains these concepts usually refrains from including long paragraphs about the many limitations they suffer. For example, the Samuelson and Nordhaus textbook, with which I studied back in the 80s, and which has been the most popular in the history of the discipline, already included a section that tried to justify that, in addition to the Gross Domestic Product, it was necessary to have a measure of “Net Economic Welfare”, and it explained its possible content in terms much like those of the Raworth doughnut. And of course, neither are economists nor politicians unaware that economic activity can lead to many consequences that reduce people’s well-being: this has been studied, also for at least one century, under the concept of externalities.

Secondly, it is true that GDP (which, technically speaking, is equivalent to the sum of everything that the inhabitants of a country earn in a certain period, normally a calendar year) does not directly measure the degree of compliance with the various purposes to which people would want the goods and services that have been produced to be devoted, but just their total quantity. But the idea is that society already has other mechanisms to decide all that: what people want to be produced is produced, either through their decisions about what things to buy with the money they earn, or through the decisions Policies on how much taxes to collect and how to spend the revenue. The GDP only tries to express how many resources a society has in order to do what it wants to do with them, and it is not reasonable to criticize it for not being useful for other things. In addition, despite this obvious limitation, the truth is that GDP is a singularly good measure for knowing the ability of a country to pursue those objectives that its citizens consider valuable, and there is usually a very high correlation between that capacity and how satisfied these citizens are with the life goals that can be achieved thanks to their economy. In other words, people in rich countries, that is, in those with the highest GDP per capita, tend to live much better than people in poor ones, and that is why people prefer to live in the former ones (either by making richer their countries, or by moving to one country that is already rich).

In the third place, obviously the most important subliminal message to be conveyed by the doughnut symbol is that if we try to get “too high” relatively to the inner circle goals (or, we might say, if we try to “live too well” ), we will have to “produce too much”, and consequently there will be a risk that we will break the limits determined by the outer circle. But, as the economist Branko Milanović, not at all suspicious of neoliberalism, has pointed out, the problem is that, however fascinated we are with the little circles and their bright colours, the simple fact is that getting the entire population of the planet to reach, say, the levels of well-being now enjoyed on average by the poorest half of the inhabitants of rich countries will require at least tripling world GDP, and that, given current technology, it is impossible to do without greatly exceeding the supposed ecological limits maximums represented by the outer part of the little circle. So, we may add, the symbol of the doughnut becomes rather the representation of a shackle with which to hold the citizens of poor countries while we try to persuade them that nothing can be done to get them out of poverty. Or, rather, while we persuade the citizens of rich countries that they are behaving in a profoundly ethical manner in advocating economic policies whose inevitable consequence is to impede the economic development of poorer countries.

A hollow model

Finally, having spent many years working on the philosophical analysis of representations and models in science, I cannot help but find Raworth’s doughnut extraordinarily insubstantial as a putative economic model. To begin with, there is absolutely no reason for the model to have the shape of a circle; that is, its circularity does not really represent anything at all (I mean, nothing that exists in the economic reality the symbol claims to represent), for its variables are completely independent from each other, and are measured on totally different scales, even those that are included in the same circumference, so they could still be represented in columns next to each other, and in any different random order. Nor does the space between the two circumferences (that is, the dough of the doughnut) mean absolutely nothing, since this space is one for the variables of the inner circle, and a completely different one for the variables of the outer circle (actually, as we have just said, they are different spaces for each variable), so there is nothing in reality like a “common space” whose “floor” is the small circle and whose “ceiling” is the big one. Simply put, each variable on the inner circle has its own floor (but not something like a “ceiling”) and each variable on the outer circle has its own ceiling (but not a “floor”). Put another way: the two circles could be rendered the same size, side by side, and with their variables placed in any other order, and still the information contained in that image would be exactly the same. Superimposing the circles forming a doughnut, instead of placing the variables in any other possible way, is exclusively a rhetorical and advertising strategy (one whose persuasiveness I do not deny, in view of its success), and not an objective and scientific representation of an economically relevant reality. Specifically, even though the image of the ring makes us think of the idea that “everything is related”, or of the so-called circular economy, the truth is that the diagram does not capture in any sense the possible causal interactions that would exist between some variables and others.

In conclusion, the doughnut has to be understood, at best, as a mere scoreboard, one visually organized in a synthetic way, but it is not, nor does it have behind it, anything remotely similar to a true economic model, that is, to an attempt to understanding, even if very simplified, of the operating mechanisms of the economic system and of the “levers” that we could activate to try to direct it towards some ends or others. The doughnut, therefore, does not help at all to better understand how the economy works, and for this, that is, to take the values ​​of each economic variable where we intend to take them, we will have no choice but to continue trusting as far as possible on the models and theories of good-old-fashioned economists, despite the fact that, unfortunately, the food that they offer us in their academic works is less tempting and delicious than a tender and sweet doughnut.

References

Milanović, Branko, “Kate Raworth’s economics of miracles”, globalinequality, June 6, 2018

Raworth, Kate, Doughnut Economics: Seven Ways to Think Like a 21st-Century Economist, Random House, 2017.