New Economics Is Not Only Possible But Desirable Too
Sometimes I feel, as a student, somehow detached and dispassionate while studying economics; not because it is a complicated subject, but, as it appears to me, it simply fails to address the societal and environmental issues we are facing in the contemporary world. Moreover, when my instructors dodge my questions about the relevance of economics in our day to day lives, it only fuels my antipathy for the subject.
But coming across the book “Doughnut Economics- Seven Ways to Think Like a 21st-Century Economist” by Kate Raworth, as an assignment by my instructor, made me realise that economics can be the most vibrant subject to address our grave societal and environmental issues only if we are ready to change our thinking and do economics in new ways. As from “Change the Goal” to “Create to Distribute,” the chapters of the book make a passionate case for holistic, sustainable and equitable economic development.
Showing disgust for obsession with economic growth, which resonates with my own thoughts, the author redefines aim of economics through a visual framework of “Doughnut”, which consists of two rings: inner ring and outer ring. The inner ring represents “the social foundation” and consists basic human needs: food, healthcare, and education; and outer ring marks “the ecological ceiling” that should not be overshot. The rings demarcate the “safe and just space for humanity,” within which economic activity should take place.
Tracing and criticizing the dominance of neoliberal economic paradigm, propounded by the free-market thinkers like Friedrich Hayek and Milton Friedman, the author offers a dynamic economic model that does not neglect societal and environmental issues. It also incorporates the contribution and impact of households, commons, and state on economic activities as well as on markets; moreover, considering an economy as a subgroup of the biosphere, not a self-regulating independent system, the book advocates for the maintenance of energy circulation and the limiting of ecological capacity.
The author postulates, while using Leonardo Da Vinci’s caricatures to expose the classical economics’ misrepresentation of human nature, that Adam Smith’s view on human nature in The Theory of Moral Sentiments gave way, later, to an obsession with self-interest in The Wealth of Nations. Subsequently, such simplification of human nature has been propounded unapologetically, by the free-market thinkers, on the cost and suppression of essential human traits: social cooperation, fluidity and interdependence.
To rescue economics from such a narrow and simplified view, the psychological, anthropological and ecological aspects should not be kept constant while studying the human nature; and there should be no underestimation of unpaid domestic labour, particularly women, in the name of market efficiency and government inefficiency.
Had Newton’s scientific thinking not taken over economics, and had recognition of complex thinking in economics surfaced sooner, economics would have been different, claims the author. While criticizing the oversimplification of mechanistic and self-correcting market mechanism, the author argues that it has miserably failed in representing the connectedness and dynamic nature of actual economies. On the contrary, the author advocates for system approach and concepts of complexity science: stocks and flows, feedbacks, and delays; which, the author believes, provide the first order of understanding about the dynamic nature of economic systems governed by unpredictable behaviour.
As income inequality and environmental degradation have become the most defining and vital issues of modern economics, no economist can risk to ignore them and still be considered as a serious economist. The author not only rejects the idea of inevitability of presence of income inequality and environmental degradation but also blames it on the flawed economic designs. Especially, that of Kuznets Curve that promulgates that with economic development income inequality and environmental degradation would increase first and then would decrease; while in actual world the curve utterly fails in explaining why, in many instances, economic growth does not equates with a drop in income inequality; and also performs poorly for range of general ecological problems: greenhouse gases and the loss of biodiversity.
Drawing for Thomas Piketty, the author not only discounted Kuznets Curve but also calls for a framework in terms of wealth redistribution and theory-driven actions for the equalization of endowments to eradicate peril of income inequality; and for an iterative economic model to restore and regenerate ecological cycles instead of just mitigation of ecological damages.
Is unrestrained economic growth possible? If Yes, but is such growth feasible and sustainable too? The chapter seven of the book debates extensively the concepts of “green-growth” and “de-growth” and highlights the obstacles to green growth in terms of energy and sustainability. And the author casts doubt on unrestricted growth model and calls it Medusa, a woman in Greek mythology with living snakes in place of hair, and no less fearsome that the infinite curve of exponential growth; and, also, mistrusts the doctrine of prioritizing GDP over human-wellbeing and ecological balance.
While revisiting economic thought, Raworth points out that economists like J. S. Mill and Adam Smith did foresee a transition from exponential to S-Curve Growth. Therefore, there should be redesigning of financial systems to focus on long-term stability, alternative methods of success, and cultural exchanges as measures to shift away from material accumulation. Moreover, for the cultural embrace and indigeneity there is necessity for tax transparency and shift from taxing income to taxing wealth; and need to go for Evergreen Direct Investing to incentivize regenerative investments.
Doughnut Economics is more than just an economic theory-it’s a transformational vision that will reinvent our economic systems and calls for regenerative and distributive practices, the vision so hard to resist. Laying the path for alternative model framing, illustrating exactly how to redesign our economies while meeting human needs and adhering to ecological limits, the message is powerful and convincing to rethink about alternative economics.
However, like any other advocacy of new way of thinking this book too suffers from the limitation of too much emphasis on theoretical aspects rather on specific and concrete explanations to address the specific problems. But the value of Doughnut Economics lies in advocating and generating a shift in the economic conversation while inviting the reader to reconsider the basic notions and assumptions of the classical economic theory; and envision new economics that is sustainable and equitable in real sense.
The author is pursuing Post-Graduate Degree from Department of Commerce, University of Kashmir
