Doughnut Economics is the answer, isn’t it?

Kate Raworth’s Doughnut Economics has been hugely successful in progressive civil society spaces. It pops up everywhere as the solution for a new economic system that is just and sustainable. No doubt, Raworth’s book provides some powerful arguments that are important to consider. The model of the doughnut is very intuitive, and the message is clear and positive: ‘It’s inside the doughnut that we need to find new economic models. For this, we must reject the mistaken rational economic theory based on the idea of the Homo economicus’. But if we are to get a real sense of how valid her arguments are and whether her proposals are taking us in the best direction to address the ecological crises, we need to let an “error-seeking network” (Jonathan Rauch) to subject the doughnut ideas to critical scrutiny. But how can this happen if at most civil society events, only like-minded friends talk to each other? With few exceptions, there seems to be little interest in solid discussion with plural perspectives. In 2018, on a rare occasion of pluralist debate, the inequality economist Branko Milanovic critically reviewed Raworth’s book, and a short but insightful debate between both economists emerged. In a later blog post on her website, Raworth appreciated the importance of such discussions and agreed that they are too rare: “Hence I’m taking this opportunity to step back and acknowledge that both of our visions of the future include strong beliefs about human nature versus human nurture, big uncertainties about how economic variables may respond, deep assumptions about how much change is possible, and lots of hope about how the future might be different from the past. Neither route is easy. Neither is proven. And a lot depends upon the choices we make. Listening respectfully to those who disagree with us is a fascinating (and still too rare) thing to do.”

In her book, Raworth convincingly lays out the complexity of human economic behaviour. The diverse forms of economic organization throughout human history and across cultures show that we do not merely act as competitive actors in a marketplace, but are predisposed to care for others and to cooperate in groups. She believes that the growing number of alternative economic models that exist today are a hopeful sign of an economy that is not dependent on economic growth and can provide prosperity for all.

Milanovic doesn’t disagree with her that an economy based on more intrinsic motivations is possible and even preferable. However, he doesn’t believe that in today’s global hyper-commercialised capitalism there are sufficient incentives to move to such a scenario.

Contrary to Kate Raworth, he believes that the core of problem is a game-theoretical problem, a collective action problem at the global level: “To combat climate change requires adjustment of behavior by individuals and countries in order to forestall effects which lie in the future and whose benefits are unclear, while costs of adjustment are obvious and present. Individual adjustment, while entailing often significant monetary or convenience cost for that individual, has close to zero effect on climate change and is therefore not rational to undertake from a purely personal perspective.”

As one way to curb carbon emissions, Milanovic suggests working toward an international consumption tax on those goods and services consumed by the richest 10% of the world’s population. As an example, he cites that in 2020 we have seen international air travel reduced by 60% and the world has managed to reorganize itself. He argues that this shows that a permanent 60% reduction in air travel is not impossible.

He concludes: “This is not magical thinking. These are policies that, with intergovernmental cooperation, knowledge of economics, data on global inequality, and the experience of covid, could be implemented. Is there appetite for such policies? I do not know. I tend to doubt it. I think that most of the population of rich countries would not be excited if told that a quasi lock-down will have to continue for an indefinite future. But if conditions are so dire, if climate change is but a long-term covid, if we have learned to live with covid and to survive, could we not adjust to this “new normal” too? I do not know — but I think it would be fair and candid of the partisans of radical change to put these questions squarely in front of the public and not try to hoodwink them with the sweet talk of ‘thriving‘ monastic lives.“

Milanovic’s ideas are of good faith and they are thought-provoking. As Raworth says, “listening respectfully to those who disagree with us is a fascinating (and still too rare) thing to do”. We need more pluralistic debates about the best strategies to address our most pressing problems.