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System Dynamics: Systems Thinking and Modeling for a Complex World 1/13/2020 DO NOT DISTRIBUTE: Intended for registrants of the MIT System Dynamics Group IAP 2020 Session only 1 SYSTEM DYNAMICS: SYSTEMS THINKING AND MODELING FOR A COMPLEX WORLD James Paine System Dynamics Group MIT Sloan School of Management IAP 2020 SESSION –JANUARY 13, 2020 01 Welcome! Grab some food! Introduction to the SD Group at MIT 02 Overview of Systems Thinking What is ‘System Dynamics’? What is ‘Systems Thinking’? Tools of the trade and key concepts 03 Hands on! Fishbank Simulation Teams of 4 (+/- 1) One laptop per team needed 04 Debrief and wrapup Fishbanks debrief Tying it into Systems Thinking Other SD resources at MIT Plan for Today 1

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System Dynamics: Systems Thinking and Modeling for a Complex World

1/13/2020

DO NOT DISTRIBUTE: Intended for registrants of the MIT System Dynamics Group IAP 2020 Session only 1

SYSTEM DYNAMICS:SYSTEMS THINKING AND MODELING FOR A COMPLEX WORLD

James Paine

System Dynamics Group

MIT Sloan School of Management

IAP 2020 SESSION – JANUARY 13, 2020

01 Welcome!

• Grab some food!

• Introduction to the SD Group at MIT

02 Overview of Systems Thinking

• What is ‘System Dynamics’?

• What is ‘Systems Thinking’?

• Tools of the trade and key concepts

03 Hands on! Fishbank Simulation

• Teams of 4 (+/- 1)

• One laptop per team needed

04 Debrief and wrapup

• Fishbanks debrief

• Tying it into Systems Thinking

• Other SD resources at MIT

Plan for Today

1

System Dynamics: Systems Thinking and Modeling for a Complex World

1/13/2020

DO NOT DISTRIBUTE: Intended for registrants of the MIT System Dynamics Group IAP 2020 Session only 2

About Me

2

Background

• B.S. Chemical Engineering (UF)

• M.S. Mechanical Engineering (Ga Tech)

• MBA Operations Management and Marketing (WFU)

• Worked for ≈10 years in GE-Hitachi (nuclear engineering), Inmar (reverse logistics and continuous improvement), HanesBrands (product marketing)

James Paine

• MIT Sloan School of Management

• System Dynamics Group, emphasis on Behavioral Operations

Management

Research Interests

• Product development (and failure)

• Supply chain management and cost mitigation via behavioral modeling (BOM)

• Managerial decision making in non-optimal environments

[email protected]

jpaine.mit.edu

System Dynamics Group at MIT

3

https://mitsloan.mit.edu/faculty/academic-groups/system-dynamics/about-us

John Sterman

Jay W. Forrester

Professor of Management

Nelson Repenning

School of Management

Distinguished Professor of

System Dynamics and Organization Studies

Hazhir Rahmandad

Mitsubishi Career

Development Professor

and Associate Professor of System Dynamics

David Keith

Assistant Professor of System Dynamics

System Dynamics: Systems Thinking and Modeling for a Complex World

1/13/2020

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System Dynamics Group at MIT

4

https://mitsloan.mit.edu/phd/students/current-phd-students

Mahdi HashemianB.S. Electrical Engineering;

M.S. Management

James HoughtonS.B. Aeronautics and

Astronautics

Tianyi Li

B.S. Geophysics; B.S. Applied

Mathematics; M.A. Geosciences

Tse-Yang LimB.S. Biology; Master of

Environmental Management

Jose Luis LopezB.S. University of Costa Rica;

INCAE Business School, M.B.A.

Jad SassineM.S. Applied Mathematics

James PaineB.S. Chemical Engineering;

M.S. Mechanical Engineering; M.B.A.

System Dynamics Group at MIT

5

A (very) brief history

“Everything I have ever done has converged to become system dynamics.”

-Jay W. Forrester

at the 1989 International meeting of the System Dynamics Society

MIT-originated field

Created by Dr. Jay Forrester in the mid-1950’s while at MIT

First formalized in 1958 with “Industrial Dynamics - A Major Breakthrough for Decision Makers"

Origins in control theory

Dr. Forrester had background in EE and pioneer in early digital computers. Inventor of Random Access Memory while working on MIT’s WHIRLWIND I general purpose digital computer

Came to understand that social systems are much harder to control than physical systems, and often source of difficulties faced in projects

First major application was stock-flow-feedback structure of GE appliance plant three-year employment cycle, refined ideas of System Dynamics

Broadened beyond corporate management throughout 60’s and 70’s, including resource management such as WORLD2 simulation for Club of Rome

Evolved beyond methodology to thinking framework with applications in numerous fields

System Dynamics: Systems Thinking and Modeling for a Complex World

1/13/2020

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OVERVIEW OF

SYSTEM DYNAMICS

AND SYSTEMS

THINKING

*Portions of the following overview slides

are modified from source material by Drs.

John Sterman, Hazhir Rahmandad, and

Robert Nachtrieb

Open Loop Thinking

7

Identify Problem

Gather Data

Evaluate Alternative

Select Solution

Implement

System Dynamics: Systems Thinking and Modeling for a Complex World

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Open Loop Thinking

8

Goals

Decisions

State of the

System

We are embedded in a larger system

9

Goals

Decisions

State of the

System

“Side

Effects”

“Side

Effects”

Actions of

Others

Goals of

Other Agents

DELAY DELAY

DELAY DELAY

DELAY

DELAY

DELAY

DELAY DELAY

DELAY

System Dynamics: Systems Thinking and Modeling for a Complex World

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Systems Thinking Foundations

What is a System?

A system is a set of interdependent parts sharing a common purpose.

The performance of the whole is affected by each and every one of its parts.

10

Social and Economic Systems

Are highly complex systems:

• Dynamic

• Tightly coupled

• Governed by feedback

• Nonlinear

• Limited Information

• Ambiguity and delays in cause and effect

…and are typically more complex than human-made, physical systems.

Systems Thinking and System Dynamics

...is not only tools and but rather framework to help ‘close the loops’ and:

Elicit and articulate mental models and impact of social and

organizational structure

Expand mental models by explicitly accounting for feedback

Test and improve mental models and structure via simulation

Develop shared mental models and more effective organizations

11

The simulation’s purpose is not to ‘be right’ but

rather to help improve mental models and

identify high leverage policy choices

System Dynamics: Systems Thinking and Modeling for a Complex World

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Systems Thinking Foundations

Structure Generates BehaviorDynamics emerge from the interaction of:• Physics

• Information availability

• Decision rules

12

Mental Models Matter (a lot!)It’s not enough to change the physical structure, information, and incentives.

The Fundamental Attribution ErrorOur first instinct is to blame the people in the system. Almost always this is a low-leverage response

Breaking Away from the Fundamental Attribution Error

13

System Dynamics: Systems Thinking and Modeling for a Complex World

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Structure Generates Behavior

14

EVENTS

STRUCTURE

PATTERNS OF BEHAVIOR

Structure Generates Behavior

15

EVENTS

STRUCTURE

PATTERNS OF BEHAVIOR

• “Drunk trader caused a spike in oil prices” (NY

Post, 2012)

• “Oil prices keep falling — this is why” (Washington

Post, 12/21/15)

• “OPEC Rumors Continue To Pull Oil Prices Higher”

(Oil Price, Aug 2016)

• “Trump slams OPEC for high oil prices” (Fortune,

4/20/18)

• “Another Sign of Economic Worry: Tumbling Oil

Prices” (NYT, 6/5/19)

• “Oil prices surge after tanker attack in Gulf of

Oman” (CNN, 6/13/19)

System Dynamics: Systems Thinking and Modeling for a Complex World

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Structure Generates Behavior

16

EVENTS

STRUCTURE

PATTERNS OF BEHAVIOR

• Chronic boom and bust cycles

• Real Prices rising on average

$-

$20

$40

$60

$80

$100

$120

$140

$160

1860 1880 1900 1920 1940 1960 1980 2000 2020

20

18

$/b

bl

Structure Generates Behavior

17

EVENTS

STRUCTURE

PATTERNS OF BEHAVIOR

• Physical structure: o Stocks and flows

o Material delays

o Feedback processes

• Information availabilityo Delays, biases, error, gaps

o Access & transparency

• Mental Modelso Actor goals and incentives

o Time horizon, model boundary

o Misperceptions of feedback

System Dynamics: Systems Thinking and Modeling for a Complex World

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(Some) Barriers to Learning in Dynamic Complexity

Dynamic Complexity

Limited Information

Confounding variables and Ambiguity

Bounded Rationality and Misperceptions of Feedback

Flawed Mental Models

Erroneous Inferences about Dynamics

Judgmental Errors and Biases

Defensive Routines and Interpersonal Impediments to Learning

Implementation Failure18

‘SYSTEM DYNAMICS’ IS REALLY APPLIED ‘SYSTEMS

THINKING’

19

System Dynamics: Systems Thinking and Modeling for a Complex World

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(SOME) TOOLS OF

SYSTEM DYNAMICS

Tools and Methods

System Thinking and Modeling is Iterative

Spiral approach, and multiple tools available

System Dynamics is NOT just compartmental models

System Dynamics practitioners use many modeling and simulation toolsets test the implications of hypothesized causal relationships

All Models are Wrong: But some models are useful!

21

System Dynamics: Systems Thinking and Modeling for a Complex World

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Tools in the Spiral Approach to Model Formulation

• Reference Modes

• Causal Loop Diagrams

• Stock and Flows

• Equation Formulation

• Dimensional Analysis

• Simulation

• Sensitive Analysis

• Policy Testing

22

*Sterman 2000

Results of any step can yield insights affecting other steps

Systems Thinking Tools: Causal Links

23

Production Inventory Shipments

Orders

BookedPriceSalesforce

Population DeathsBirths

+

+

+

-

-

-

System Dynamics: Systems Thinking and Modeling for a Complex World

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Systems Thinking Tools: Causal Links

24

Ice CreamSales

Murder Rate

+

Ice CreamSales

Murder Rate

AverageTemperature

++

Incorrect! Correct

https://www.tylervigen.com/spurious-correlationsJust for fun:

Systems Thinking Tools: Loops

25

EmplyeeSkill

CustomerSatisfaction

ComplaintsManager Time SpentResolving Customer

Issues

Manager Time SpentCoaching Employees

+

-

-

+

+Reinforcing Loop:

R

System Dynamics: Systems Thinking and Modeling for a Complex World

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Attractivenessof Market

Number ofCompetitors

ProductPrice

Profits

Systems Thinking Tools: Loops

26

-

+

Balancing Loop:

+

+

B

Systems Thinking Tools: Loops

27

Balancing Loops also called Goal Seeking Loops

Performance

Desired

Performance

Need for

Additional EffortEffort

+

-

+

+

B

Loop Polarity

Right Way: Trace Effect of a Change Around the Loop

Quick Way: Count the ‘-’ connections

System Dynamics: Systems Thinking and Modeling for a Complex World

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Systems Thinking Tools: Stock and Flows

28

Stock and Flow Diagram (Compartmental Model)

Integral Representation

StockInflow Outflow

Differential Representation

𝑆𝑡𝑜𝑐𝑘 𝑡 = න

𝑡0

𝑡

𝐼𝑛𝑓𝑙𝑜𝑤 𝑠 − 𝑂𝑢𝑡𝑓𝑙𝑜𝑤 𝑠 𝑑𝑠 + 𝑆𝑡𝑜𝑐𝑘 𝑡0

𝑑

𝑑𝑡𝑆𝑡𝑜𝑐𝑘 = 𝐼𝑛𝑓𝑙𝑜𝑤 𝑡 − 𝑂𝑢𝑡𝑓𝑙𝑜𝑤 𝑡 = 𝑁𝑒𝑡 𝐶ℎ𝑎𝑛𝑔𝑒 𝑖𝑛 𝑆𝑡𝑜𝑐𝑘 𝑡

Systems Thinking Tools: Stock and Flows

29

Hydraulic Metaphor

Stock

Inflows

Outflows

System Dynamics: Systems Thinking and Modeling for a Complex World

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Systems Thinking Tools: Stock and Flows

30

Hydraulic Metaphor

Greenhouse Gasses in the Atmosphere

Greenhouse Gas Emissions

Net Removal

Systems Thinking Tools: Stock and Flows

31

Stocks Flows

Balance Sheet

Wealth

CO2 in Atmosphere

Integrals

Water in a bathtub

Accounts Payable

Income and Expenditures

Cash Flow Statement

CO2 Emissions

Derivatives

Flows through faucet and drain

Vehicle Production

Product preorders

System Dynamics: Systems Thinking and Modeling for a Complex World

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HANDS-ON

MANAGEMENT

FLIGHT SIMULATOR

James Paine

System Dynamics Group

MIT Sloan School of Management

Fishbanks

*Briefing and debriefing borrowed heavily from Dr. Hazhir Rahmandad and Dr. John Sterman

System Dynamics: Systems Thinking and Modeling for a Complex World

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Fishbanks• Intro (almost over)

• Fishbanks!• Short break

• Results and Discussion

Winslow Homer, The Herring Net

Fishbanks game by originally developed by Prof. Dennis Meadows, 1986. Web version developed by Prof. John Sterman, MIT Sloan School of Management, with help from Prof. Andrew King, Tuck School of Business, Dennis Meadows, Keith Eubanks, and Forio.com, 2010. Translations available: Chinese, Spanish, Portuguese.

System Dynamics: Systems Thinking and Modeling for a Complex World

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System Dynamics: Systems Thinking and Modeling for a Complex World

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Three oceans, Seven teams each

Teams of three to five (aim for 4)

A1

A2

A3 A4

A5

A6

A7

I1

I2I3

I4I5

I6I7

P1P2

P3

P4

P5P6

P7

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Your GoalMaximize your team’s Net Worth at the end of the game.

Net Worth =

Bank Balance+

Value of Fleet

The winner is the team with the highest Net Worth at game end

$

Profit

Profit = Income - Expenses

Fish Sales

Ship Trade Sells

Interest Earning

Harbor Operation

Costs

Ship Purchases

New Ship Orders

Interest Charges

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Income

Catch x Price ($20 per fish)Fish Sales

Ship Sales

Interest Earnings

2%/year if Minimum Bank Balance is greater than zero

Price set by auction

Expenses

Harbor: $ 50/year per shipCoastal Fishery: $150/year per shipDeep Sea Fishery: $250/year per ship

Harbor Operation

Costs

ConstructionNew Ships: $300 each. Charged at end of current year. Delivered the following year

Ship Purchases

Buy a ship at auction. Cost: your winning bid per ship * number bought

Interest Charges

5%/yr if Minimum Bank Balance is less than zero.

System Dynamics: Systems Thinking and Modeling for a Complex World

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Sequence of Debits and Credits

Ban

k B

alan

ceStart year with bank balance that accumulated through all past years

If you buy ships at auction or from other teams, the cost is subtracted

START AUCTION

You are then charged for the operating costs of your fleet

Your fish catch is calculated and sales are credited as income

DECISION COSTS AND INCOME CALCULATED

The minimum balance is calculated and your account adjusted up or down based on the interest charged or earned

Finally, your account is charged for any new ships you ordered at the beginning of the year

Fishing Fleet

• Initial Fleet =3 Ships/team

• Fleet Growth- Purchase from other teams via auctions

- Order new ships

• Fleet Reduction- Sales to other teams via auctions

System Dynamics: Systems Thinking and Modeling for a Complex World

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Ordering New Ships

Each year you may order the construction of new ships.

The maximum order is half of your current fleet (initial fleet + auction purchases).

If total fleet is an odd number, your maximum order is rounded up to the next whole number.

Catch

Catch influenced by:Number of Ships,Ship Effectiveness,

Weather

System Dynamics: Systems Thinking and Modeling for a Complex World

1/13/2020

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Recent History of the Fisheries

Ship Effectiveness

25

System Dynamics: Systems Thinking and Modeling for a Complex World

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• Three oceans: Atlantic, Pacific, Indian

• 7 teams in each ocean, 3-5 people per team

• The oceans are separate

• Fish do not move between oceans

• Ships do not move between oceans

• Conditions identical except for your decisions

FishBanks

Let’s go fishing…

Winslow Homer, Fishing Boats, Key West (1903)

System Dynamics: Systems Thinking and Modeling for a Complex World

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Login

• 1 Laptop per team (put all others away please)

• Go to: http://bit.ly/fishbanks

•STOP – wait for instructions

Alt link: http://forio.com/simulate/mit/fishbanks/simulation/login.html

System Dynamics: Systems Thinking and Modeling for a Complex World

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System Dynamics: Systems Thinking and Modeling for a Complex World

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Fishing Areas

Deep Sea

Maximum Population2000 - 4000 Fish

Annual Operating Cost$250 per Ship-Year

Productivity (Max Ship Effectiveness)

25 (Fish/year)/ship

Coast

Maximum Population1000 - 2000 Fish

Annual Operating Cost$150 per Ship-Year

Productivity (Max Ship Effectiveness)

15 (Fish/year)/Ship

Profit Example

FISH SALES = 25 X $20OPERATING COST

DEEP SEA SUBTOTAL

FISH SALES = 15 X $20 OPERATING COST

COASTAL SUBTOTAL

HARBOR COST

1 SHIP TO DEEP SEA

1 SHIP TO COASTAL

1 SHIP TO HARBOR

PROFIT

$250

$150

- $50

$350

$500- $250

$300- $150

System Dynamics: Systems Thinking and Modeling for a Complex World

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Regeneration of Fish

New Fish

Per Year

Deep Sea

Coastal

Fish00

Max

Develop your strategy

1. Your goal is to end the game with the maximum possible assets.

2. Discuss within your team what strategies for boat acquisition and allocation you will follow to attain this.

3. Write your strategy down.

System Dynamics: Systems Thinking and Modeling for a Complex World

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Step 1: Auctions

System Dynamics: Systems Thinking and Modeling for a Complex World

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Step 2: Buy and Allocate ships

Any Questions?

System Dynamics: Systems Thinking and Modeling for a Complex World

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Game is on!

Game over!You can take a 10-min break

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Total Assets (Net worth) by team

The Winner is:Pacific 4 with 35,421

• What was your personal intention at the start?

• What was your team’s strategy at the start?

• What did you actually do?

• What did your team do?

• What could you have done differently?

Reflection

System Dynamics: Systems Thinking and Modeling for a Complex World

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Fishbanks Debrief

The Iceberg: A Metaphor for Systems Thinking

More

Leve

rage

Events

Patterns of Behavior

Systemic Structure

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Loopholes found

In fishing rules

Fishing banned

at Georges BankLocal fishermen fear overcrowding

Lobstermen

Snag record

38m pounds

Codfish

depleted

off MaineRestrictions could

Hurt local fishermen

N.E. lawmakers seek boat buyback ideas

Hearing casts fishery as sinking ship

Canada’s

Gunboat

DiplomacyChrétien to protect

Atlantic fish stocks

Limits may follow

as cod diminishes

in Gulf of Maine

Feds approve boat buyback programHope to thin fishing fleet with $2m in incentives

Event level: the Headlines

Pattern #1: Overshoot and Collapse

Atlantic Swordfish

Catch

0

1

2

3

4

5

1950 1960 1970 1980 1990 2000

Thousand M

etr

ic T

ons/y

ear

Pacific Bluefin Tuna

Catch

0

4

8

12

16

1950 1960 1970 1980 1990 2000

Thousand M

etr

ic T

ons/y

ear

System Dynamics: Systems Thinking and Modeling for a Complex World

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North Sea Herring Catch

Consider the Cod

• Northern or Atlantic Cod• Long-lived, slow to mature

• Once immensely abundant• Early fishers (e.g., Basque) claimed fish so dense you could walk

from Spain to the New World on their backs.

• John Cabot, exploring Newfoundland in 1497, noted fish so thick they practically blocked his ship.

• Harvest ≈ 250,000 metric tons/yr through 1950s

• Vital in feeding the Old World, in the development of the New World,

…and of Massachusetts:

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The Sacred CodMassachusetts State House

Prevailing Mental Model: Unlimited Abundance

“Probably all the great fisheries are inexhaustible; that is to say that nothing we do seriously affects the number of fish.”

• Thomas Henry Huxley, 1883

System Dynamics: Systems Thinking and Modeling for a Complex World

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Source: US National Marine Fisheries Service

Source: https://foss.nmfs.noaa.gov/

0

10000

20000

30000

40000

50000

60000

1950 1970 1990 2010

(Updated) US Atlantic Cod Commercial Landings

(Metric Tons/Year)

System Dynamics: Systems Thinking and Modeling for a Complex World

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Estimated Biomass in 1852

Estimated Carrying Capacity

(Myers et al. 2001)

1200

800

400

0

1850 1870 1890 1910 1930 1950 1970 1980

Total Cod Biomass

Total Cod Biomass Age 5+

Estimated Cod Stocks, Scotian Shelf

(1000 Metric Tons)

Rosenberg et al., Frontiers in Ecology, 2005

Rebranding “Trash” Fish

• Slimehead * “Orange Roughy”

• Patagonian Toothfish * “Chilean Sea Bass”

• Whore’s eggs * “Maine Sea Urchin”

• Mud Crabs * “Peekytoe Crab”

System Dynamics: Systems Thinking and Modeling for a Complex World

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Aquaculture expanding to feed the world

Source: http://www.fao.org/state-of-fisheries-aquaculture

Overshoot and CollapseWhy the pervasive pattern of overshoot and collapse of fisheries?

Time

An

nu

al fish

ca

tch

Where are the leverage

points for creating a

sustainable fishery?

Where are they not?

What could you

have done

differently?

System Dynamics: Systems Thinking and Modeling for a Complex World

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1. Renewable resources can be used no faster than they regenerate.

2. Pollution and wastes can be emitted no faster than natural systems can absorb them, recycle them, or render them harmless.

3. Nonrenewable resources can be used no faster than renewable substitutes can be introduced.

Source: Herman Daly (e.g., H. Daly (1990) Ecological Economics 2, 1).

Hu

man

Activity

Eco

syst

em S

ervi

ces

The “Daly Rules”

Feedback structure Governing Renewable Resources

Fish Stock

Net Recruitment Catch

+

Fish Density

Maximum FishStock

+

-

Fractional NetRecruitment

+

+

Catch per Ship

Fleet Size

+

+

+R1

Population

Growth

B1

Limits to

Growth

B2

Fishing

Effectiveness

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Fractional Net Recruitment vs. Fish Density

0

0 1 Fish Density, S/Smax (Dimensionless)

Fra

cti

on

al N

et

Rec

ruit

men

t (1/year)

Impact of Technology on Ship Effectiveness

0

0 1Fish Density, S/Smax

(Dimensionless)

Catc

h p

er

Sh

ip

(Fis

h/S

hip

/ye

ar)

Low Technology

High Technology

System Dynamics: Systems Thinking and Modeling for a Complex World

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0

0 1 Fish Density, S/Smax (Dimensionless)

Ne

t R

ecru

itm

en

t (fish/year)

Net Recruitment vs. Fish Density

Net Recruitment vs. Fish Density

0

0 1 Fish Density, S/Smax (Dimensionless)

Ne

t R

ecru

itm

en

t (fish/year)

Reinforcing Feedback Dominant (R1)

Balancing Feedback Dominant (B1)

Unstable Equilibrium

Stable Equilibrium

MSY

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Overshoot and Collapse

Simulation:

Fleet (potential

catch) grows

2%/year

Overshoot and Collapse: Examples

• Carrying capacity of the Earth:- climate change, - ozone layer, - ground water, - agricultural soils, - forests, - etc.

• Borrowing to maintain lifestyle

• Speculative bubbles

(housing, tech stocks, art, etc.)

• Abusing trust and good will - Misleading accounting - Telephone Marketing- False online reviews

• Drinking

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“The Tragedy of The Commons”Garrett Hardin. Science 1968; 162:1243-8.

G. Hardin,

1915-2003

Photo: 1986

The Tragedy of the Commons

“No technical solution can rescue us.…”

“Each man is locked into a system that compels him to

increase his herd without limit—in a world that is limited.

Ruin is the destination toward which all men rush, each pursuing his own best interest…”

“We may well call it ‘the tragedy of the commons,’ using

the word ‘tragedy’ as the philosopher Whitehead used it:

‘The essence of dramatic tragedy is not unhappiness. It

resides in the solemnity of the remorseless working of things.’

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“Common Pool Resources”

• Limited Stock and Rate of Renewal• Easily Appropriable (Low barriers to access)• Rival (What you use, I can’t use)

• EXAMPLES:

• Pastures

• Fish

• Forests

• Irrigation

• Clean Air & Water

• Climate

• Roads and Highways

• Parking Spaces

• Views

• Server Resources

• Trust among

consumers

Causes of Collapse (1)

Collapse of the carrying capacity can occur when underlying resources are

Nonrenewable or

Renewable but Consumable or Degradable

Collapse is worse with

• Common pool resources (Tragedy of the Commons)

• Slow or limited regeneration potential

• Tipping points created by positive feedbacks

• Irreversibilities due to e.g.

➢ Trophic cascade

➢ Evolutionary impacts

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Causes of Overshoot (2)

• Long Delays in

Changes in Resource level (Physical/Biological delay)

Measuring resource level (Perception delay)

Understanding causes (Research delay)

Recommending action (Political/social delay)

Implementing policies (Political/social delay)

Policy impact (Physical/Biological delay)

Note: Delays are partly physical and partly political and social. Those with vested interests in the status quo often misrepresent the situation to delay action (e.g. tobacco, lead in gasoline, toxics in food, climate change).

Privatization can help, but has Limits• Enforcement

• Requires effective rule of law to enforce property rights.

• Conflict around equity, fairness.

• High discount rate• Owners may find it in their interest to harvest unsustainably

• Irreducible externalities• You can pen up your sheep, but your fish? Air? Water? Climate?

• Dynamic complexity• Difficulty of measuring resource stocks, consumption, regeneration

• Long delays in detecting and responding to overexploited resource

• Long recovery delays

• Nonlinearities, thresholds, ‘side effects’

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Limits to Privatization• Moxnes (1998): Experiment similar to Fishbanks

but with perfect private property rights: no Tragedy of Commons

• 74% of subjects overbuilt fleets; average fleet 60% above optimal

• Average fish stocks 15% below optimal

• Average subject wealth 46% below optimal

• Subjects: Fishers, Fishing Resource Managers, Researchers

Typical subject behavior:

No uncertainty case

Moxnes, E. (1998) Not Only the Tragedy of the Commons: Misperceptions of Bioeconomics. Management Science, 44(9):1234-1246.

Population

ProductiveCapacity

NetBirths

NetInvestment

Human Activity

Net FractionalGrowth Rate

+

Net Increase inHuman Activity

+

R1

Population andEconomic Growth

Adequacy ofResources

+

-B1

Involuntary Limitsto Growth

Global CarryingCapacity

+

Resource Prices,Social Concern,

Gov't Policy-

Innovation+

Technology

+

Technological"Side Effects"

+

Consumption and

Degradation

Regeneration andRestoration

-+ +

B2Resource

Consumption

B4

TechnologicalSolution

R3

TechnologicalNightmare

RegenerationCapacity

-

+

+

Voluntary Limits-

-

B5Voluntary Limits

to Growth

B3

Regeneration

R2

EnvironmentalTipping Points

DELAY

DELAY

DELAY

DELAY

DELAYDELAY

DELAY

Beyond Fishbanks

Source: John Sterman, MIT Sloan

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Collective Action

Elinor Ostrom (1933-2012): Winner, 2009 Nobel Memorial Prize

in Economic Sciences

Elinor Ostrom’s Optimism

“I would rather address the

question of how to enhance the

capabilities of those involved to

change the constraining rules of

the game to lead to outcomes

other than remorseless

tragedies…”

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• Individuals know the boundaries and limits

• Of the resource (“Common Pool Resource”)

• Of the community of users (“Appropriators”)

• Rules are locally made and adapted to context

• Decisions are made together

• Active measurement and monitoring

• Effective, graduated sanctions

• Accessible mechanisms for conflict resolution

• Latitude from higher authorities to act locally

Design Principles for “Governing the Commons”

Leadership question: how do we enroll and mobilize people to

create these conditions?

OTHER SYSTEM

DYNAMICS

RESOURCES

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Want more?

Classes at MIT

15.871- Introduction to System Dynamics

15.873 - System Dynamics for Business and Policy

102

Population

Susceptible to

Ebola

PopulationInfected with

EbolaInfection Rate

Infectivity

Contacts BetweenInfected and Uninfected

Persons

+

+

Susceptible

ContactsProbability of Contact

with Infected Person

Contact

Frequency Total Population

+

+

-

+

++

R

Contagion

B

Depletion

+

CumulativeReported

CasesNew Reported

Cases

<Infection Rate>

+

Assignment 1 - Section B1

Submitted by: James Paine

Want more?

Books

103All are in the MIT Library!

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Articles (personal favorites):

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All are free when accessing from MIT’s network!

System Dynamics at Sixty: The Path Forward

Selling System Dynamics to (other) Social Scientists

Making the Numbers? “Short Termism” and the Puzzle of Only Occasional Disaster

Nobody ever gets credit for fixing problems that never happened: Creating and sustaining process improvement

Capability Traps and Self-Confirming Attribution Errors in the Dynamics of Process Improvement.

https://sdjournalclub.mit.edu/sites/default/files/documents/Sys%20Dyn%20Reading%20List.xls

Want more?

Websites (personal favorites):

105

Creative Learning Exchange http://www.clexchange.org/

Tom Fiddaman’s MetaSDhttps://metasd.com/model-library/

MIT OCW System Dynamics Self Studyhttps://ocw.mit.edu/courses/sloan-school-of-management/15-988-system-dynamics-self-study-fall-1998-spring-1999/

MIT System Dynamics Journal Clubhttp://sdjournalclub.mit.edu/

The System Dynamics Societyhttps://www.systemdynamics.org/what-is-sd

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(Some) Software

106

(Some more) Software

107

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System Dynamics in Action

En-Roads Climate Policy Simulator https://en-roads.climateinteractive.org/scenario.html?v=2.7.6

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