Doughnut Economics: Seven Ways to Think Like a 21st-Century Economist

This chapter argues that economics borrowed the wrong metaphor—mechanical equilibrium—from Isaac Newton. Economists like William Stanley Jevons and Léon Walras modeled markets as systems that return to equilibrium, establishing the supply-and-demand diagram. Although foundational flaws were exposed, equilibrium models dominated until the 2008 crash, when they failed to account for financial risk. Earlier economists, from Karl Marx to Friedrich Hayek, had already warned against such static thinking. The chapter suggests that by 2050, economics will finally situate itself within complexity science rather than physics.

Systems thinking introduces stocks and flows, feedback loops, and delays to explain emergent behavior. Stocks and flows are basic elements of a system, like water in a bath; feedback loops are interconnections that amplify what is happening in a system, for better or worse; and delays interrupt a system’s flow. This lens reframes major changes viewed by some as “externalities” as core effects arising from innate, underlying trends. The 2008 crisis exposed models that omitted banks; Hyman Minsky’s financial-instability hypothesis explained how reinforcing loops make stability breed instability. Reinforcing loops also drive inequality through a “Success to the Successful” dynamic, leading to market concentration and wealth inequality. Elizabeth Magie’s original version of The Landlord’s Game, later rebranded as Monopoly, was designed to show this effect.