Like so many others who suffered the dispiriting experience of studying economics at A Level (or even worse, at university), I had to plough through reams of economic diagrams in the standard textbooks like Samuelson’s dreary tome, writes Sean Thompson. The central image in mainstream economics is the circular flow diagram. It depicts a closed flow of income cycling between households, businesses, banks, government and trade, operating in a social and ecological vacuum. There is, according to received neo-classical wisdom, no reason for that closed system not to go on and on in endless equilibrium.
According to Kate Raworth, in her book Doughnut Economics: Seven Ways to Think like a 21st Century Economist, there’s only one problem with the circular flow diagram: it’s wrong. Energy, materials, the natural world, human society, power, the wealth we hold in common, all are missing from the model. The unpaid work of carers – principally women – is ignored, though no economy could function without them. Like rational economic man, this representation of economic activity bears little relationship to reality.