Doughnut Economics: Springtime for Activists

The "tell" in Doughnut Economics: 7 Ways to Think Like a 21st Century Economist by Brit academic Kate Raworth is right at the beginning when she describes the dilemma of a well-born Chinese woman.

Yuan Wang arrived at Oxford University to study economics. Born in China and raised in Yorkshire... [she] was determined to make a difference in the world.

She thought that economics was the way to do it, but soon got "frustrated."

She found the theory -- and the maths used to prove it -- absurdly narrow in its assumptions.

See, that's the basic religious and cultural meaning of "life, the universe, and everything" for the well-born youngster. They want to do something creative, to make a difference. I call it Activism Culture.

And that is the underlying agenda of Doughnut Economics. How can we activists deploy economics to make the world a safer and a juster place, given that the two big problems are the Ecological Ceiling of planetary pressure or a Social Foundation of human well-being?

Well, current macroeconomics does not represent a useful knowledge base for dealing with an Ecological Ceiling of planetary pressure or a Social Foundation of human well-being. Something new is needed, and it must not be based on the economics of old that just wanted to increase GDP. The economics of Paul Samuelson and his hydraulic Circular Flow diagram just isn't going to solve climate change or transition from exponential economic growth to a sustainable economy and society.

The big problem with Kate Raworth is that economics cannot tell humans what to do. It is only an analytical tool to help humans get an idea of what might happen if they change the economy in accordance with the demand of well-born activists. Let's look at the seven things she thinks economics should be about in the 21st century. And my critique.

Proposal	Raworth's Justification	My Opinion
Change the Goal from GDP	to the Doughnut	Any "Goal" is political or religious
See the Big Picture	beyond market to "embedded economy"	But this is no longer economics but the entirety of human knowledge
Nurture Human Nature	with socially adaptable humans	This is religion, changing humans' experience of life's meaning
Get Savvy With Systems	understand complexity	Good idea, and recognize that no government or globalist plan will understand complexity to the depth it needs to
Design to Distribute	create economy that is distributive by design	You mean double down on the welfare state? Economics can probably help you understand that this is doomed to failure
Create to Regenerate	recycling by another word	Well, yeah. If you work on externalities, the cost of our actions on other people, you can help
Be Agnostic About Growth	because it won't last forever	I think it is fair to believe that when growth tapers off, or even declines, today's and tomorrow's economics have No Idea what to do about it.

OK. How many of these seven things come within the purview of any economics? The point about economics is that it is an attempt to understand the market and human action in a market system. And one aspect of that is to understand how government action affects the market and the behavior of market participants. One of the conceits of economics is that it is "value free." Thus Hilary Putman and his The End of Value-Free Economics. But economics tries not to impose its values on human interactions; it just tries to understand them. But anybody at all serious about economics tends to realize that as soon as you start imposing your values on human interaction, by government or by church, you pretty soon experience negative economic impacts as people find it harder to live their ordinary day-to-day lives 

The bottom line about Doughnut Economics is that it is not really about economics. It is all about politics. That has been the faith of left-wing believers since at least Marx, that by political means it is possible to create a juster society. So the honest thing to do would have been to call the book Doughnut Politics: 7 Ways to Think Like a Lefty Activist. Or, if you like, Doughnut Activism: 7 Ways to Change the World.

Of course, politics is not really mentioned in Doughnut Economics, not as such. But when you imagine the human world as a doughnut with an Ecological Ceiling and a Social Foundation, and if you experience penetrating the Ecological Ceiling of planetary pressure as causing an "overshoot of pressure on Earth's life-giving systems", and if you experience a fall through the Social Foundation below as "a lack of life's essentials such as food, education and housing" there is an unsaid assumption that educated and caring people -- activists -- are called upon to do something about it. And how are they going to do it? Obviously, by their domination of the political, cultural and secular religious institutions of global society. They are going to tell the rest of us what to do, because they know.

Suppose Raworth is right, that we have to Do Something about climate change and lack of justice in food, education, and housing. But is there is one thing we know it is that top-down direction of the economy does not work. Then the question becomes: what do we do when the elite and activist supervision of things environmental and social falls short of the mark? For instance, just this week I read about a minor cock-up on the doughnut front. In western Europe there was a lack of wind in the North Sea last week, worst in 20 years. That meant that natural gas plants had to step in and generate electric power to make up for the power that the wind turbines weren't generating and that meant that natural gas prices went through the roof and that meant that fertilizer factories closed down and that meant that carbon dioxide supplies for the food industry were cut off and that meant that grocery stores may run out of food.

Golly who knew?

See that's the problem with our current global ruling class. They know, they know, that they are the smart ones, and they know, they know, that their solutions to the world problems are what it is going to make the world Build Back Better. And the best way they know is to change things with politics and government.

But that is not how the world works. The world is "one damn thing after another," as someone said. Economics is the study of just how, with one damn thing after another and the help of the price system and the individual efforts of millions of people, somehow humans manage to struggle on from day to day. And, in the last 200 years, increase real per capita income by 3,000 percent. It asks: how did that happen? Not because of wise, knowledgeable elites and academics but by anybodies with a new idea changing the world, and fixing mistakes on the way, mistakes that you and I never hear about.

Kate Raworth and her student Yuan Wang beg to differ. They have a better idea. Maybe they do. But what happens when there is a small glitch in the Matrix, the most windless week in the North Sea in 20 years? Well, then the market system and its pricing steps in. And you may not like the result.

Now, at the end of Doughnut Economics on page 258 Raworth has "Table 2. The ecological ceiling and its indicators of overshoot" including Climate Change,Ocean Acidification, Freshwater Withdrawals, and so on, as compiled by Steffen et al. "Planetary boundaries: guiding human development on a changing planet," an article in Science in 2015. For each indicator Steffen et al. have proposed a planetary boundary. For carbon dioxide it is "at most 350 ppm" and we are at 400 ppm and rising.

Well? Is rising CO2 a problem? Experts say it is. And anyone that disagrees, including retired experts, is stigmatized as a "science denier."

This, of course, is the way it has always been in human history until quite recently. Anyone that challenged the received wisdom, as promulgated by elite academics and soothsayers was stigmatized, and perhaps executed as a heretic, an evil opponent of the Truth.

Or, as Bryan Magee writes in Philosophy and the Real World: An Introduction to Karl Popper,

[A]ll, or almost all human societies of which we have knowledge seem to have an interpretation of the world which was articulated in some myth or religion, and in primitive societies any questioning of its truth is usually punished by death.

Obviously this approach to human society has not changed much. The method of Soviet Russia and Maoist China was to direct society from the top and to punish, often by death, those that objected.

But our era has thrived on an opposite idea, that Magee calls "the era of criticism." In this notion all theories, scientific, economic, and political, should be constantly tested and criticized. And out of the criticism we will discover and develop new theories that resolve the problems -- and there will be problems -- in the current theories.

Kat Raworth imagines that her Doughnut Economics is a critique of "neoliberal" economics that she represents as coming from the folks that formed the Mont Pelerin Society in 1947. Maybe. Only I get the feeling that she has never read the books by Ludwig von Mises and Friedrich von Hayek and Co. Reading Doughnnut Economics I do not detect the least whisper that she knows anything except the mainstream economics that goes from the classical economists to Marshall to Keynes to Samuelson. Samuelson is the guy she goes after. Well, I never paid Samuelson no nevermind, because I think his macroeconomics misses the point. I experience western macroeconomics as a crude effort to help welfare-state politicians avoid crashing the economy, and not really providing an insight into the way that the capitalist economy works. So how do you like them apples?

Let's get back to the big issue, climate change, the basic justification for Raworth's Rule of the Experts.

For instance, the UN's IPCC has sponsored the development of dozens of computer climate models. All of them predict significant warming of the planet, year on year. But the models all "run hot." They have predicted higher temperatures that have transpired in the record.

So? Well, in Magee's notion and Karl Popper's notion, we now start to subject the models and their assumptions to rigorous critique and try to figure out why they have prophesied an increase in temperatures in excess of the actual record. Is it because they misunderstand the way the climate works? Is it because they can't simulate the intertropical convergence zone? Is it because the models aren't detailed enough? Who knows?

And anyway, is it a problem if temperatures increase? And how would we know? The temperature record shows that the Earth has been quite a bit warmer than the present, as recently as the Roman Warming and the Medieval Warming. On the other hand, the Earth is presently in an "interglacial" period in the middle of an Ice Age in which CO2 in the atmosphere has been down to 180 ppm. And scientists say that C3 photosynthesis stops at about 150 ppm, meaning all the plants die.

But let us assume that the scientists are right and that global temperatures are increasing and the reason is the increase in CO2 due to burning of fossil fuels. If we do nothing, what happens?

Well, what happens is that humans adapt to the new climate. We move grain agriculture northward. And if the deserts move northward from Africa into southern Europe we migrate northward. And if the sea level rises we move cities inland. Is it possible that we encounter a real crisis where millions of humans perish? Certainly. And there will be wars and rumors of wars and frightful outcomes. Kinda like things have ever been.

But what we do not know is if the outcome from doing nothing is worse than the option of letting our educated betters decide for us.

For instance, our betters tell us, on the one hand, that we are running out of fossil fuels, and on the other hand that fossil fuels are going to change the climate. Well, if fossil fuels run out, that will take care of that, right? No more warming from increased CO2. And it's not as if we don't have the knowledge and technology to create nuclear fission plants. And it is not as if we are probably close to effective nuclear fusion energy.

See, the problem with the whole Ecological Ceiling thing is cui bono. Who benefits? And the answer is that a climate crisis benefits people like Kate Raworth that seem to go from international conference to international conference advising corporate execs on the right and proper way to respect the Ecological Ceiling.

Just as the problem with the Social Foundation thing is also cui bono. "Doing something" about social problems, for the last century, has been all about politicians buying votes from the proposed beneficiaries of programs to prop up the Social Foundation. Because justice.

Now my particular prejudice is that I believe that politics and government and elite academic ukases are the wrong way to deal with almost everything. Carl Schmitt says politics is about friends vs. enemy, and killing the enemy if necessary. It is all the other things, from work and markets and social interaction and religion and culture that really make the human world go round.

So my question to the Kate Raworths of the world is: are you really sure that your doughnut model -- even if it is a sensible understanding of the human world -- can really be managed with politics? And do you think that the stigmatization of people that disagree with you as enemies, that is inevitable in politics, is going to solve anything?

I'm sure you have never thought about such question in such terms. Of course not, because nobody ever taught you to think like that.

And anyway, Carl Schmitt was a Nazi. So there.

Doughnut Economics: Growth Agnostic

In her Doughnut Economics: 7 Ways to Think Like a 21st Century Economist Brit academic Kate Raworth imagines the human world as a doughnut. If you penetrate the Ecological Ceiling or fall through the Social Foundation, here there be dragons, and you must call in and submit to the activist elite.

In "Be Agnostic About Growth" she proposes that GDP growth is not all it's cracked up to be. And she challenges her students on this by asking them to divide themselves according to the statement "Is green growth possible? Yes/No."

As these students quickly discover, our beliefs about economic growth are almost religious: personal in nature, political in consequence, privately held and little discussed.

Nevertheless, the question reduces to this:

No country has ever ended human deprivation without a growing economy.
And no country has ever ended ecological degradation with one. 

Raworth's goal is to stay in the Doughnut, "by ending deprivation and degradation at the same time." But what does that mean to GDP growth? Her goal is to design "an economy that promotes human prosperity whether GDP is going up, down, or holding steady." The goal is to "thrive" not just get richer. And that "calls for transforming the financial, political, and social structures that have made our economies and societies come to expect, to demand and depend upon growth."

The point is that GDP growth at a fixed rate is an exponential function that heads out to infinity a lot sooner than you think. Conventional thinking she represents as Walt Rostow's five stages of growth;

1. Traditional society -- where agriculture and artisans "place a ceiling" on productivity.
2. Preconditions for take-off -- the idea that economic growth is not just possible, but good.
3. Take-off -- mechanized agriculture and manufacturing make growth the norm.
4. Drive to maturity -- in which a wide range of modern industries is established.
5. Age of high mass-consumption -- growth delivers enough surplus income to provide bicycles, kitchen gadgets and cars.

Think of a plane that cruises forever "at a constant growth rate into the sunset of consumerism."

The early classical economists understood that growth would not go on forever. And Keynes saw "the economic problem" taking a back seat to "the problems of life and of human relations, of creation and behavior and of religion." In other words, the exponential curve of GDP growth would eventually decay into an S-curve. And mainstream economists at places like the OECD are starting to realize that growth, at least in the richer countries, is starting to slow down.

But what are the consequences of lower growth? Some people think that growth must continue, because it is a "social and political necessity in every country." And they typically think that this growth is "environmentally sustainable." But Raworth thinks that this will not work. She sees three scenarios.

1. Relative decoupling: GDP grows faster than resource use.
2. Absolute decoupling: Resource use declines as GDP grows.
3. Sufficient absolute decoupling: GDP decline to force sufficient resource use decline.

When Raworth approaches responsible officials she sometimes finds one that admits that "sufficient absolute decoupling" is needed but is afraid to say so. In other words absolute GDP decline is needed to save the climate, but nobody dare say so.

Thus, for Raworth it is "science" that we need to "do something" or resource depletion and CO2 increase will crash the environment. So what should we do? What is needed to ensure "the Doughnut's safe and just space?"

Getting there calls for many sectoral transformations, including a strong contraction of industries (such as mining, oil and gas, industrial livestock production, demolition and landfill, and speculative finance), offset by a rapid and lasting expansion of long-term investment in renewable energy, public transport, commons-based circular manufacturing and retrofit buildings.

But we don't know what will be the net effect of such policies. All we know is that capitalist economies "have restructured their laws, institutions, policies and values" to expect continual GDP growth.

On the contrary, we need to ensure "the capacity to thrive when growth comes to an end." And right now we should expect governments to take desperate measures to keep growth going. So we must "learn how to land" and become "thriving, growth-agnostic economies" when we need to. Raworth addresses various social "addictions" that we need to address.

Financial addiction to gain. Gain is the basis of the modern economy. How do we get off the addiction. One method is to replace "the constant pressure to grow from shareholders." Another is "demurrage, a small fee incurred for holding money.

Political addiction: hope, fear and power. Politicians need growth to grow revenue to fund their programs. People fear unemployment, if that would come from the slowing or elimination of growth. Politicians don't want their country to fall in the GDP rankings so their country becomes a second rate power.

Social addiction: aspiration. We need to replace economic aspiration with something else. "What might we aspire to instead, if not more possessions? The New Economic Foundation recommends:

connecting to the people around us, being active in our bodies, taking notice of the world, learning new skills, and giving to others.

It all seems so hard, but we need "to come up with economic designs that would enable nations coming towards the end of their GDP growth to learn to thrive without it." Maybe in the modern economy we need the skills akin to that of the kite-surfer, using a supple body to adjusts to "the dynamic interplay of the wind and the waves."

Interestingly my Great Enrichment web page shows that GDP growth in the major countries is easing off. But can the ideas that Kate Raworth proposes work? And more to the point, will they work? My guess is no, for several reasons.

1. Despite Raworth's faith in the CO2 climate change hypothesis, my guess is that it is wrong.
2. Going back to solar and windmills will not work. Humans keep moving to more and more concentrated energy sources, from sitting in the sun to wood fires to coal-fired steam engines to oil-powered ships and cars, to nuclear fission power. The next step is nuclear fusion, and who knows what comes next.
3. Politics, whether national or UN based, is not going to solve any problems except responding to a genuine emergency -- like a hurricane. Politics is war plus loot and plunder to the supporters. It cannot "plan" a safe and just future. The Commies already tried that.
4. Educated people in rich countries may want to sit back and write poetry, but the poor and the ordinary middle class do not. They still want a better life for their themselves and their children. Since educated people drive the politics there is going to be a collision somewheres down the road.

Kate Raworth seems to think that because she and her pals in the international conference set have cool ideas that they should get to implement them. Given the prophecies of breakdown, we need to educate a new generation of economists that can go out into the world and change it. They need "the most enlightened economics education possible."

Given the diverse technological, cultural, economic and political routes that could take us into the Doughnut, there will be many ways of distributing the costs and benefits, power and risk, within and between countries and communities. That makes the political process of adjudicating between alternative policies as important as ever.

Raworth says we need more Yuan Wangs -- the student she introduced at the beginning of Doughnut Economics -- to advocate for the new future. 

My guess is that she and her pals have No Idea about the utter disaster they are creating.

Doughnut Economics: Redistribute, Regenerate

In her Doughnut Economics: 7 Ways to Think Like a 21st Century Economist Brit academic Kate Raworth imagines the human world as a doughnut. If you penetrate the Ecological Ceiling or fall through the Social Foundation, here there be dragons, and you must call in and submit to the activist elite.

In "Design to Distribute" she tells us that we don't have to put up with "growing inequality."

If every human is to thrive within the Doughnut, every human must have the capabilities needed to live a life of dignity, opportunity and community.

But millions of people don't. Where do they live? Used to be, they lived in "the world's poorest countries," those with "GDP per person of less than $1,000 per year." But now "three-quarters of the world's poorest people live in middle-income countries" like China and India. And they are becoming more unequal.

And in the richest countries, "the gap between the rich and the poor is now at its highest level in 30 years." So experts agree that we need to "tackle" rising inequality.

But what does economics say about inequality? The classical economists were concerned, but did not agree about what would happen to inequality with economic growth. Marx said the rich would get richer and the poor poorer. Alfred Marshall said that incomes would tend to converge. In the 1890s Pareto found that 20 percent of the people got 80 percent of the income, and this was a fixed order of nature.

Then Simon Kuznets -- "brilliant inventor of national accounting" -- in the 1950s found that "income inequality first rose, then levelled out, and eventually fell again, all while the economy grew." But then by the 1990s researchers decided that there is no pattern.

In 2014 Thomas Piketty decided to look not just at earnings but at wealth. He found that "returns to capital have tended to grow faster than the economy as a whole, leading wealth to become ever more concentrated." Kutzets findings were due to the capital-depleting effects of two world wars and a Great Depression, plus "post-war public investment in education, healthcare and social security." But once the returns on capital returned to normal, the rich got richer and inequality grew. Still, according to economists at the IMF in 2014:

[T]he notion of tradeoff between redistribution and growth seems deeply embedded in policymakers' consciousness.

But look at this. Wilkinson and Pickett in The Spirit Level found that inequality affects social welfare.

More unequal countries, they found, tend to have more teenage pregnancy, mental illness, drug use, obesity, prisoners, school dropouts and community breakdown, along with lower life expectancy, lower status for women and lower levels of trust. 

And, of course, the inequality "unleashes a market in political influence." And "increased environmental degradation."

The 2008 crash goes to prove it.

When the high-paid took on high-risk assets that turned out to be the bundled debts of the low-paid taking on mortgages they could not afford, the result was system fragility and financial crash. 

 And more unequal countries have less economic growth.

So, inequality is a problem. But can we do anything about it? Naturally, Oxford University economist Kate Raworth thinks we can.

The answer to this problem, says Raworth is the network.

The question, then, is how to design economic networks so that they can distribute value -- from materials and energy to knowledge and income -- in a far more equitable way.

Back in the later 20th century, the "authors of the neoliberal script" pushed back on progressive income taxes, labor law, minimum wage, and government health, education, and housing. But now economists are proposing higher marginal income tax rates; activists demand a living wage and a maximum wage; guaranteed access to work; and a national basic income.

But Raworth's plan is to distribute value, partly top-down and partly bottom-up.

Five opportunities stand out, concerning who controls land, the power to create money, enterprise, technology and knowledge[.]

For who owns the land Raworth cycles through giving peasants title to land, to Henry George's plan to tax land, to blaming the land "enclosures" of "both the state and the market encroaching on command land". So she decides that "neither the market, the commons nor the state" has an "infallible blueprint."

For who makes your money Raworth tells us that the banks create 97 percent of money and they put 75 percent of that into "buying stocks and houses" and only 13 percent into small businesses. Thus, when debt increases "a growing share of national income" is siphoned off to rentiers. What if the central bank took back money creation and forced banks to limit their loans to their depositors' savings? What if state-owned banks channeled loans to "long-term transformation, such as affordable or carbon-neutral housing and public transport." What if central banks "tackled deep recession by issuing money directly to every household" instead of trying to stimulated bank lending. What if communities created their own "complementary currencies." What if cryptocurrencies like Ethereum could be used to set up "peer-to-peer trading in renewable energy." Good luck with all that, I'd say.

For who owns your labor Raworth notes that across the West GDP has increased faster than labor incomes. The model of "labour, landlords, and capitalists" seems to relegate wage owners to be outsiders. But Marjorie Kelly proposes alternative enterprise designs, with employee-owned firms, issuing bonds  with "a fair, fixed return" to employees. "Employee-owned companies... born out of the cooperative movement... in England" offer their "members better pay, greater job security and a say in managing the business." But, perhaps, workers do better by opting for a fixed wage rather than accepting the risks of enterprise.

And who will own the robots? The digital revolution means a transformation of work. On the one hand, "anyone with an Internet connection can entertain, inform, learn and teach worldwide." With access to a 3D printer anyone can "print-to-order" the gadget they need. But then there is the network effect, that creates digital monopolies like Google and Amazon, that amount to "an enclosure of the twenty-first century's most creative commons."And what about all the jobs, from taxi drivers to heart surgeons, that could be digitized? Suppose job creation in non-digitized fields can't keep up? Maybe we should switch from taxing labor to taxing non-renewable resources. Or we could invest in "skilling people up.... in creativity, empathy, insight ,and human contact." But what if workers can't keep up "just from selling their labour alone"? Maybe what we need is for everyone to get a "robot dividend." But we need to be sure that the wealth created by robots is "widely distributed."

So who owns the ideas? Patents seemed like a good idea when it began with Venetian glass-blowers in the 15th century. But now it's got out of hand with Amazon getting a patent for its "one-click" purchasing. On the other hand there is a huge and growing "open source" community in everything from software to farm machinery. And there's the Open Building Institute with open-source designs for "ecological, off-grid-affordable housing available to all." But Raworth thinks that open source will need the backing of "a Partner State... to enable the creation of common value." The state can help: "invest in human ingenuity... in schools and universities"; ensure that "publicly funded research becomes public knowledge... in the knowledge commons"; "roll back... corporate intellectual property claims"; "publicly fund... community makerspaces"; encourage the spread of civic organizations.

But I'd say that Raworth's five point plan is just the fashionable conversation of a privileged academic that gets to go to all the cool international meetings. Whatever the future brings, it won't come from the credentialed fashionables, but from nobodies and anybodies getting their ideas up and going before the fashionables notice and start to screw things up.

But what about distribution globally? International inequality -- a legacy of colonialism, debt, privatization and trade rules -- is still extreme. And the nation state hasn't helped. International redistribution started with development assistance. In 1970 rich nations pledged 0.7 percent of GDP to poor nations, but in 2013 only spent 0.3 percent. If "well spent" imagine the lives that lost money could have transformed! Instead the slack has been taken up by the remittances back home from "global migrants." Rich countries have complained of corruption, but what if we distributed money directly to the poor through mobile banking and smartphones? Like Kenya and its M-PESA mobile money service? But also, how about a tax on "extreme personal wealth?" Or we could have "Commons Trusts... to protect and steward" a watershed or the global atmosphere. But hey, how about the Malawi kid that went to the local library in 2002 and learned how to make a windmill -- from the Internet.

Yep. 21st century economists are right here, ready to "design distributive flow into the very structure of economic interactions." Step right up.

Then Raworth discusses "Create to Regenerate." This, of course, is mainly about the environment and climate change.

Up to now, conventional wisdom is that environmental is a luxury concern. Only when income reaches a certain point do countries start to clean up the environment. 

But if you consider "a nation's global material footprint" including "biomass, fossil fuels, metal ores and construction minerals used world-wide to create the products that a country imports" then global footprints increase with GDP and the human impact on the planet goes up with GDP.

The reason for this, Raworth says, is a linear industrial system of 

take, make, use, lose: extract Earth's minerals, metals, biomass and fossil fuels; manufacture them into products; sell those on to consumers who -- probably sooner rather than later -- will throw them "away".

But this linear model is "flawed because it runs counter to the living world, which thrives by continually recycling life's building blocks such as carbon, oxygen, water, nitrogen and phosphorus.." 

Industrial activity has broken these natural cycles apart, depleting nature's sources and dumping too much waste in her sinks. Extracting oil, coal and gas... and dumping carbon dioxide in the atmosphere. Turning nitrogen and phosphorus into fertiliser, then offloading the effluent... into lakes and oceans. Uprooting forests to mine metals and minerals... with toxic chemicals leaching out into the soil, water and air. 

Governments try to check these "negative externalities" with quotas and taxes, but they won't do the job because "they are rarely set to the level required". This is a degenerative system, "devouring the sources of its own sustenance."  It's unacceptable for corporations to do nothing, or do what pays, or do their fair share, or do no harm. What's needed is a circular, regenerative system, "generous by design, giving back to the living systems of which we are a part."

For instance coffee grounds could be used to grow mushrooms and then used for animal feed and returned to the ground as manure. Cellphones could be designed for easy collection and disassembly. After consumption and use we can regenerate and restore what we have used and consumed. We need to stop thinking about wealth in monetary terms and adopt Ruskin's notion that "there is no wealth but life."

In the "generous city" architects and planners would have rooftops that grow food and welcome wildlife, pavements that release water into aquifers, buildings that sequester CO2 and turn sewage into soil nutrients with wildlife corridors and urban agriculture, renewable energy microgrids, affordable housing connected by public transport, neighborhood enterprise hubs, with skillful jobs to maintain it. The only question is, can economists show how to make it pay.

But extending this circular paradigm to corporations is not easy, and the average westerner owns more than 10,000 products made worldwide. 

Making it happen calls for rebalancing the roles of the market, the commons and the state. It calls for redefining the purpose of business and the functions of finance.

But, Raworth admits, it will come "from the innovative experiments of those who are trying to bring it about." Meanwhile there's an Open Source Circular Economy (OSCE) movement to extend the notion of open-source software and the knowledge commons to boost circular manufacturing. There's an open-source video camera, an open-source electric car, and open-source 3-D printers. Utopian? Don't forget Linus Torvalds, the father of open-source Linux.

In the future businesses could be like Anita Roddick's Body Shop, or John Fullerton reimagining finance, "turning savings and credit into productive investments that deliver long-term social and environmental value." It means separating deposits from speculation, and making it unprofitable to be too leveraged and too complex. There could be "complementary currencies" to encourage people to be environmentally sound, shop locally and travel publicly.

Government, the "partner state" has a role to play, 

including restructuring taxes and regulations, stepping up as a transformative investor, and empowering the dynamism of the commons.

Government will change from taxing labor to taxing non-renewable resources and subsidizing renewable energy. "Only the state can provide the kind of patient finance required to make a decisive shift." And this has started to happen on a local scale, at Oberlin, Ohio, home of Oberlin College.

And we need a new kind of metrics, a "living metrics" to replace the current "monetary metrics." So instead of just monitoring GDP we will monitor the many sources of wealth -- human, social, ecological, cultural and physical -- from which all value flows."

Could it work? My guess is: not likely. Just like socialism, you can imagine a wonderful perfect world, but then comes the problem of implementing it. We found that socialism required making humans into slaves, and mountains of skulls, and it still didn't work. Behind the wonders of the regenerative economy is the will of determined and vain people, that want to make the rest of the people into the mirror of their vanity with their clunking fists.

For the great question is: how will we fix mistakes? The problem with politics and noble elites with glorious plans is that they cannot admit to making mistakes. The wonder of the capitalist economy is that it is always making mistakes and fixing them. Companies are born, grow, decline and die, and nobody needs to be in charge, except the bankruptcy judge at the end. But governments and elites don't come and don't go quietly. And while they live, all governments since the dawn of time have lived by the distribution of loot and plunder to their supporters. Call that a circular economy if you like.

Doughnut Economics: Human Nurture and System Complexity

In her Doughnut Economics: 7 Ways to Think Like a 21st Century Economist Brit academic Kate Raworth imagines the human world as a doughnut. If you penetrate the Ecological Ceiling or fall through the Social Foundation, here there be dragons, and you must call in and submit to the activist elite.

What we must do, she writes in "Nurture Human Nature," is attack Homo economicus, the "rational economic man... at the heart of mainstream economic theory."

You see, rational economic man is "an isolated individual -- unaffected by the choices of others" and a useful basis for modeling the economy. But in fact, as critics of economics have pointed out, we are in fact social animals:

We follow social norms, typically preferring to do what we expect others will do, and especially if filled with fear and doubt we tend to go with the crowd.

Economists have tended to think that it is prices that change peoples' behavior. But other social scientists say that "social norms and expectations of what others are doing" can be far stronger influences on behavior. Especially for WEIRD (White Educated, Industrialized, Rich and Democratic) people. For instance we act on the basis of:

availability bias -- using most accessible information

loss aversion -- strong aversion to taking losses

selective cognition -- selecting for information that fits our world view

risk bias -- underestimating chance of extreme events

The point is that "just getting the prices right" is not the whole story, especially when it comes "to relationships that we have traditionally managed with our morals." And "money" can erode "social norms."

Well, yes. And social science research has indicated that individuals can be "nudged" into socially beneficial behavior.

The challenge now is to discover how lessons from street-level success... could be scaled up to nudge and network whole cities, nations, and international negotiations with the Doughnut. 

Hey, we can change Homo economicus & Co. into Homo altruisticus and Homo socialis. Under the wise and beneficial control, no doubt, of Homo educatus and Homo Sinistericus.

Of course, what Raworth is really saying is that gubmint economists, up to now, have got it all wrong. So what we need is a new generation of gubmint economists with bright shining new ideas.

But how do we do this? In "Get Savvy With Systems" Raworth attacks the old economics of treating society as a "mechanism" and instead think of it as an "organism."

See, we humans aren't used to dealing with complex systems. 

Our brains evolved to cope with the near, the short term and the responsive, while expecting incremental, linear change... [not to mention] our stories, with their happily-ever-after endings.

And 150 years of economics "has reinforced our biases with mechanistic models and metaphors" with Jevons and Walras trying to make economics into the physics of economic mechanics. And the supply-and-demand curves led to general economic equilibrium theories that dominated economics all the way up to the 2008 economic crash.

It was back in 1948 that Warren Weaver pointed out that a far more useful approach was to think about "what makes an evening primrose open when it does". Instead of thinking about "the economic world as linear, mechanical and predictable" it is time to think in terms of complexity science, the problem of "organized complexity" such as the unimaginable complexity of every living thing, the way that things are interconnected in ways that produce distinct behaviors: "cells in an organism... members of a family, or banks in a financial network." You need "reinforcing feedbacks" to "make a system move, then balancing feedbacks" to "stop it from exploding or imploding."

Actually economists have known this: the problem was to do it. For Raworth the event that forced economists to get a clue was the 2008 crash. Everybody was using economic models that "in which private banks played no role at all" and they all thought we had reached "the Great Moderation." In fact, like in the classic economic bubble, where trends tend to reinforce. Until they don't. And in the process, the successful get more successful. Until they don't. 

Between 1988 and 2008, the majority of countries worldwide saw rising inequality within their borders, resulting in a hollowing out of their middle classes.

Then, she writes, there is not just economic inequality but the nightmare of climate change. Fortunately John Sterman has built a computer game C-ROADS that "instantly adds up all nations' greenhouse gas reduction pledges to show their... implications for global emissions, atmospheric conentrations, temperature change, and sea-level rise." Assuming, I would say, that the experts' predictions about the effect of increasing CO2 are correct and not another South Sea Bubble.

So here we are, with the alarm bells ringing,

we have transgressed at least four planetary boundaries, billions of people still face extreme deprivation and the richest 1 percent own have of the world's financial wealth.

To avoid a fate worse than death we heed to understand

Today's economy is divisive and degenerative by default.
Tomorrow's economy must be distributive and regenerative by design. 

The answer is to change the economist "from engineer to gardener." They should set up "small-scale policy experiments to test out a variety of interventions" stop the ones that don't work "and scale up the ones that do." Donella Meadows has a three-point program to make this work: "healthy hierarchy, self-organization and resilience."

Healthy hierarchy means that "nested systems serve the greater whole of which are are a part" such as liver cells in a liver.

Self-organization means not just the self-organization of the price-mechanism but the commons and the household as well. And "the state should support all three in doing so."

Resilience "emerges out of a system's ability to endure and bounce back from stress".

And economists must get ethical: "act in service to human prosperity... respect autonomy in the communities that you serve... be prudential in policymaking".

So, "we must embrace complexity and draw on its insights in order to... make [economies] distributive and regenerative by design."

Or, of course, we might figure out from all this that when you combine economists with politics you get politics, whether the economists are mechanics or gardeners. And what is needed is not better, more ethical economists, but governments that stop looting and plundering and using economics to help them do it.

Doughnut Economics: Forget GDP; See the Big Picture

In her Doughnut Economics: 7 Ways to Think Like a 21st Century Economist Brit academic Kate Raworth imagines the human world as a doughnut. If you penetrate the Ecological Ceiling or fall through the Social Foundation, here there be dragons, and you must call in and submit to the activist elite.

Raworth's first Way is to attack the idea of GDP as the be-all and end-all of measuring the welfare of society. But the ancients considered "household economics" as and art and "Aristotle distinguished economics from chrematistics, the art of acquiring wealth."

So Raworth thinks that the GDP growth fixation is like a cuckoo in the nest. It makes its host feed the baby cuckoo instead of its own chicks. But there is another way, with "human welfare, not wealth accumulation, as the goal." Notice the passive voice in the quote.

Chilean economist Manfred Max-Neef  proposed that development be focused on... fundamental human needs -- such as sustenance, participation, creativity, and a sense of belonging[.]

Thus the Doughnut.

Below the Doughnut's social foundation lie shortfalls in human well-being... such as food, education, and housing. Beyond the ecological ceiling lies an overshoot of pressure on Earth's life-giving systems, such as through climate change, ocean acidification, and chemical pollution. 

All the world's experts agree that we should set a target date for every human living above the social foundation, including "gender equality, social equity, political voice, and peace and justice." But the Great Acceleration in humans living above the social foundation has caused "an accompanying surge in ecological impacts." And this could mean the end of the Holocene climate optimum of stable, warmish climate of the last 12,000 years. Experts propose keeping CO2 below 350 ppm, keeping 75 percent of once-forested land forested, and limit fertilizer use to 62 million tonnes of nitrogen and 6 million tonnes fertilizers per year.

But how do we get into the Doughnut "safe and just space?" It takes: population control; "equitable distribution" of resources; control of aspiration for "faster cars and slimmer laptops, for exotic holidays and the latest-craze gadgets;" technology to replace private cars with urban transit, fossil fuel with rooftop soar power, self-heating self-cooling buildings; and governance "that is suited to the challenges we face."

Yes. Well, I tell you something, Kate Raworth. You educated government-funded experts are not up to the job of doing all that. Because human society is not a top-down administration like a government bureaucracy or a university. It is, at the very least, an emergent, network phenomenon that nobody really understands.That is the point of economics. It is a first, limited guess at how things work. To Be Continued.

And the question is: what if you are wrong? And how would you know? The advantage of GDP as a guide for government is that it is "real simple" as they say in The Manchurian Candidate. Any politician can figure out that he is in a whole heap of trouble if the GDP goes down. But nobody can figure out what is up or down with the complicated top-down agenda of the Doughnut.

Having told us how wise and credentialed government-funded experts should run things, Kate Raworth now proposes to de-legitimize the two brands of economics of the past half-century: Paul Samuelson's economics that, to her, is symbolized by his simplistic Circular Flow diagram, and the "neoliberal" agenda of the Mont Pelerin Society founded in 1947 by Friedrich Hayek, Frank Knight, Karl Popper, Ludwig von Mises, George Stigler, Milton Friedman and others. Actually, La Wik regards the term "neoliberalism" more circumspectly than Raworth. And I would suggest that it has become yet another left-wing pejorative; Raworth, born 1970, probably only knows it as a pejorative. Against the pathetic narrative of Samuelson and the Mont Pelerin Society Raworth proposes a different narrative, the Doughnut narrative.

Here is a table of the two narratives.

	Mont Pelerin Society	Doughnut Economics
EARTH	which is inexhaustible -- so take all you want.	which is life giving -- so respect its boundaries
SOCIETY	which is non-existent -- so ignore it	which is foundational -- so nurture its connections
THE ECONOMY	(no entry)	which is diverse -- so support all of its systems
THE HOUSEHOLD	which is domestic -- so leave it to the women	which is core -- so value its contribution
THE MARKET	which is efficient -- so give it free rein	which is powerful -- so embed it wisely
THE COMMONS	which is tragic -- so sell them off	which are creative -- so unleash their potential
THE STATE	which is incompetent -- to don't let it meddle	which is essential -- so make it accountable
FINANCE	which is infallible -- so trust in its ways	which is in service -- so make it serve society
BUSINESS	which is innovative -- so let it lead	which is innovative -- so give it purpose
TRADE	which is win-win -- so open your borders	which is double-edged -- so make it fair
POWER	which is irrelevant -- so don't mention it	which is pervasive -- so check its abuse

Notice that the "neoliberal" Mont Pelerin Society narrative is represented as basically a Do Nothing philosophy. Since I know something about the Hayeks and Miseses and Poppers and Stiglers and Friedmans that founded the society, not to mention their lives, their ideas and their tendencies, I would suggest that Raworth's take is profoundly dishonest.

But the nagging question for me, as a racist-sexist homophobe that profoundly mistrusts the educated ruling elite, is who gets to "do" all the things that Kate Raworth wants done? And who gets to appoint them?

And that was the concern of the Mont Pelerin Soiety "neoliberals." The reason that they proposed to "do nothing" was because they mistrusted anyone once they were given the power to direct traffic. "All power corrupts, and absolute power corrupts absolutely." Said Lord Acton.

For instance, who is the who that gets to embed The Market wisely? And how would we know?

Who gets to make Finance "serve society?"

Who gets to make The State "accountable?"

Who get to "unleash" The Commons "potential?"

Who do we trust to check the "abuse" of Power?

Let us just take The Commons as an example. Raworth uses the work of Elinor Ostrom who researched the Commons and found that "successful commons were governed by clearly defined communities with collectively agreed rules and punitive sanctions for those who broke them." But, she adds,

the commons have, for centuries, been encroached upon by the market and the state alike, through the enclosure of common land, the division of enterprise into workers and owners, and the rise of market-versus-state rivalry."

Well yes, but how do you split the difference? My understanding of the commons in the Middle Ages was that the common land was land that the feudal lord was not interested in using. So the peasants within his domain got to use it and decide how to share it out among them. How did common land get "enclosed?" Because the lords of the land started to learn that they could "improve" the land and make money off it. And they needed the money to strut their stuff as courtiers in the capital. So, get out of there, peasants.

Just axin', but who would be the guy to curb the enthusiasm of the lord for "improvement" and "enclosure?" The king? The Church? A colloquium of wise Doughnut economists?

Doughnunt Economics: For Well-born Activists

In the rarified heights that I live I had never heard of Doughnut Economics: 7 Ways to Think Like a 21st Century Economist by Brit academic Kate Raworth until last week when I encountered the book in a used book store. It's a manual for well-born women activists like this one.

Yuan Wang arrived at Oxford University to study economics. Born in China and raised in Yorkshire... [she] was determined to make a difference in the world.

She thought that economics was the way to do it, but soon got "frustrated."

She found the theory -- and the maths used to prove it -- absurdly narrow in its assumptions.

She found that there was a huge disconnect between the economic theory she was being taught and the real world "visible in the gulf between the preoccupations of mainstream economic theory and growing real-world crises such as global inequality and climate change."

Ms. Wang is a stand-in for author Kate Raworth who "is an economist focused on exploring the economic thinking needed to address the twenty-first century's social and ecological challenges." There isn't an "Early Life" section in La Wik's piece on her, but she describes herself as a former "London schoolgirl." Another website says she was raised in Surrey, a wealthy suburb of London, the daughter of a businessman and a florist.

My take is that well-born young women in the world today all want to get into "activism" working for some NGO. So I experience Doughnut Economics as a manifesto for their world-saving faith.

But what is this "doughnut" Raworth is talking about? It is a world model, rather like the Solar System model we are all brought up to believe in (Image By DoughnutEconomics - Own work, CC BY-SA 4.0, https://commons.wikimedia.org/w/index.php?curid=75695171).

The idea is that the outer ring of the doughnut is an "ecological ceiling of planetary pressure that we should not go beyond" and the inner ring of the doughnut is a "social foundation of well-being that no one should fall below."

You can see that this is almost a perfect view of the universe from the perspective of an educated elitist that wants to make a difference in the world. If there is a global ecological problem then global-minded ecological activists should be tasked with policing the ecological ceiling and solving the problem. If there is a social problem, social activists should be tasked with policing the social foundation and solving the problem. All with manipulations of the economic system through taxation, subsidies and government force. It's another top-down secular-religious fantasy in the tradition of rich-kid Marx and rich-kid Engels and their determination to make a difference.

Yes, what is the meaning of "life, the universe, and everything" from the perspective of a Yuan Wang or a Kate Raworth? Look no further than the Doughnut.

To make it "real simple" know that if we are predicted to penetrate the "Ecological Ceiling" then the ruling class activists must intervene. If we are reported to have fallen through the "Social Foundation" then ruling class activists must intervene. All roads lead to Rome.

The interesting thing is that Yuan Wang and her generation of well-born activists seem to think they are rebelling against the ruling class. In the wake of the 2008 economic crisis, Wang and "her fellow rebels" all over the world got together to demand that economics "catch up with the current generation." Economics needed to deal with the challenges of the 21st century, "from financial stability, to food security and climate change."

I'll believe that when I see it.

But what is it that Raworth and her well-born activists want to do?

1. Change the goal from GDP to "meeting the human needs of every person within the means of our life-giving planet.
2. See the big picture and move from the hydraulic "Circular Flow" model of Paul Samuelson and the "neoliberal" faith in "the efficiency of the market, the incompetence of the state, the domesticity of the household and the tragedy of the commons" to "the power of the market, the partnership of the state, the core role of the household and the creativity of the commons.
3. Nurture human nature and move from a vision of "rational economic man" to a vision that is "social, interdependent, approximating, fluid in values and dependent upon the living world."
4. Get savvy with systems, moving from supply and demand curves to systems thinking and feedback curves. Go from "control levers" to an "ever-evolving complex system."
5. Design to distribute, going beyond redistributing income to "exploring ways of redistributing wealth."
6. Create to regenerate. Don't think of a "clean" environment as a luxury good, but build build clean into the entire economy.
7. Be agnostic about growth. Nobody has created the dangerous diagram of the long-term path of GDP growth. It may be hard to give up growth as an economic goal.

Actually, many of these ideas make sense. The devil, of course, is in the details. Will the noble activists insist that they and only they are allowed to direct traffic. And in regard to the "dangerous diagram" of GDP growth, how about this, from my usgovernmentspending.com?

Isn't it interesting. It shows that growth is slowing in the US and Europe and Japan, while China and India are in the exponential phase of growth, with China showing a slight indication of slowing down after its meteoric growth since 1978. But Kate Raworth says that we are merely focused on growth. I wonder why.

We'll see, in the next exciting installment of this series on Doughnut Economics. Of course, there is bound to be a disconnect between me and Raworth. Her story of economics goes through Quesnay, Marshall, Samuelson, and introduces Kuhn's paradigms, Goffman's "framing," Korbyski's a-model-is-only-a-model, Lakoff's demand for "an alternative frame," e.g., "tax justice" to counter "tax relief."

My story of economics goes through Adam Smith to Marx. Then to Menger, Jevons and Walras in the marginal revolution and Bagehot on central banking. Then to von Mises and Hayek and supply-sider Arthur Laffer. And to me your Keyneses and Samuelsons and MMT advocates are fools and knaves, tools of the globalist ruling class. Like I assume Kate Raworth to be.

And what I want to know is how come little Yuan Wang didn't know about Walter Bagehot and his understanding of central banking and thus did not know that the 2008 crash was all about the ruling class ignoring the advice of Bagehot after the Crash of 1873? Hey Kate Raworth: Didn't you teach her the central banking facts of life?

Doughnut Economics -- Contents

Analysis and Commentary on Kate Raworth's Doughnut Economics

Analysis

1. Doughnunt Economics: For Well-born Activists
   
   
2. Doughnut Economics: Forget GDP; See the Big Picture
   
   
3. Doughnut Economics: Human Nurture and System Complexity
   
   
4. Doughnut Economics: Redistribute, Regenerate
   
   
5. Doughnut Economics: Growth Agnostic
   
   

Commentary

1. Doughnut Economics: Springtime for Activists