The Embedded Economy
The embedded economy is the second of Raworth's seven conceptual moves: the replacement of the self-contained circular-flow diagram that dominates introductory economics with a nested picture in which the economy is a subsystem of society, which is a subsystem of the biosphere. Nothing enters the economy that does not come from the living world. Nothing leaves the economy that does not return to the living world. The economy is an open subsystem of a finite, materially closed planetary system — and treating it as if it were self-contained is the source of the most systematic economic errors.
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The circular-flow diagram that Raworth displaces was developed by Paul Samuelson in the mid-twentieth century and has been taught to generations of economics students as the foundational picture of what an economy is. Households supply labor to firms, firms supply goods to households, money circulates between them, and the system is analytically complete. The living world