Doughnut Economics

[7Wannabe5]

The full title is "Doughnut Economics: Seven Ways to Think Like a 21st Century Economist" by Kate Raworth. Although some of you 20th Century Free Market Capitalist Thinkers may not agree with much of what the author is attempting to share in this book, I found it to be a very good, very clear, condensation of many other recent or recently revived important books or lines of thought. She touches on everything from work on language as metaphor by George Lakoff to Henry George's take on land taxation.

The doughnut shape represents the area between the core tasks of ensuring basic economic functioning for all humans and not depleting planetary resources.



Here is an associated TedTalk:https://www.youtube.com/watch?v=1BHOflzxPjI

One interesting question to consider from the perspective of ERE would be if 1Jacob = $7200/year = approximate Environmental Ceiling level spending in the doughnut diagram, what dollar amount might approximate the Social Foundation inner ring level of the doughnut diagram?

Another thing I really liked about this book was her very clear division of the 21st century economic doughnut into quadrants beyond the market/government to include the home and the commons. Frugality itself is clearly a manifestation of the value of home economics, and this forum is in good part a manifestation of the value of the commons. Two of the misleading theories of the 20th century that need to be discarded as we move forward would be that growth is always ultimately good and that the commons always ultimately end in tragedy. New evidence suggests otherwise, and it may even be the case that the source of "innovation", the magical something that is required to make the 20th century economic math even a little bit rigorous, most often is the creative commons composed of intrinsically motivated "hobbyists" pursuing and sharing their passionate interests.

[Alphaville]

thanks for the review, looks superinteresting. glad to see both the social and the environment accounted for, instead of innumerable externalities ignored in the name of “little king me.”

[7Wannabe5]

Right. Someone said that the most important thing about any model is what is not in the model.

[Campitor]

The full title is "Doughnut Economics: Seven Ways to Think Like a 21st Century Economist" by Kate Raworth. Although some of you 20th Century Free Market Capitalist Thinkers may not agree with much of what the author is attempting to share in this book, I found it to be a very good, very clear, condensation of many other recent or recently revived important books or lines of thought...

...One interesting question to consider from the perspective of ERE would be if 1Jacob = $7200/year = approximate Environmental Ceiling level spending in the doughnut diagram, what dollar amount might approximate the Social Foundation inner ring level of the doughnut diagram?

...Two of the misleading theories of the 20th century that need to be discarded as we move forward would be that growth is always ultimately good and that the commons always ultimately end in tragedy. New evidence suggests otherwise, and it may even be the case that the source of "innovation", the magical something that is required to make the 20th century economic math even a little bit rigorous, most often is the creative commons composed of intrinsically motivated "hobbyists" pursuing and sharing their passionate interests.

I viewed the linked TED talk and the speaker has a good heart and wants to empower the powerless and safeguarding the planet. However there are huge gaps between what she wants and how to implement it - she basically leaves that up to the politicians and economists. I have little trust the people in government who put us in this situation will be the same people to implement solutions.

In regards to the Jacob unit spending ceiling and how it would need to be revised for doughnut economics, let's consider current US government spending. For example there are approximately 331 million people in the US. There are 130.5 million working in the US (16 yrs or older). Only 117.6 million work 35 hours or more (1). If all workers spent 1 Jacob unit per year ($7200), that would generate 940 billion in domestic consumer activity. In 2019, the US gov took in 3.5 trillion in revenues(2). Who and what is expected to make up the difference to attain 3.5 trillion in revenue? Would corporations be able to cover the shortfall?

And 1 Jacob unit per year is $19.72 per day. Jacob attained his outlay because he was motivated to do so and the costs were split with his SO ( so it's really $7,200 x 2). Anyone remember his blog posts regarding Navy showers, using tarps to fix his leaky roof, and living in an RV? I find nothing wrong with Navy showers, tarps, or RV living, but I don't think the rest of the world wants to live this way unless they are in an impoverished economy. The US 2020 poverty line for a 1 person household is $12,760 ($34/day) and it's $17,240 (47.23/day) for a 2 person household. Jacob was spending less than that for his 2 person household - Jacob please correct me if I'm wrong.

Look at the wheel. Look at what they want accomplished within the wheel. There's no way we can do all that without continuing to produce unwanted externalities. There are no perfect solutions - only tradeoffs. There's no saving the planet and getting everything done listed in the doughnut bucket list.

(1) https://www.bls.gov/cps/cpsaat08.htm
(2) https://www.cbo.gov/publication/56324

[classical_Liberal]

In 2019, the US gov took in 3.5 trillion in revenues(2). Who and what is expected to make up the difference to attain 3.5 trillion in revenue?

This is making the assumption that revenue is being using efficiently and for productive purposes. I would argue neither is true for a large share of it. I think this amount can easily be trimmed down if the resources this money represents were being used even slightly efficiently. I'm not saying it will ever happen, just that theoretically, since a large share of this revenue is being burnt away, it's not all actually needed to attain the goals in the doughnut.

I find nothing wrong with Navy showers, tarps, or RV living, but I don't think the rest of the world wants to live this way unless they are in an impoverished economy. The US 2020 poverty line for a 1 person household is $12,760 ($34/day) and it's $17,240 (47.23/day) for a 2 person household.

Right, but read the journals and it becomes clear there are a ton of ways to effectively live at "poverty level" spending and be just fine. We've had this discussion many times before. Poverty is not a direct result of the $$ spent. Poverty is a lack of other resources, and only having $$ spent as a resource.

I'm not a techno optimist, but I also think humanity is pretty ingenious. Productivity/growth increases would still be possible through innovation if/when a hard reset to sustainable consumption was achieved. To completely think otherwise is just as wrong as thinking the advances of the industrial revolution will continue on indefinitely into the future. So, the potential for "better lives" will still be there through human innovation.

The elephant in the room for any discussion like this is the global population of humans. The less humans, the bigger the pieces of the pie (or doughnut) can be. I really think any discussion about world level sustainability needs to start, not end, with natural processes that seem to cause humans to want to decrease population (ie stop having kids). This is happening in certain areas, and in certain demographics within other areas. This phenomenon needs to be examined and, wherever possible, replicated.

[jacob]

And 1 Jacob unit per year is $19.72 per day. Jacob attained his outlay because he was motivated to do so and the costs were split with his SO ( so it's really $7,200 x 2). Anyone remember his blog posts regarding Navy showers, using tarps to fix his leaky roof, and living in an RV? I find nothing wrong with Navy showers, tarps, or RV living, but I don't think the rest of the world wants to live this way unless they are in an impoverished economy. The US 2020 poverty line for a 1 person household is $12,760 ($34/day) and it's $17,240 (47.23/day) for a 2 person household. Jacob was spending less than that for his 2 person household - Jacob please correct me if I'm wrong.

You are aware that we haven't lived in the RV since 2011 and now live in a house using the same budget, right?!(*) Also, that this budget has held since the 1990s and involved houses and apartments before that. My blogging just happened to mostly coincide with the 3.5 years we lived in the RV.

Using examples from the RV years is, therefore, a bit of a strawman argument for what's possible. See this thread: viewtopic.php?t=7870 ... Adding some more nuance in terms of "changing the entire world", I don't think there's a way to get from "here to there" in terms of Wheaton levels because advancement [against the grain, so to speak] requires surplus capital (privilege in modern terms). Conversely, none of the high WLs are difficult insofar one grew up with them. It's resolving the cognitive dissonance that is hard.

(*) Sorry, I'm a bit touchy when it comes to generalizing about ERE based on a few specific examples from one specific person a long time ago. I realize that was an easy albeit lazy conclusion to draw ten years ago but now there's both plenty of examples from other people + the theory has been hashed out more to show where the misunderstandings are.

In particular, one thing which we've discussed many times before over the years, is that poverty is as much a shortage of other kinds of capital as it is a shortage of cash. This is why the poverty line is set so high. People living in poverty have to pay to compensate for their other shortcomings and this is expensive. Also see Captain Vimes 'Boots' theory for why buying one's way out of poverty is expensive. https://www.goodreads.com/quotes/72745- ... s-reasoned

[Hristo Botev]

In particular, one thing which we've discussed many times before over the years, is that poverty is as much a shortage of other kinds of capital as it is a shortage of cash. This is why the poverty line is set so high. People living in poverty have to pay to compensate for their other shortcomings and this is expensive. Also see Captain Vimes 'Boots' theory for why buying one's way out of poverty is expensive. https://www.goodreads.com/quotes/72745- ... s-reasoned

I'm guessing community/family (nuclear and extended)/social capital is one of those shortages that's been discussed many times before. It doesn't take a whole lot of cash to keep a really tight family/community living happy and healthy. But it can be insanely expensive for a single parent to raise a child/children while living on an island, so to speak, with no real community or family bonds to lean on for support.

[7Wannabe5]

@Campitor:

Kate Raworth does talk about going from household to city-state to nation-state to global perspective in the course of the history of economics, but I think it’s easier, or more natural, to go from household to watershed to global perspective. Therefore, I was thinking that the inner ring of the doughnut might be represented by minimum income/spending to be part of the global middle-class which is approximately $11/capita/day (2011PPP.) This income/spending level represents good assurance of not slipping back into food insecurity in next generation.

Jacob’s current residence is large enough that, for instance, a 6 year old refugee and a 19 year old ERE apprentice could also be squished in, and that would leave $4/day for providing the extra two household citizens with homemade hotdog buns, fingerless gloves, and age appropriate reading material. So, global middle class level is also quite possible, even given heavy head tax of urban U.S. location.

Obviously, many of the items listed on both the inner and outer rings are difficult to directly translate into $$. For instance, gender equality is a bit tricky. My rule of thumb would be neutrality under the law and I get to carry a taser to compensate for upper body strength. I could probably make something like a taser from scrap and scratch for less than $50, but it might err on the side of mad scientist overkill and leave some serious scorch marks, so maybe budget a bit more.

A more recent version of the doughnut diagram also includes “networks” , both social and technological, as core item in the inner ring. I think this is key, because one of my minor problems with the model was that it didn’t include sex, and we all know that can lead to social discontent in otherwise affluent settings.

[classical_Liberal]

@HB
Yep, also skills, education, critical thinking, emotional stability/mental health, self esteem, cultural esteem, agency, "free time". The list could go on. We all like to think our own hard work and meritocratic system proves we've earned our successes. It is true to a large degree, and that just shows agency. However, without having some or all of the above how would have everything turned out? A quote from my favorite Dicken's book, Great Expectations

That was a memorable day to me, for it made great changes in me. But it is the same with any life. Imagine one selected day struck out of it, and think how different its course would have been. Pause you who read this, and think for a moment of the long chain of iron or gold, of thorns or flowers, that would never have bound you, but for the formation of the first link on one memorable day.

Personally, in the five years since first reading ERE, my spending has cut by more than half and I have not sacrificed jack s**t. I live better/richer in many ways. All of that stemming from one fork of the road, a fork that I only noticed because I already had a lot of that soft capital. Crazy.

[Campitor]

@jacob

You're correct. I do know that you haven't lived in an RV for years. But your current situation is the benefit of the compounding effects of your previous actions which allowed you to build a cash reserve to ERE. Remove any of those actions to a significant degree, and could you still make the claim that you could live in a Chicago home at the same cost of living as in 2011? Could you even afford to purchase a home in Chicago?

And speaking of Chicago, how much does it cost to maintain a Chicago home in regards to water, sewage, electrical infrastructure as paid for by the private utilities or government in your jurisdiction? There's a carbon cost to that behavior as well. If the cost of that infrastructure was reduced to 1 jacob unit per member of household, could the state afford to maintain that infrastructure? ERE doesn't exist in a vacuum. The very agencies that help us "ERE" are the same agencies that help with overconsumption and carbon emission. So unless someone is living an ERE lifestyle that requires zero goods produced in a modern economy (i.e., Amazonian Indian living in the deep Amazon with no contact with modern civilization), our lifestyle in total, which includes the global outputs needed to live in a modern economy, exceeds the cost of 1 jacob, 2 jacob, and probably 10 jacob units. That you still spend $7200 a year today is not the total cost of supporting JLF's existence in his home state.

To get to a point where overconsumption and carbon output is no longer a net negative would require a drastic reduction or change in infrastructure or a significant decrease in the human population (less than 3 billion total). I understand Vimes Boot's theory because I lived it. I was a poor immigrant. But what Captains "Vimes" theory doesn't include is learning how to repair your own shoes. I'm no cobbler but I certainly glued and repaired the soles on my boots so they did last 10 years. Net cost was less than paying $50 bucks for "good" boots and the labor spent was less than 30 minutes worth of work. Goop glue for the win! But regardless how cheap the boot, or how cheap the Goop Glue, there's was a factory behind those purchases, and those factories have a carbon and consumption footprint which far exceeds the 1 Jacob Unit.

I don't think there's a way to get from "here to there" in terms of Wheaton levels because advancement [against the grain, so to speak] requires surplus capital (privilege in modern terms). Conversely, none of the high WLs are difficult insofar one grew up with them. It's resolving the cognitive dissonance that is hard.

Agreed. This is the hardest part. None of what you do now or did before (The tarp, RV, etc.) is hard but people think it's hard. That "poverty is as much a shortage of other kinds of capital as it is a shortage of cash" is not an insurmountable obstacle unless someone is born with a deficiency that prevents or greatly impairs their efforts. What makes it seem insurmountable is the cognitive dissonance that convinces people it's unattainable or undesirable. What if the only option to get to 1 Jacob was RV living, tarps, and navy showers? Is that so bad? In my opinion it's not. The problem is that many would find it mentally difficult to undertake any type of measure that doesn't conform to the fantasy they have in their heads.

This is making the assumption that revenue is being using efficiently and for productive purposes. I would argue neither is true for a large share of it. I think this amount can easily be trimmed down if the resources this money represents were being used even slightly efficiently. I'm not saying it will ever happen, just that theoretically, since a large share of this revenue is being burnt away, it's not all actually needed to attain the goals in the doughnut.

@ classical_Liberal

I'm not making that assumption. I've actually discussed the inefficiencies of government in other threads. Governments are inherently wasteful because they lack the monetary feedback required to make sound monetary decisions. Government doesn't care if they overspend because it's not their money they're wasting; they can just tax more in one area or stop providing services in another area. If waste was tied to compensation such that government officials were paid less and less the more wasteful they are, perhaps we would see a better stewardship of expenses.

And regardless how efficient our government gets, 3.5 Trillion in revenues would be a hard pressed target when everyone is only spending $7,200 per year. In Q4 of 2019, American's spent 13.35 Trillion dollars. Even with all that spending, the Government still needed to borrow an estimated 1.2 Trillion to keep the wheels turning. There's no way the goals in the doughnut can be achieved on 1 Jacob Unit without a severe curtailment of entitlements. You can totally scrap the military budget and it will only save you 676 billion (https://www.cbo.gov/publication/56324). The TED talk lady had no solutions because there are no solutions that can possibly provide everything listed within her doughnut. Even the soft goods she desires (social equity, gender equality) have an associated cost. There are no perfect solutions, only tradeoffs.

[Campitor]

@7wb

Kate Raworth heart is in the right place. I just don't know if it's possible to accomplish everything on her list in such a manner than lessens the world's human ecological footprint. I would probably start with water, food, education (includes a big dose of climate models and sustainable water/land/agriculture practices), and health. The other things on the list would need to wait. None of the other things on her list matter much if we don't have planet that can sustain life or if we're sick, thirsty, uneducated, and hungry. Education will probably produce the other things on her list eventually but hopefully in a manner that doesn't pollute our planet or decimate wildlife.

[7Wannabe5]

@Campitor: Kate Raworth is also stone intelligent. Therefore, she knows that such a complex problem or complex of complex problems is unlikely to be solved by top-down approach designed by her or anyone else. Her role is work towards changing or developing the picture or the metaphor to make it more in alignment with reality in toto than infinite GDP growth curve.

I would probably start with water, food, education (includes a big dose of climate models and sustainable water/land/agriculture practices), and health.

Picking and choosing in this manner is missing the point that complex problems require complex solutions. For instance, money spent on education is unlikely to result in population reduction if the culture promotes gender inequality to the extent that the vast majority of the money is spent on educating male children only. Obviously, social unrest is growing in even relatively affluent countries where inequities in wealth distribution are increasing. Ironically, studies actually indicate that even the wealthiest individuals are happier and feel more secure in societies where the wealth and income is more uniformly distributed. Access to technological networks might seem like a luxury, but, for instance, learning Calculus from Khan Academy is likely going to be less expensive choice than providing in-person learning for both Burmese village child and rural Michigan resident. Etc. etc. etc.

[Campitor]

@Campitor: Kate Raworth is also stone intelligent. Therefore, she knows that such a complex problem or complex of complex problems is unlikely to be solved by top-down approach designed by her or anyone else. Her role is work towards changing or developing the picture or the metaphor to make it more in alignment with reality in toto than infinite GDP growth curve....
...Picking and choosing in this manner is missing the point that complex problems require complex solutions.

The complex problems plaguing humanity occur at scale. How does a bottom up approach address this? Not every society values the same thing and their bottom up approach could result in externalities that affect someone else. And who or what committee will determine the degree in which the doughnut's "wish list" is being implemented in such a manner that all desired outcomes are growing uniformly to satisfy the "you can't pick and choose" criteria? How many humans will work towards doughnut nirvana when the incentive to do so is entirely up to self motivation, a.k.a, the bottom up approach?

In Spanish we have a saying: Del dicho al hecho hay gran trecho. I don't see this doughnut coming to fruition because of the constraints inherent in any undertaking where humans with different values and cultures are involved.

[classical_Liberal]

Picking and choosing in this manner is missing the point that complex problems require complex solutions.

Given that humans are unlikely to act in unison to rewire a global system, when they each have different goals (ie Campitors point). Can't we try triage? I mean, if a human (complex system) is bleeding out, first we stop the bleeding. This buys time to address the other issues.

[jacob]

And this [unpossibility of coordinating a complex rationally organized response] is why [ I gave up on education and raising awareness as a solution and why] ERE was designed to be an individually flexible and hedged solution that it is robust towards whatever the outcome may be---because web of goals and multiple capitals.

Once again ...
http://earlyretirementextreme.com/the-h ... treme.html
http://earlyretirementextreme.com/myths ... uture.html

In contrast, FIRE (whether ER or E-ER) is a 100% bet on a techno-optimistic outcome and thus somewhat fragile.

[7Wannabe5]

@Campitor:

I didn't express myself very well. For some reason, bottom-up vs. top-down is something I can never quite grok, likely because I am always going sideways What I was thinking about was this video on The Cynefin Framework which I found on the site associated with the "Doughnut Economics" book. Especially what Dave Snowden says at 6:40 about the boundary between Simple and Chaotic.

https://www.youtube.com/watch?v=N7oz366X0-8

Also, I was thinking about the concept of leverage as it applies to problems involving complex systems. Sometimes you get better results at solving a more important problem by solving a seemingly less important problem, because the less important problem lies at a juncture with greater leverage. For instance, in a classroom situation maybe the obvious most important problems are that the students are failing to achieve basic standards of learning, and they are raiding the science lab for weapons, and the fact that one particular student doesn't feel heard or respected seems less important, but if that student is a natural leader, solving the problem of "feels heard and respected" might create cascade which goes a long way towards solving "more important/obvious" problems.

Can't we try triage? I mean, if a human (complex system) is bleeding out, first we stop the bleeding. This buys time to address the other issues.

Where are we on The Cynefin Framework if triage has become best practice? I'm wondering myself.

ERE was designed to be an individually flexible and hedged solution that it is robust towards whatever the outcome may be---because web of goals and multiple capitals.

Right. I grok the interface between ERE and the outer edge of the doughnut and also making the doughnut into a more robust/delicious torus in third dimension labeled something like "quality of life", but I am wondering about the inner edge of the doughnut and how that relates? Obviously, the late 20th Century Neoliberal Capitalist solution is ever-rising-tide-of-GDP-will-lift-all-boats, but clearly that violates outer edge doughnut/1 Jacob spending boundary. However, it seems to me that it must be something like "educate/share skills with other citizens of your water-shed-> planet" rather than "create products and $$ paying jobs for $$ spending consumers."

Q: Why is it in our self-interest to do this?

A: Because then there are more other people with whom we can have interesting conversations or engage in interesting projects. For instance, 25 years ago I taught my DD29 how to read for $0 cash renumeration and just yesterday in conversation she gifted me with the priceless phrase "the exultation of canceled plans."

[Campitor]

..For some reason, bottom-up vs. top-down is something I can never quite grok, likely because I am always going sideways What I was thinking about was this video on The Cynefin Framework which I found on the site associated with the "Doughnut Economics" book. Especially what Dave Snowden says at 6:40 about the boundary between Simple and Chaotic.

https://www.youtube.com/watch?v=N7oz366X0-8

Also, I was thinking about the concept of leverage as it applies to problems involving complex systems. Sometimes you get better results at solving a more important problem by solving a seemingly less important problem, because the less important problem lies at a juncture with greater leverage. For instance, in a classroom situation maybe the obvious most important problems are that the students are failing to achieve basic standards of learning, and they are raiding the science lab for weapons, and the fact that one particular student doesn't feel heard or respected seems less important, but if that student is a natural leader, solving the problem of "feels heard and respected" might create cascade which goes a long way towards solving "more important/obvious" problems.

Thank you for posting the link to this framework. It's one of the best systems for a decision based framework that I've come across.

Favorite quotes from the video:

• The complicated framework: The distinction between good practice and best practice is actually quite important. In a complicated domain there are several different ways of doing things all of which are legitimate if you have the right expertise. And trying to force people to adopt one of them is actually quite dangerous. You'll basically piss people off to be honest to the point where they will not apply best practice where it should be applied.
• The complex framework: Natural complexity workers...their reaction to a crisis is to get lots of different people from lots of different backgrounds in a desperate hope that someone will come up with the right solution - that's actually quite a good strategy.
  
• Chaotic framework: Fascists love a crises because then they can be given absolute command of everyone and everyone has to do what they're told.

It seems to me that today's complex and complicated problems are trying to be solved using the Chaotic framework of decision making. The crux of the Cynefin Framework is to correctly determine the framework you're operating in so the correct decision based framework is employed. The doughnut will require dipping into all the 4 sectors of the Cynefin Framework. Hopefully the Chaotic portion of the doughnut will be handled by a Lucius Quinctius Cincinnatus and not a Adolf Hitler.

[classical_Liberal]

@7WB5
Another thank you for introducing that concept. I still have much further to go into this rabbit hole, but at this point I think triage, in the sense of bleeding out, is in the obvious domain. But in other senses could be very much chaotic, particularly in a resource constrained situation. In medicine this would be lack of diagnostic tools, or interventions. You do what you need to do, with what you have, because there is no other choice.

I also think your point about using smaller problems to leverage solutions to larger ones is great. Of course there is a problem here in that you have to know the leverage points. I think the overgeneralized leverage point of "education" we hear thrown around so much has proven to be a failure. Education does not equate to action further down in the system. Anyway, then the problem becomes determining the leverage points that may actually be effective.