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System Dynamics December 16, 2010

Posted by stewsutton in Information Policy, Information Technology, Knowledge Management.

So the field of System Dynamics is about 50 years old*. And while it has been around at least as long as I have been wandering the earth, I only recently connected to the power and potential of this discipline and how it can offer an important way to critically evaluate complex systems. Started around 1961, the field developed initially from the work of Jay W. Forrester. His seminal book Industrial Dynamics (Forrester 1961) is still a significant statement of philosophy and methodology in the field. Within ten years of its publication, the span of applications grew significantly.

So what is system dynamics and how can you define its approach?

  • Defining problems dynamically, in terms of graphs over time.
  • Striving for an endogenous, behavioral view of the significant dynamics of a system, a focus inward on the characteristics of a system that themselves generate or exacerbate the perceived problem.
  • Thinking of all concepts in the real system as continuous quantities interconnected in loops of information feedback and circular causality.
  • Identifying independent stocks or accumulations (levels) in the system and their inflows and outflows (rates).
  • Formulating a behavioral model capable of reproducing, by itself, the dynamic problem of concern. The model is usually a computer simulation model expressed in nonlinear equations, but is occasionally left unquantified as a diagram capturing the stock-and-flow/causal feedback structure of the system.
  • Deriving understandings and applicable policy insights from the resulting model.
  • Implementing changes resulting from model-based understandings and insights.

Mathematically, the basic structure of a formal system dynamics computer simulation model is a system of coupled, nonlinear, first-order differential (or integral) equations.  Simulation of such systems is easily accomplished by partitioning simulated time into discrete intervals and stepping the system through time one interval  at a time.  Each state variable is computed from its previous value and its net rate of change.

The simulation tools for System Dynamics have evolved considerably and today there are several different simulation tools that can be acquired to perform research and analysis based on system dynamics methods.

The Feedback Loop is the Key

Conceptually, the feedback concept is at the heart of the system dynamics approach.  Diagrams of loops of information feedback and circular causality are tools for conceptualizing the structure of a complex system and for communicating model-based insights.  Intuitively, a feedback loop exists when information resulting from some action travels through a system and eventually returns in some form to its point of origin, potentially influencing future action.  If the tendency in the loop is to reinforce the initial action, the loop is called a positive or reinforcing feedback loop;  if the tendency is to oppose the initial action, the loop is called a negative or balancing feedback loop.  The sign of the loop is called its polarity. Balancing loops can be variously characterized as goal-seeking, equilibrating, or stabilizing processes.  They can sometimes generate oscillations, as when a pendulum seeking its equilibrium goal gathers momentum and overshoots it.  Reinforcing loops are sources of growth or accelerating collapse;  they are disequilibrating and destabilizing.  Combined, reinforcing and balancing circular causal feedback processes can generate all manner of dynamic patterns.

For understanding, system dynamics practitioners strive for an endogenous point of view.  The effort is to uncover the sources of system behavior that exist within the structure of the system itself.

System structure

These ideas are captured in Forrester’s (1969) organizing framework for system structure:

  • Closed boundary
    • Feedback loops
      • Levels
      • Rates
        • Goal
        • Observed condition
        • Discrepancy
        • Desired action

The closed boundary signals the endogenous point of view.  The word closed here does not refer to open and closed systems in the general system sense, but rather refers to the effort to view a system as causally closed.  The modeler’s goal is to assemble a formal structure that can, by itself, without exogenous explanations, reproduce the essential characteristics of a dynamic problem.

The causally closed system boundary at the head of this organizing framework identifies the endogenous point of view as the feedback view pressed to an extreme.  Feedback thinking can be seen as a consequence of the effort to capture dynamics within a closed causal boundary.  Without causal loops, all variables must trace the sources of their variation ultimately outside a system.  Assuming instead that the causes of all significant behavior in the system are contained within some closed causal boundary forces causal influences to feed back upon themselves, forming causal loops.  Feedback loops enable the endogenous point of view and give it structure.

* References taken from “What is System Dynamics” authored at: http://www.systemdynamics.org/what_is_system_dynamics.html

Additional References

Ford, A. 2009. Modeling the Environment. Washington, DC: Island Press.
Forrester, J.W. 1961.  Industrial Dynamics. Cambridge, MA: The MIT Press.  Reprinted by Pegasus
Communications, Waltham, MA.
Forrester, J.W. 1969.  Urban Dynamics. Cambridge, MA: The MIT Press.  Reprinted by Pegasus Communications,
Waltham, MA.
Maani, K. E. and R. Y. Cavana. 2007.  Systems Thinking, System Dynamics: Understanding Change and Complexity.
Aukland: Printice Hall.
Morecroft, J. D. W. 2007.  Strategic Modeling and Business Dynamics: a Feedback Systems Approach. Chichester:
Morecroft, J. D. W. and J. D. Sterman, Eds. 1994. Modeling for Learning Organizations. System Dynamics Series.
Cambridge, MA:  Pegasus Communications.
Richardson, G.P.  1991/1999.  Feedback Thought in Social Science and Systems Theory. Philadelphia: University of
Pennsylvania Press; reprinted by Pegasus Communications, Waltham, MA.
Richardson, G.P., Ed. 1996.  Modelling for Management:  Simulation in Support of Systems Thinking.  International
Library of Management.  Aldershot, UK:  Dartmouth Publishing Company.
Richardson, G.P. and D. F. Andersen. 2010. Systems Thinking, Mapping, and Modeling for Group Decision and
Negotiation, Handbook for Group Decision and Negotiation, C Eden and DN Kilgour, eds.  Dordrecht:
Springer, 2010, pp. 313-324.
Richardson, G.P. and A.L. Pugh III. 1981. Introduction to System Dynamics Modeling with DYNAMO. Cambridge,
MA: The MIT Press.  Reprinted by Pegasus Communications, Waltham, MA.
Roberts, E.B. 1978, ed.  Managerial Applications of System Dynamics. Cambridge, MA: The MIT Press.  Reprinted
by Pegasus Communications, Waltham, MA.
Senge, P.M.  The Fifth Discipline:  The Art and Practice of the Learning Organization. New York:
Sterman, J.D. 2000.  Business Dynamics: Systems Thinking and Modeling for a Complex World.  Boston: Irwin
System Dynamics Review. 1985-present.  Chichester, U.K.:  Wiley-Blackwell, Ltd.
Vennix, J. A. M. 1996. Group Model Building: Facilitating Team Learning Using System Dynamics. Chichester:
Wolstenholme, E.F. 1990.  System Enquiry:  a System Dynamics Approach.  Chichester, U.K.:  John Wiley & Sons,



1. Len Malczynski - December 17, 2010

Very nice review of SD.
Jay’s first published work was “Industrial Dynamics–A Major Breakthrough for Decision Makers.”, in: Harvard Business Review, Vol. 36, No. 4, pp. 37–66. 1958

stewsutton - December 17, 2010

Thanks for the correction Len. Nice to know that the field is even older than I referenced and that more than 50 years of good thinking has contributed to applications of the discipline beyond targets that were part of the formative years. I’m going to assume that you are a member of this vibrant community and I am pleased to make your acquaintance. I am particularly interested in the use of Systems Dynamics modeling to research enterprise usage of social computing. If you happen to be aware of some researchers leaning in that direction, please let me know. Thank you! -Stew

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