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

Doughnut Economics: Seven Ways to Think Like a 21st-Century Economist (2017) is a work of nonfiction by British economist Kate Raworth that critiques mainstream economic theory and proposes a new framework for sustainable development. Raworth argues that 20th-century economics, with its focus on endless growth, is unfit for addressing modern crises like climate change and extreme inequality. She introduces a visual model called the “Doughnut” to redefine the goal of economics: to create a “safe and just space for humanity” that exists between a social foundation of human rights and an ecological ceiling of planetary boundaries (38). The book is structured around seven key shifts in economic thinking designed to help achieve this goal.

Raworth is a self-described “renegade economist” who developed her ideas through a career that combined academic research with practical experience. She has worked as a senior researcher at Oxfam, co-authored the UN’s Human Development Report, and teaches at Oxford University’s Environmental Change Institute. This background informs the book’s synthesis of ideas from ecological, feminist, and complexity economics to challenge the dominant paradigm. An international bestseller, the book was named a Book of the Year by the Financial Times and Forbes and has inspired a global movement. Its ideas have been adopted by policymakers in cities such as Amsterdam and have led to the creation of the Doughnut Economics Action Lab (DEAL) to support practical implementation. The book explores themes including Rethinking Progress Beyond GDP, Designing More Distributive Economies, and The Lack of Nuance in Economic Models.

This guide refers to the Chelsea Green 2018 paperback edition.

Plot Summary

The book opens with the story of Yuan Yang, an economics student at Oxford University whose frustration with the outdated curriculum reflects a global, student-led movement called Rethinking Economics. This movement gained momentum after the 2008 financial crisis, demanding that economics education address real-world challenges. Author Kate Raworth shares her own journey of disillusionment with academic economics, her work on practical issues at organizations like Oxfam, and her eventual return to the field with the goal of reimagining it. 

She introduces the book’s central visual metaphor, the “Doughnut,” which she conceived as a picture of humanity’s goals. The Doughnut consists of two concentric rings. The inner ring is the “social foundation,” representing the essentials for a good life, such as food, water, and political voice, below which lies critical human deprivation. The outer ring is the “ecological ceiling,” representing the planetary boundaries that support life, beyond which lies irreversible environmental degradation. The area between these rings is the “safe and just space for humanity” (38). The book’s core question is what economic mindset will best help humanity get into this space. Raworth argues that visual framing is a powerful tool for shaping thought and critiques the dominant, limited mental model created by Paul Samuelson’s famous Circular Flow diagram. The book is structured around seven ways to rethink economics, each replacing an outdated diagram with a new one fit for the 21st century.

Chapter 1 critiques the 20th-century obsession with Gross Domestic Product (GDP) growth, labeling it a “cuckoo in the […] nest” that has displaced the true purpose of economics (28). Raworth traces how the field lost sight of its goals, from Aristotle’s focus on household management to the modern era’s reliance on GDP. She notes that Simon Kuznets, who developed national income accounting in the 1930s, warned that a nation’s welfare could not be inferred from this single metric. Raworth formally presents the Doughnut as a new compass, with a social foundation of 12 dimensions drawn from the UN Sustainable Development Goals and an ecological ceiling of nine planetary boundaries identified by Earth-system scientists. An assessment of humanity’s current state reveals a significant “shortfall” on all social dimensions and an “overshoot” of at least four planetary boundaries: climate change, land conversion, nitrogen and phosphorus loading, and biodiversity loss. This leads to a proposed shift in the metaphor of progress, from endless upward growth to one of thriving in dynamic balance.

In Chapter 2, Raworth deconstructs the Circular Flow diagram, arguing that it presents a misleading picture of the economy as a self-contained market, isolated from society and nature. This narrow framing, she contends, set the stage for the 20th-century neoliberal narrative, which champions an efficient market while characterizing the state as incompetent and the commons (or resources shared by a community, like grazing land or fishing ponds) as tragic. As a replacement, she introduces the “Embedded Economy” diagram, which nests the economy within society and the living world. This model redefines the economy as a diverse system of provisioning that includes four key realms: the Household (the core of unpaid care), the Market, the Commons, and the State. Raworth then re-characterizes the key actors in this new economic story, presenting Earth as life-giving, society as foundational, and the market as a powerful tool that must be wisely embedded to serve the common good.

Chapter 3 deconstructs the protagonist of mainstream economics, Homo economicus, or “rational economic man” (81). Raworth traces the evolution of this figure from Adam Smith’s complex individual to a crude caricature who is self-interested, calculating, and isolated. She argues that this model has become a self-fulfilling prophecy, making people more selfish. A new portrait of humanity is proposed, based on five key shifts: people are socially reciprocating, not self-interested; they have fluid values, not fixed preferences; they are interdependent, not isolated; they approximate using heuristics, not calculate with perfect rationality; and they are dependent on the web of life, not dominant over it. Raworth warns against over-relying on monetary incentives, which can “crowd out” or displace intrinsic motivations like community spirit by replacing them with financial ones. She instead advocates for policies that nurture human nature by leveraging reciprocity, values, and social networks.

Chapter 4 challenges the metaphor of the economy as a machine seeking mechanical equilibrium, a concept visually represented by the supply and demand curves. Raworth argues the economy is a complex, adaptive system that requires systems thinking. She introduces core concepts like stocks, flows, and feedback loops (both reinforcing and balancing). This dynamic perspective is then applied to re-examine key economic issues. The instability of financial markets is explained through Hyman Minsky’s hypothesis, which posits that long periods of stability encourage risky behavior that ultimately leads to instability. Inequality is framed as a result of the “Success to the Successful” dynamic, a reinforcing loop that concentrates wealth. Climate change is presented as a stock-flow problem, illustrated by the “carbon bathtub” analogy to show that stabilizing emissions is not enough; they must be cut to a level below which nature can absorb them. The chapter concludes by reimagining the economist as a gardener stewarding an evolving system, rather than an engineer controlling a machine.

Chapter 5 addresses inequality, debunking the Kuznets Curve, which suggested that rising inequality is a necessary phase of development. Raworth argues that inequality is a design failure, not an economic law, and is detrimental to society, democracy, and the economy. She proposes creating an economy that is “distributive by design,” visualized as a distributed network. This involves redistributing not just income but also the sources of wealth itself. Five key areas for redesign are explored: land (through land value taxes and commons stewardship), money creation (through complementary currencies and state-led design), enterprise (through employee-owned and cooperative models), technology (by sharing the wealth from automation), and knowledge (by promoting an open-source “knowledge commons”).

Chapter 6 critiques the myth of the Environmental Kuznets Curve, which claimed that economic growth would eventually clean up the environmental damage it creates. Raworth shows that the global material footprint of high-income nations continues to grow. The current industrial model is described as a linear, degenerative “caterpillar economy” based on a “take, make, use, lose” process. The alternative is a “regenerative by design” economy, visually represented by the “butterfly diagram” of a circular economy. This model distinguishes between biological nutrients, which should be returned to nature, and technical nutrients, which should be continuously restored and reused. Raworth outlines a “Corporate To Do List” that moves from inaction to the ultimate goal of being “generous,” actively regenerating living systems.

Chapter 7 confronts the addiction to endless GDP growth, symbolized by the ever-rising exponential growth curve. Raworth poses a conundrum: growth has been essential for ending deprivation but has driven ecological destruction. She proposes the S-curve as a more realistic trajectory, where growth levels off as an economy matures, and suggests that many high-income countries are approaching this plateau. The chapter’s central proposal is for these economies to become “growth agnostic,” designing systems that allow humanity to thrive whether or not GDP is growing. Raworth identifies the deep-seated financial, political, and social addictions to growth and explores ways to overcome them, such as interest-free currencies, shifting taxes from labor to resource use, and shortening the working week.

The book concludes by summarizing the seven ways of thinking as a coherent vision for a distributive and regenerative economy. Raworth revisits the Rethinking Economics movement, affirming its mission to create a more accessible and widely-understood discipline. She issues a final call to action, arguing that economic change is an evolutionary process driven by real-world experiments. By engaging in “new economic doing,” such as creating new business models and contributing to the commons, everyone can become an economist and help shape a more hopeful future.