This is a tale of how a king learned from a wise woman the seven ways to think like a 21st-century economist, and transformed his GDP-obsessed kingdom into a donut-shaped society that meets the needs of all within the means of the planet, based on the book Doughnut Economics by Kate Raworth.
Once upon a time, there was a kingdom called Econia, where everyone believed in the power of GDP, the magic number that measured the wealth and happiness of the land. GDP, or gross domestic product, was a concept that was developed by Simon Kuznets, an economist who was asked by the to measure the kingdom’s income in 1934. He came up with a formula that added up the value of all the goods and services produced in a country in a given period of time. He thought that this would be a useful way of tracking the economic performance and progress of the kingdom, especially during the Great Depression and the World War II.
However, Kuznets himself was aware of the limitations and problems of GDP. He warned that GDP was not a measure of welfare, and that it did not account for the distribution of income, the quality of life, the environmental costs, or the non-market activities that were also important for human well-being. He also suggested that GDP should be adjusted for depreciation, which is the decrease in the value of the capital stock over time.
Despite these warnings, GDP became the most widely used indicator of economic success and development after the Bretton Woods conference in 1944, where the world leaders agreed to use it as a basis for international trade and finance. GDP was seen as a simple and objective measure of economic growth, and it was assumed that more growth would lead to more prosperity and happiness for everyone.
The king of Econia was obsessed with making GDP grow, and he hired the best economists in the world to advise him on how to do so. They told him to follow the rules of the market, to ignore the effects of his policies on the environment and society, and to trust that growth would eventually trickle down to everyone.
The king followed their advice, and for a while, GDP did grow. But soon, he noticed that something was wrong. The people of Econia were not happy. They were working longer and harder, but they felt more stressed and isolated. They had to compete and conform to the demands of the market, and they lost their sense of identity and autonomy. They had no time or energy for their families and friends, and they felt lonely and alienated. They were consuming more and more, but they felt less satisfied and fulfilled. They had to buy and discard things that they did not need or want, and they felt empty and addicted. They were producing more and more, but they were also polluting more and more, and the natural resources and ecosystems that supported them were degrading and collapsing. They had to face the consequences of climate change, biodiversity loss, and resource depletion, and they felt fearful and hopeless. The king also realized that there was another source of value and well-being that he had overlooked: the core economy. He noticed that the people of Econia were not only engaged in the market, the public sector, and the commons, but also in the unpaid and often invisible work of households and communities, such as caring, cooking, cleaning, teaching, and volunteering. He learned that this work was essential for human well-being and social cohesion, but it was often neglected and undervalued by mainstream economics. The king decided that GDP was not a good measure of well-being, and that his policies were creating more problems than solutions.
He decided to seek a new way of thinking and doing economics, and he heard of a wise woman who lived in the forest, who had a different vision of prosperity. He went to visit her, and he was amazed by what he saw. She lived in a cozy hut, surrounded by a beautiful garden, where she grew her own food and made her own clothes. She had a network of friends and neighbors, who helped each other and shared their skills and resources. She had a library of books and a workshop of tools, where she learned and created new things. She had a balance of work and leisure, of material and spiritual needs, of individual and collective goals.
She welcomed the king, and she showed him a drawing of a donut. She explained that this was her model of economics, based on the idea of creating a safe and just space for humanity, between the minimum social foundations and the maximum ecological ceilings. She said:
“Imagine that this donut represents the world we live in. The center hole of the donut depicts the proportion of people that lack access to life’s essentials, such as health, education, and water. We want to make sure that no one falls into this hole, and that everyone has a decent quality of life. The crust of the donut represents the ecological limits that life depends on and must not be exceeded, such as climate change, biodiversity loss, and resource depletion. We want to make sure that we do not overshoot these boundaries, and that we respect and protect the living planet. Between these two sets of boundaries lies a doughnut-shaped space that is both ecologically safe and socially just: a space in which humanity can thrive. This is the space we want to get into and stay in. This is the doughnut.”
She explained him the seven ways to think like a 21st-century economist, and how they could help him transform his kingdom into a more sustainable and equitable society. She told him to:
- Change the goal: from GDP to the donut. GDP ignores the environmental and social costs of growth. The donut balances the needs of people and the planet.
- See the big picture: from self-contained market to embedded economy. The market is a complex and interdependent system that is embedded within society and the living world, and depends on the flows of energy and materials, the provision of public goods and services, the unpaid work of households and communities, and the stewardship of the commons.
- Nurture human nature: from rational economic man to social adaptable humans. The standard economic model ignores the rich diversity and complexity of human behavior, motivations, and values. Humans are social, interdependent, and adaptable beings who are influenced by norms, networks, and narratives, and who care about fairness, reciprocity, and cooperation.
- Get savvy with systems: from mechanical equilibrium to dynamic complexity. The equilibrium model of economics fails to capture the feedback loops, tipping points, and emergent properties of complex systems. The economy is a dynamic and evolving network of interactions that can generate both stability and change, and that requires anticipation, adaptation, and resilience.
- Design to distribute: from ‘growth will even it up again’ to distributive by design. The trickle-down theory of economics ignores the structural and systemic drivers of unequal distribution of income, wealth, and power. A distributive design to create a more fair and inclusive economy that shares the value created among all stakeholders and across generations.
- Create to regenerate: from ‘growth will clean it up again’ to regenerative by design. The degrowth theory of economics ignores the potential of human creativity and innovation to generate positive impacts and restore the health of the living world. A regenerative design creates a circular and restorative economy that mimics the cycles and processes of nature and enhances its vitality.
- Be agnostic about growth: from growth addicted to growth agnostic. The growth imperative of economics equates more with better. A growth agnostic approach recognizes that there is no one-size-fits-all formula for economic success and that different contexts and goals may require different strategies and indicators.
The king was intrigued and inspired by her words, and he decided to try her approach. He returned to his kingdom, and he announced a new plan for Econia, based on the donut. He replaced GDP with a set of indicators that measured the well-being of people and the planet. He acknowledged that humans were not rational and selfish, but social and adaptable, and that he needed to foster a culture of cooperation and diversity. He understood that the economy was not a machine, but a complex system, and that he needed to anticipate and manage the feedback loops, tipping points, and emergent properties. He strived to create a circular and restorative economy, that mimicked the cycles and processes of nature and enhanced its vitality. He realized that there was no one-size-fits-all formula for economic success, and that he needed to adapt and innovate according to different contexts and goals.
The king implemented his plan, and he saw the results. The people of Econia were happier. They had more time and freedom, more security and dignity, more meaning and purpose. They consumed less and better, they produced less and better, they polluted less and better. They had a healthier and more resilient environment, that provided them with the services and resources they needed. They had a more diverse and dynamic economy, that offered them the opportunities and challenges they wanted. They had a more peaceful and harmonious society, that respected and celebrated their differences and similarities.
The king was proud and grateful, and he thanked the wise woman for her guidance and wisdom. He invited her to visit his kingdom, and he showed her the changes he had made. She was happy and impressed, and she congratulated him for his courage and vision. She gave him a hug, and a real donut, and they enjoyed it together, as they watched the sun set over Econia.
