Investing | Donught Economics - Kate Raworth (2017)

🐵 I. One-sentence summary:

Doughnut Economics by Kate Raworth, an English economist, proposes a new economic model that aims to meet the needs of all people within the means of the planet, by adopting a systems thinking approach, designing economies that distribute wealth and power more equitably, regenerating natural resources and ecosystems, and focusing on measures of progress beyond GDP growth.

My mentor in sustainable investing recommended the book a couple of years back, and I was immediately drawn to its key message of creating a sustainable and equitable economic system. As someone who believes in measuring the value of resources beyond just economic growth, I am inspired by Kate Raworth's call to shift our economic narrative from one of endless growth to one of sustainability, equity, and well-being. The finite nature of our planet's resources and our responsibility to future generations as temporary tenants on this earth can’t be ignored in our economic models. I believe that this book offers valuable insights into how we can create a better economic system that takes into account both the needs of people and the planet.

1. Change the Goal - Raworth argues that the goal of economic policy should be to meet the needs of all within the means of the planet. This requires moving beyond the outdated goal of endless GDP growth, which fails to address poverty, inequality, and environmental degradation.

• In her book, "Doughnut Economics," Kate Raworth argues that the traditional goal of economic policy, which has been endless GDP growth, is outdated and fails to address some of the most pressing issues of our time, such as poverty, inequality, and environmental degradation. She proposes a new economic goal that focuses on meeting the needs of all people within the means of the planet, which she represents as a doughnut-shaped diagram.
• Raworth argues that the traditional economic goal of endless GDP growth has created a world where economic prosperity is not shared equitably, where the environment is degraded, and where poverty and inequality persist. She suggests that economic policy should be reoriented towards a new goal, which she calls "meeting the needs of all within the means of the planet."
• The idea behind this new goal is to create a world where everyone's basic needs are met, while at the same time living within the ecological limits of the planet. Raworth suggests that this requires a shift away from the current economic model, which is based on the extraction of natural resources and the production of ever more goods and services, towards an economic model that prioritizes sustainability, equity, and social justice.
• By adopting this new economic goal, Raworth argues that we can create a more equitable and sustainable world, where economic prosperity is shared more fairly, and where people's basic needs are met without exceeding the limits of the planet's resources. She provides several examples of countries and communities that have begun to adopt this new economic model, such as Bhutan's Gross National Happiness Index and the Transition Towns movement.

2. See the Big Picture - To address global challenges, such as climate change and biodiversity loss, it is essential to adopt a systems thinking approach that recognizes the interconnectedness of social and ecological systems.

• Interconnectedness: The systems thinking approach recognizes that social and ecological systems are interconnected and cannot be addressed in isolation from one another. For example, economic growth may be dependent on the availability of natural resources, but this growth can also lead to environmental degradation that affects the health and livelihoods of people.
• Feedback loops: Systems thinking recognizes the presence of feedback loops, where the outputs of a system become inputs that affect the system itself. For example, climate change can lead to more extreme weather events, which in turn can affect agriculture, transportation, and other systems, creating a cycle of negative impacts.
• Emergence: Systems thinking also recognizes that complex systems can exhibit emergent properties that cannot be predicted from the behavior of their individual parts. For example, the emergence of antibiotic-resistant bacteria can result from the overuse of antibiotics, even though the individual bacteria themselves do not have the ability to develop resistance.
• Solutions: To address global challenges, it is important to recognize and address the systemic causes of problems, rather than simply treating their symptoms. This may involve changing social norms, transforming economic systems, or developing new technologies that are more sustainable and resilient.
• Overall, adopting a systems thinking approach can help to identify the root causes of global challenges and design more effective solutions that address the interconnected social and ecological systems involved.

3. Nurture Human Nature - Economics should be based on a more realistic understanding of human behavior, recognizing that people are not just self-interested individuals but also social beings who care about others and the planet.

• Redefining the economic narrative: Raworth argues that mainstream economics has created a narrow view of human nature that emphasizes self-interest and materialism. She proposes a new economic narrative that acknowledges the complexity of human nature, which includes social relationships, empathy, and creativity.
• Incentivizing cooperation: Raworth suggests that cooperation can be incentivized through economic policies that encourage collaboration and collective action. For instance, instead of rewarding individuals for their personal achievements, we could reward teamwork and collaboration.
• Empowering communities: Raworth argues that empowering communities and promoting local initiatives is crucial for building more resilient and sustainable economies. By giving people more control over their own lives and resources, communities can develop more holistic approaches to economic development that take into account their social and ecological needs.
• Promoting well-being: Raworth suggests that economics should prioritize well-being over material consumption. This means developing policies that promote health, education, social connections, and other non-material sources of happiness and fulfillment.
• Reimagining work: Raworth argues that economics should reimagine the role of work in our lives. Instead of viewing work as a means to an end (e.g. earning a salary), we should focus on creating work that is fulfilling, meaningful, and contributes to the well-being of society and the planet.
• Overall, "Nurture Human Nature" is about recognizing the importance of social and ecological relationships in shaping our economic systems, and using this understanding to build more sustainable, equitable, and fulfilling economies.

4. Get Savvy with Systems - Policymakers need to understand the feedback loops and dynamic behavior of complex systems and recognize that interventions can have unintended consequences.

• Systems thinking is about understanding how different parts of a system interact with each other and how changes in one part of the system can have ripple effects throughout the whole system.
• When it comes to economics, policymakers need to understand the complex feedback loops and dynamic behavior of economic systems. For example, policies that focus solely on increasing GDP growth may have unintended consequences for inequality, social cohesion, and the environment.
• One way to get savvy with systems is to use computer models and simulations to test the likely outcomes of policy interventions before implementing them in the real world. This can help policymakers to anticipate unintended consequences and adjust their policies accordingly.
• Another important tool for getting savvy with systems is to engage in participatory decision-making processes that involve stakeholders from diverse backgrounds and perspectives. This can help to surface different viewpoints and potential trade-offs, and can lead to more resilient and inclusive policies.
• Overall, getting savvy with systems means recognizing that the economy is a complex and dynamic system, and that effective policymaking requires a deep understanding of how this system works and how it can be influenced for the better.

5. Design to Distribute - Raworth argues for creating economies that are designed to distribute wealth and power more equitably, rather than concentrating it among the few.

• Economic systems should be designed to promote equitable distribution of wealth and resources, rather than concentrating them in the hands of a few individuals or companies.
• This means prioritizing policies that support workers, communities, and the public good over those that benefit only a small group of elites.
• The distribution of wealth and resources should be based on principles of justice and fairness, rather than simply on market outcomes or individual merit.
• In practice, this could involve measures such as progressive taxation, universal basic income, and worker-owned cooperatives.
• The goal is to create an economy in which everyone has access to the resources they need to thrive, rather than a system that perpetuates inequality and concentrates power among a select few.

6. Create to Regenerate - Rather than focusing on endless growth and consumption, economic systems should be designed to regenerate natural resources and ecosystems.

• Regenerative design: Raworth suggests that economic systems should be designed with the aim of restoring and regenerating natural resources and ecosystems. This involves creating closed-loop systems where waste is minimized and resources are continuously reused and regenerated.
• Circular economy: Raworth advocates for a circular economy, where resources are kept in use for as long as possible and waste is minimized. This approach requires a shift away from the linear "take-make-dispose" model of the current economy, towards one that is regenerative.
• Sustainable agriculture: Agriculture is a key sector where regenerative practices can be implemented. Raworth highlights the importance of agroecology, which involves using farming practices that promote soil health, biodiversity, and resilience, while reducing the use of external inputs such as fertilizers and pesticides.
• Green energy transition: To create a regenerative economy, it is also crucial to transition to renewable energy sources and reduce reliance on fossil fuels. This involves investing in technologies such as solar, wind, and geothermal energy, as well as reducing energy consumption through energy efficiency measures.
• Natural capital: Raworth emphasizes the importance of valuing and investing in natural capital, which refers to the stocks of natural resources and ecosystems that provide economic and social benefits. By recognizing the value of natural capital, policymakers can create incentives for its protection and restoration.
• Overall, Raworth argues that creating a regenerative economy is essential for addressing the environmental challenges facing the planet and creating a more sustainable and equitable future.

7. Be Agnostic about Growth - Raworth suggests that policymakers should stop treating GDP growth as the ultimate goal of economic policy and instead focus on other measures of progress, such as well-being and environmental sustainability.

• The traditional measure of economic success, GDP, only measures the amount of money changing hands in an economy, without taking into account the well-being of people or the health of the planet. Raworth argues that this narrow focus on GDP growth has led to environmental degradation, social inequality, and other problems.
• Instead of solely focusing on GDP growth, Raworth suggests that policymakers should adopt a more holistic view of economic progress that takes into account social and environmental factors, such as happiness, health, and sustainability.
• This does not mean that economic growth should be abandoned altogether, but rather that it should not be treated as the sole goal of economic policy. Raworth argues that there are limits to growth, and that we should strive for sustainable and equitable economic systems that prioritize the well-being of all people, while respecting planetary boundaries.
• By being agnostic about growth, policymakers can shift their focus towards other measures of progress, such as reducing inequality, improving health outcomes, and preserving natural resources. This can lead to a more balanced and sustainable approach to economic development, and can help ensure that economic growth benefits everyone, not just a select few.
• Raworth suggests that by being agnostic about growth, policymakers can explore alternative economic models, such as degrowth or steady-state economics, which prioritize sustainability and well-being over endless growth. These models challenge the assumption that economic growth is always necessary for a thriving society, and instead suggest that we can achieve prosperity without consuming more resources than the planet can sustainably provide.

8. Embrace the Doughnut - The "doughnut" model provides a visual representation of the planetary boundaries and social foundations that define a safe and just space for humanity to thrive.

• The model represents the space between two concentric circles: the inner circle represents the minimum level of resources necessary for a dignified human life, such as food, water, energy, and housing, while the outer circle represents the planetary boundaries beyond which ecological systems begin to break down.
• Here are some key insights about the doughnut model:
• The doughnut model emphasizes the need to balance social and ecological concerns. It recognizes that social and ecological systems are interconnected and that a healthy society depends on a healthy planet.
• The doughnut model provides a useful tool for policymakers to evaluate the sustainability of economic policies. It helps to identify the areas where policies are falling short in terms of meeting the needs of people or exceeding the limits of the planet.
• The doughnut model encourages a holistic approach to development that takes into account the multiple dimensions of human well-being, such as health, education, and social inclusion, as well as the health of natural systems.
• The doughnut model challenges the traditional economic growth paradigm and emphasizes the need to prioritize sustainability over GDP growth.
• The doughnut model has been used as a basis for policy-making in various cities, including Amsterdam, where the city government has adopted it as a framework for their economic development plans.
• Overall, the doughnut model provides a simple and powerful way to visualize the complex interplay between social and ecological systems and serves as a reminder that economic development must be pursued in a way that is both socially just and ecologically sustainable.

9. Change the Story - Raworth argues that we need to change the dominant economic narrative from one of endless growth and consumption to one of sustainability, equity, and well-being.

• Raworth argues that the current economic narrative, which focuses on endless growth and consumption, is unsustainable and fails to account for environmental degradation and social inequality.
• She suggests that a new economic narrative is needed, one that prioritizes sustainability, equity, and well-being for all.
• This new narrative should recognize the interconnectedness of social and ecological systems and the need for a more regenerative approach to economic activity.
• It should also prioritize the well-being of people and the planet over short-term economic gains, and recognize that economic growth does not necessarily lead to greater well-being for all.
• Raworth argues that changing the economic narrative requires engaging in public discourse, challenging the dominant economic ideology, and developing new stories that better reflect our values and aspirations for the future.
• This requires the involvement of a wide range of stakeholders, including policymakers, business leaders, civil society organizations, and ordinary citizens.

 Examples:

• Changing the economic narrative requires challenging the dominant discourse that economic growth is the key to prosperity. Instead, it requires promoting alternative narratives that prioritize well-being and sustainability. For example, some cities have adopted a "well-being economy" approach that prioritizes social and environmental well-being over economic growth.
• The new narrative should also recognize the need for a more regenerative approach to economic activity. For example, some businesses are adopting circular economy models that focus on reducing waste and maximizing the use of resources.
• Engaging in public discourse and developing new stories that better reflect our values and aspirations for the future is critical to changing the economic narrative. For example, the "doughnut economics" movement has been successful in raising awareness about the need for a new economic narrative that prioritizes sustainability, equity, and well-being.

10. Invest in What Matters - Governments, businesses, and individuals should invest in the things that matter, such as education, health, renewable energy, and public goods, rather than wasting resources on harmful activities like fossil fuel extraction and arms production.

• Governments should prioritize investments in education and healthcare, which are key to promoting human development and well-being. This can help to create a more equitable and sustainable society in which everyone has the opportunity to reach their full potential.
• Businesses can invest in renewable energy, which not only helps to mitigate climate change but also creates jobs and stimulates economic growth. Other important areas of investment include sustainable agriculture and resource-efficient production processes.
• Individuals can also make a difference by investing in sustainable products and services, such as organic food, green energy, and public transportation. By supporting companies and initiatives that align with their values, individuals can help to create demand for more sustainable and equitable economic practices.
• At the same time, it's important to divest from harmful activities like fossil fuel extraction and arms production, which contribute to environmental degradation and social inequality. This can be achieved through a combination of government regulation, consumer activism, and socially responsible investing.
• Overall, investing in what matters means prioritizing the long-term well-being of people and the planet over short-term profits and economic growth. By shifting resources and attention to areas that promote sustainability, equity, and well-being, we can create a more resilient and just economic system that works for everyone.

💯 II. Key takeaways:

1. The current economic system is not sustainable: The book argues that the current economic system is based on the flawed assumption of endless growth and consumption, which is leading to environmental degradation and social inequality.
2. A new economic model is needed: Raworth proposes a new economic model that takes into account the planetary boundaries and social foundations necessary for human well-being.
3. Economics should be based on human nature: Raworth argues that economics should be based on a more realistic understanding of human behavior, which recognizes that people are not just self-interested individuals, but also social beings who care about others and the planet.
4. Policy makers need to adopt a systems thinking approach: To address global challenges, such as climate change and biodiversity loss, policymakers need to adopt a systems thinking approach that recognizes the interconnectedness of social and ecological systems.
5. The doughnut model provides a visual representation of a safe and just space for humanity to thrive: The doughnut model provides a visual representation of the planetary boundaries and social foundations that define a safe and just space for humanity to thrive.

🛰️ III. Other recommended references:

Here are some amazing resources by Kate Raworth -  her website along with her Ted talk and YouTube channel.

*Her website: Kate Raworth | Doughnut Economics