Seven ways to think like a 21st century economist (2023)

Credit:https://www.kateraworth.com.

No one can deny it: the economy matters. His theories are the mother tongue of public policy, the raison d'être of multimillion dollar investments, and the tools used to fight global poverty and manage our planetary home. Too bad, then, that its basic ideas are centuries outdated and still guide decision-making for the future.

Today's business students will be among the influential citizens and policymakers shaping human society in 2050 of the 21st century, from climate change and extreme inequality to recurring financial crises: this is shaping up to be a catastrophe. We have little chance of writing a new, contemporary economic history if we continue to rely on the economic history books of the last century.

When I studied economics at university 25 years ago, I believed that it would enable me to contribute to solving the social and environmental challenges facing humanity. But like many of today's disillusioned students, I was deeply frustrated by his disconnect between relevance and reality. So I left his theories and dived into real-world economic challenges, from the villages of Zanzibar to the United Nations headquarters to the front lines of Oxfam's campaign.

In doing so, I realized that you can't leave economics behind because it shapes the world we live in, so I decided to go back and turn it around. What if we started economics with humanity's goals for the 21st century and then asked what kind of economic thinking gave us half the chance of achieving them?

Spurred on by this question, I put aside my old economics textbooks and searched for the best new ideas I could find, drawing from a variety of schools of thought, including complex, ecological, feminist, behavioral, and institutional economics, and set about discovering what happens when everyone dances the same side. The insights I have gained imply that the economic future will be exciting but vastly different from the past provided we arm ourselves with the right mindset. So here are seven ways I think we can all start thinking like 21st-century economists:

1. Change the goal: from GDP growth to donut.

For more than half a century, economists have been obsessed with using GDP as the primary measure of economic progress, but GDP is a false target waiting to be shot. The 21st century calls for a much more ambitious global economic goal:Meet everyone's needs within the limits of the planet's capabilities. I drew this target on the page, and oddly enough, it looks like a donut.The challenge now is to create local to global economies that ensure no one lacks the necessities of life, from food and shelter to health care and political voice, while protecting the earth's vital systems, from a stable climate and fertile soils to healthy oceans and an environment. protective ozone layer. This single shift in purpose changes the meaning and form of economic progress: from endless growth to balanced prosperity.

2. See the big picture: from an independent market to an integrated economy.

Exactly 70 years ago, in April 1947, an ambitious group of economists wrote a neoliberal economic history that has dominated the international stage since Thatcher and Reagan came to power in the 1980s. His narrative of the efficiency of the market, the incompetence of the state, the domesticity of the family, and the tragedy of the commons helped propel many societies into social and ecological collapse. It is time to write a new economic history fit for this century, which sees the economy's dependence on society and the living world. This story needs to recognize the power of the market, so let's integrate it wisely; the national association, so we hold them accountable; the primary function of the family, so let's value your contribution; and the creativity of the commons, so let's unleash their potential.

3. Concern for human nature: from rational economic man to socially adaptable man.

The central figure of the economy of the 20th century, the "rational economic man", draws a pathetic picture of man: he is alone, with money in his hand, a pocket calculator in his head, an ego in his heart and nature at his side. Foot. Worse, when we're told he's just like us, we actually look more like him, to the detriment of our communities and the planet. But human nature is much richer than that, as the emerging sketches of our new self-portrait show: we are reciprocal, interdependent, and bringing together people deeply rooted in the world of the living. It is time to place this new portrait of humanity at the center of economic theory, so that economics can begin to promote the best in human nature. This will give the ten billion of us who are coming a much better chance of succeeding together.

4. Acquire system knowledge: from mechanical balance to dynamic complexity.

Economics has long suffered from the envy of physics: impressed by the genius of Isaac Newton and his insight into the physical laws of motion, 19th-century economists were obsessed with discovering the economic laws of motion. But these simply don't exist: they are mere models, much like the market equilibrium theory that blinded economists to the impending 2008 financial crisis. For this reason, 21st-century economists embrace complexity and evolutionary thinking. Putting dynamic thinking at the heart of economics opens new perspectives for understanding the 1% surge and the rise and fall of financial markets. It's time to stop looking for the elusive levers of controlling the economy (they don't exist) and instead start managing the economy as an ever-evolving system.

5. Design to distribute: from "growth will be the same again" to distributive design.

In the 20th century, economic theory whispered a strong message when it came to inequality: it has to get worse before it can get better, and growth will eventually even things out. But it turns out that extreme inequality isn't a law or an economic necessity, it's a design flaw. Twenty-first century economists recognize that there are many ways to design economies that distribute far more value to those who help create them. And that means going beyond the redistribution of income to the pre-distribution of wealth, such as wealth that resides in land ownership, business, and the power to create money.

6. Created to regenerate: from “growth will cleanse again” to regenerative by design.

Economic theory has long portrayed a clean environment as a luxury accessible only to the wealthy, a view that says pollution must increase before it can decrease, and (guess what) growth will eventually clean it up. . But like inequality, there is no such economic law: environmental degradation is the result of degenerative industrial designs. This century requires economic thinking that unlocks the potential of regenerative design to create a circular, nonlinear economy and restore us as full participants in the cyclical processes of life on Earth.

7. Being growth agnostic: From growth addict to growth agnostic.

To the concern of governments and financiers, GDP growth forecasts are faltering in many high-income countries, opening a crisis in the growth-based economy. Perpetual GDP growth is seen as imperative by mainstream economics, but nothing in nature grows forever, and the economic attempt to reverse this trend raises tough questions in high-income, low-growth countries. That's because today we have economies that need to grow, whether they help us prosper or not. We need economies that allow us to thrive, whether they're growing or not. This fundamental shift in perspective invites us to become growth agnostic and to examine how our economies, currently financially, politically and socially addicted to growth, might learn to live with or without growth.

I am convinced that these seven ways of thinking like a 21st century economist are fundamental to the new economic thinking that this century requires. . Given the speed, scale and uncertainty of the change we will face in the coming years, and the diversity of contexts from Beijing to Birmingham to Bamako, it would be unwise to attempt now to prescribe all the policies and institutions needed to make it happen are suitable future. The next generation of thinkers and doers will be much better able to experiment and figure out what works when the context is constantly changing.

What we can do now, and must do well, is to bring together the best ideas to create a new economic mindset that is never fixed but always evolving. The task of economic thinkers in the coming decades will be to bring these seven ways of thinking together and add them up in practice. We have only just begun this adventure of rethinking the economy. Please join the crew.

Kate Raworth's new book isDonut Economics: Seven Ways to Think Like a 21st Century Economist.