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1983 Proceedings with Abstract – Chestnut Hill, MA USA

The First International Conference

of the System Dynamics Society

1983 – Chestnut Hill, MA USA

The following papers were presented at the conference in parallel and plenary sessions. The original printed proceedings, edited by John D. Morecroft, David F. Andersen and John D. Sterman were printed in hardcopy and distributed at the conference. Below please find the Paper Index for these proceedings, including abstracts. Available papers are Acrobat (.pdf) files and can be read using Acrobat Reader available from adobe.com.

For details about purchasing a copy of the printed proceedings, visit our website System Dynamics Society.

PAPER INDEX

Plenary Session
I. Enlarging the Paradigm Session 1

The Feedback Concept in American Social Science, with Implications for System Dynamics
George P. Richardson

Abstract: The feedback concept is perhaps the single most essential characteristic of the system dynamics approach. However, the application of the feedback concept to social systems is neither original nor unique to the field. Loops of mutual causality appeared explicitly in classical social science literature as early as the mid-1800s, and there were implicit indications of the loop concept as an adjustment mechanism as early as the 1700s. A major thread in the use of the feedback concept in the social sciences developed out of the cybernetics movement that emerged in the 1940s.
System Dynamics arises in a line of feedback thinking separate and distinct from cybernetics, which us termed in this paper the servomechanisms thread. Through the 1960s the cybernetics and servomechanisms thread differ in their approaches to problems, most fundamentally in their purposes, their assumptions about the source of system dynamics of interest, and their beliefs about what can be achieved with the feedback perspective.
This paper places the feedback perspective of system dynamics in historical context. It identifies the system dynamicist’s “endogenous point of view” as a significant development in the use of the feedback concept in social sciences, and draws some implications for practice in the field.

Development of System Dynamics into a More Complete Methodology for Practical Systemic Enquiry
Eric F. Wolstenholme

Abstract: The premise of this paper is that System Dynamics has, in the past, been primarily perceived, both by external observers and by most of its own practitioners, as a technique of computer simulation. Although this situation is changing, there is still little wide scale recognition of its true generality and relevance as a complete subject of systemic enquiry.
The purpose of this paper is to explore the merits of system Dynamics as a total systems methodology. Specifically the presentation will undertake to review the need for and the requirements demanded of such problem solving methodologies, to briefly explore the dilemma resulting from historic attempts to create them and to present changes to the existing Systems Dynamics method which might improve its conformity and acceptability as such a methodology. These include the formal definition of Qualitative System Dynamics and the presentation of a set of rigorous rules to provide much needed guidance in its application; firstly, Stepwise Influence Diagramming, aimed at enhancing problem exploration and model development and secondly, Qualitative analysis, aimed at identifying critical system components and exploring the effects of change.

Rationality and Structure in Behavioral Models of Business Systems
John D. W. Morecroft

Abstract: Rationality is an underutilized concept for creating and analyzing behavioral simulation models of business systems. Much explanatory power and insight can be gained by assuming that business decisionmaking is intendedly rational, examining the factors that limit rational adjustment in business decisions, and exposing in simulation experiments the rationality the underlies even the most counterintuitive total-system behavior.
The paper begins by defining rationality and illustrating the difference between objective rationality, which is common in behavioral models of decisionmaking.
Two methods of analysis are then proposed for clarifying the theory implicit in a simulation model. The first method is premise description. In describing decision functions and model equations attention should be drawn to the organizational processes of factoring, goal formation, routine and tradition that limit the area of rational adjustment in business decisionmaking. The second method is partial model testing. A sequence of partial model tests should be designed to examine the intended rationality of decisionmaking. The intuitively clear and sensible behavior of partial tests should be contrasted with the more complex and often counterintuitive behavior of the whole model.
The application of these methods is illustrated with a  simulation model of a sales organization containing linked decision functions for sales objectives and salesman overtime, and a behavioral function for sales force motivation.

II. Enlarging the Paradigm Session 2

Self-Organization and Stochastic Re-Causalization in System Dynamics Models
Erik Mosekilde, Steen Rasmussen, Torben Smith Sørensen

Abstract: Self-organization denotes a class of instabilities in which a system spontaneously generates structure, diversity and/or specialization. From a thermodynamic point of view, transitions of this kind, which proceed against the general tendency for relaxation towards an unstructured equilibrium, can occur in energetically open systems and under far-from-equilibrium conditions. The exergy required to build up and maintain a non-equilibrium (so-called dissipative) structure can here be extracted from the continuous supply of energy (and/or resources).
The interest of self-organizing systems originates in the work on irreversible thermodynamics performed primarily by the so-called Brussels school. According to this school, developments in biological, ecological, and social systems which involve qualitative change, diversification or increased complexity are also to be viewed as self-organizing processes. This applies for instance to the build-up of genetic information, the appearance of new species in an ecological system, the introduction of new techniques in a social system, the adoption of new scientific paradigms, and the penetration of new products.
In the present paper we analyse the basic ideas of self-organization in terms of concepts familiar to System Dynamics practitioners. Through a series of relatively simple models it is shown how System Dynamics can be used as an efficient tool for modeling self-organizing systems. As a particular example we consider the evolution of cooperative structures (RNA molecules with their associated enzymes) in a prebiotic system.

Dynamical Systems Theory and Complicated Economic Behavior
Richard H. Day

Abstract: Recent developments in mathematics show that more-or-less random behavior and spontaneously evolving structures can be given analytical and deterministic representations. Both empirical simulation and theoretical models have been developed in economics that have similar capacities. This suggests that we are entering a new period when structural change and inherently unpredictable events can be explained or understood in terms of endogenous economic forces.

Eigenvalue Analysis of Dominant Feedback Loops
Nathan B. Forrester

Abstract: Eigenvalue analysis of dominant feedback loops promises to be a powerful new tool for identifying the structural origins of behavior in system dynamics models. Traditional simulation methods for dominant loop analysis are time-consuming and error-prone. A new technique permits calculating the marginal contribution of each feedback loop to each mode of behavior in a model. The technique computes the numbers showing the percentage change in natural frequency and damping of each eigenvalue resulting from a one percent change in loop gain. The magnitude of an elasticity measures the overall importance of a loop to a mode of behavior. The magnitudes can be used to rank loops by relative dominance over each mode, or to rank; modes by relative importance to each loop. The techniques can be used to analyze both linear and some nonlinear behavior modes.

III. Validation and User Confidence Session 3

Appropriate Summary Statistics for Evaluating the Historical Fit of System Dynamics Models
John D. Sterman

Abstract: System Dynamics models are often faulted for their reluctance to employ formal measures of goodness-of-fit when assessing the historical behavior of models. As a result, the validity of system dynamics models is often questioned even when the model’s correspondence to historical behavior is quite good. This paper argues that the failure to present formal analysis of historical behavior creates an impression of sloppiness and unprofessionalism. After reviewing the concept of validity in simulation modeling, the paper proposes a simple set of summary statistics appropriate for system dynamics models (the root-mean-square error and Theil inequality statistics). The statistics allow the error due to individual behavior modes to be analyzed, do not require the use of formal parameter estimation procedures, and can be conveniently computed. A large model of the U.S. economy is used to illustrate the use of statistics.

A Practical Approach to Sensitivity Testing of System Dynamics Models
Andrew Ford, Jeffrey Amlin, George Backus

Abstract: Sensitivity testing, according to the glossary of terms in a Congressional manual on simulation modeling, is defined as the “running of a simulation model by successively changing the states of the system…and comparing the model outputs to determine the effects of these changes” (Congress 1975, p. 129). Sensitivity testing is generally viewed as an important part of the modeling process because it helps researchers narrow down those areas where more data gathering would be useful. In our introductory remarks, we argue that detailed sensitivity testing is particularly important in system dynamics modeling efforts, and we list several obstacles that make detailed sensitivity testing difficult. We introduce a set of testing procedures developed at the Los Alamos National Laboratory and verified by the Control Data Corporation that can help system dynamicists perform detailed sensitivity testing on a routine basis.
In the body of the paper, we present an illustrative application of the testing procedures, and we list six specific uses of the procedures. We describe the availability of the testing package, and we conclude with a set of practical guidelines for investigators wishing to make use of this unique set of procedures.

What is an Adequate Model?
Henry Birdseye Weil

Abstract: Much of the literature on model evaluation focuses on what amount to absolute measures, that are independent of the context in which a particular model is used. This paper argues in favor of situation-dependent measures. Whether or not a model is “good enough” depends on the job it is being asked to do and the mid set of the people who must use the results. The relationships between model adequacy and successful implementation of model-based recommendations are discussed. While rejecting the classical paradigm, the author emphasizes model realism and historical accuracy as important determinants of implementation. The life of the model involves many evaluations of whether it is “worth the costs”, “believable”, “useful”, and “right”. Issues surrounding these judgements are explored. How differences in circumstances can lead to different, but in each case quite adequate, models is illustrated by contrasting two models developed five years apart for the same organization. The paper concludes that successful models are persuasive, not simply to modeling technicians but to high-level decision makers.

IV. Enlarging the Paradigm Session 4

Enlarge the Paradigm? Yes!
Barry M. Richmond

Abstract: The question at issue before this session is whether the system dynamics paradigm should be expanded to include selected issues from the broader field of systems theory. Although some limited expansion in this direction is desirable and probably inevitable, I will argue that it is not the most fruitful direction for broadening our paradigm to take.

Enlarging the Paradigm: Historical View from 1973 until 1983
Hermann Krallmann

Abstract: This paper will provide an overview of the past ten years describing the activities of enlarging the paradigm of System Dynamics (SD).

A Modern Control Engineering Approach to System Dynamics
R. K. Appiah, R.G. Coyle

Abstract: The paper reviews, briefly, the development of system dynamics (SD) and presents a modern control approach. It formulates and solves the SD policy design problem as a model-following control system design problem in an adaptive control framework. A computationally simple policy algorithm based on variable-structure system theory is used as an illustrative example of the stabilization of the dynamic characteristics of a production/raw materials system. Computer simulation results are given for the modern control approach as well as the classical SD techniques. Directions in which the modern control approach could be developed are indicated.

 

Volume I
Parallel 1
Section 1: Private Sector Applications

A General Feedback Model of Business Performance
P. D. A King, R. G. Coyle, E. F. Wolstenholme

Abstract: The paper concludes that the general models of business performance should greatly benefit from analysis within a dynamic framework. The work has already indicated possible relationships between existing theories and formed the basis of a simulation model which may identify the possible consequences of certain strategic actions combined with alternative organization structures.

Strategies for Converting to New Technologies: Computer Graphics in the Color Printing Industry
Alan K. Graham, David P. Kreutzer

Abstract: A number of challenges face firms that need to decide when and whether to convert from technologies to new computer-based technologies. Such is the case with lithographic setup shops, which prepare photos for color printing; they must choose between continuing with traditional craft methods or acquiring digital image-processing equipment. Pioneering firms can be saddled with experimental, undependable, and expensive prototype systems. Rapid technological changes still occurring in digital systems can allow competitors who invest later to obtain cheaper, more effective equipment. But firms investing later may find themselves paying for the large investment just when most competitors are established in the new technology and competition has forced prices and profits to low levels.
In order to create an organizing framework for analyzing and developing conversion strategies for these firms, we worked in collaboration with Inter/Consult, the project’s sponsor, to build a system dynamics model of the color process industry, its market, and a typical firm. The primary purpose of the moel is to provide a clear understanding of the impact these major capital investments will have on the profit structure of lithographic setup shops and to help these shops develop effective conversion strategies. A secondary purpose of the model is to aid digital image-processing equipment suppliers in understanding their market and to provide them with a toll for generating alternative scenarios given different assumptions about economic trends, technological developments, prices, market size and composition. The model serves as a strategy support system that allows clients to derive scenarios explicitly from causal assumptions and to evaluate alternative investment strategies.

System Dynamics Model of Material Flow: Case of a Steel Plant
Rakesh Kumar, Olaf Kleine

Abstract: The System Dynamics Method has been applied to simulate the flow of production in a steel plant. This model has been designed to be an aid in long term planning. The model is driven by a time variant input i.e. incoming orders of nine different types of finished steel products. The internal dynamics is generated by six negative feed back loops of a production shop. The material flow takes place through 16 such shops each having its own dynamics which gets induced to other shops as material flows from coke ovens to finishing mills. The model makes explicit the environmental influences, policy parameters and their relationships with production. Together these explain the dynamic behaviour of monthly production. It can now be used to experiment with all that can be thought of to influence the parameters and improve upon the production performance of the steel plant. The extended version of this model which includes the financial aspects is a top management laboratory for experimentation with different scenarios of environmental influences and counteracting strategies.

A Methodology to Built System Dynamics about Agricultural and Lumberig Products Markets
Lysiane Guenneguez, Louis Breton

Abstract: For four years, the authers have been studying agricultural products markets with this year a development on lumber market.
Search goals are not only to understand market working processes but also to define for each of then the M.I.S. necessary to permit some control by interprofessional organisations specially on price levels.
The paper presents in a first step two building model approaches:
One is a pragmatic approach, formalised by Buffa, Cuzo, Bonini, Boulden, Cetenick, Rosenzweig, on San Diego meeting, A.M.A., in 1970, the other is a theoretical approach by Bross, Schoderbeck, New -York in 1971, and Kaplan, Scranton in 1964.
In a second type, the use of System Dynamics approach is confronted with these two first methods specially on noted research area,
In conclusion, results of our models are discussed.

Section 2: Public Sector Applications

Monetary Policy: A Comparative Study of Economic Forecasting Methodologies
Nathaniel J. Mass

Abstract: This paper proposes to utilize the Management Technologies’ U.S. Economic Model to simulate the same monetary policy tests performed on the three macro-econometric models. Such comparison is likely to be methodologically revealing for several reasons. First, the ‘Management Technologies’ U.S. model is at least of comparable detail and sophistication to the econometric models. Second, the U.S. Model has been developed for similar purposes of short-term (1-2 years) and medium-term (5-20 years) forecasting and analysis of various industry and government policy measures. Third, the U.S. Model has been extensively validated historically and empirically, so that model details and parameter values are not simply “representative” a priori selections, but meet the dual tests of being a priori satisfactory and historically accurate. Policy tests thus far performed on the U.S. Model in fact illustrate significant differences from the econometric results, both near-term and longer-term.

A Political-Economic Model of Urban Growth in Britain, 1801-2001
Ian Moffatt

Abstract: Marxian economics is used as a new conceptual foundation for modelling urban growth. This conceptual model is made operational using the methodology of system dynamics to replicate the pattern of urban growth for an hypothetical city set in a British context. The predicted and actual patterns of urban growth are then compared to a set of British towns and cities from 1801 to 1971, with further predictions to 2001 in dicennial intervals. Some advantages and limitations of this new approach to urban modelling are discussed.

A Simple Model of the Economic Long Wave
John D. Sterman

Abstract: Recent economic events have revived interest in the economic long wave or Kondratiev cycle, a cycle of economic expansion and depression lasting about fifty years. Since 1975 the System Dynamics National Model has provided an increasingly rich theory of the long wave. The theory revolves around ‘self-ordering’ of capital,the dependence of the capital-producing sectors of the economy, in the aggregate, on their own output. The long-wave theory growing out of the National Model relates capital investment, employment and workforce participation, monetary and fiscal policy, inflation, productivity and innovation,and even political values. The advantage of the National Model is the rich detail in which economic behavior is represented. However, the complexity of the model makes it difficult to explain the dynamic hypothesis underlying the long wave in a concise manner.
This paper presents a simple model of the economic long wave, The structure of the model is shown to be consistent with the principles of bounded rationality. The behavior of the model is analyzed, and the role of self-ordering in generating the long wave is determined. The model complements the National Model by providing a representation of the dynamic hypothesis that is amenable to formal analysis and is easily extended to include other important mechanisms that may influence the nature of the long wave.

Counterintuitive Economic Consequences of Accounting Policies: A Dynamic Analysis
Miklos Vasarhelyi

Abstract: This paper uses a system dynamics simulation methodology to assess the potential effects of new accounting policies being considered by rule formulating bodies.
The key objective of this paper is to demonstrate that current ex-ante intuitive assessment of the effect of proposed accounting rules is inadequate due to the counterintuitive nature of economic consequences in a complex social system. For this purpose a very simplified model of he US economy is developed and its parameters varied to reflect potential accounting policy changes. The effects of these policy changes are shown to be counterintuitive in nature, requiring consideration of second and third harmonics of the feedback loops for adequate ex-ante impact assessment.
This paper is divided into six parts: the first part describes alternate approaches to economic consequence assessment and the advantages and disadvantages of utilizing the system dynamics methodology; the second part describes the skeleton of the system dynamics model; the third part examines the measurement problems of rates, levels, and delays as well as reviews the details of their computation for model formulation; the fourth part discusses the problems and results of model validation efforts; the fifth part describes some of the results obtained from application of the model, and their meaning in comparison with traditional methodologies for accounting impact analysis; the sixth part concludes by suggesting the next step for macro-accounting modeling: evaluating the potential and shortcomings of this methodology.

Section 3: Modeling Support Methods

Behavior Analysis Software for Large DYNAMO Models
Alan K. Graham, Alexander L. Pugh

Abstract: An experimental software package is being used as an extension to the DYNAMO IV compiler to linearize the model at any point during a simulation, compute the eigenvalues and eigenvectors of the linearized system, identify the levels important in producing each behavior mode, and compute the elasticity of a given eigenvalue (corresponding to elasticiy of period and damping) with respect to all model parameters. The package is intended to help modelers understand the causes of behavior in very complex models, both for debugging implausible behavior, and for presenting the causes of plausible behavior more convincingly. The package is able to work for the System Dynamics National Model, a model of around 300 levels. Practical experience has uncovered some difficulties in making the analysis useful,, but these are being surmounted. The experience suggests that mathematical methods should be used extensively “in the field” before being offered as candidates for expanding the paradigm of System Dynamics modeling.

The Role of Interactive Colour Graphics in Boosting User Understanding and Confidence
I. McIvor, D. E. Probert

Abstract: Our role is to advise senior British Telecom management on strategy for BT as a whole. This requires coherent strategic analysis aided by systems dynamics models. All management levels must have confidence in the models in their results. For analysing alternative futures we find that graphs are easier to appreciate and understand. We have also found that colour graphics greatly enhances the presentation of more than one curve at a time. Interaction with models in real time is a major step in boosting user confidence for it allows rapid confirmation, or rejection, of the user’s prejudices.
Interfaces to computer models, such as menus, bit pads, etc, are successful if they interface efficiently between the user’s mental map and that which is enshrined in the model. If the user can move a ‘lever’ which exists in the real world and that causes the model to display the effects he expects, then he will have confidence in the model. Decision makers want the best strategy. We shall discuss how we use colour graphics to compare strategies, but that often begs the question ‘Why?’. This requires techniques used in artificial intelligence, which can also be used to ‘customise’ interfaces to individual users.

System Dynamics by Visicalc: Simulation Models Using the New Spreadsheet Programs
Alan Mck Shorb

Abstract: Visicalc, the original spreadsheet program for microcomputers is explored for suitability as a vehicle for system dynamics models.
It is shown that Visicalc can support most of the model features that DYNAMO allows, but at the price of some inconvenience and care needed when setting up the model. However, with the widespread distribution of spreadsheet programs among decision makers, there maybe situations where they may be the vehicle of choice for implementing a dynamic model.

Interactive Computer Graphic Technologies for Representing System Dynamics Model Structure and Behavior: New Tools for Marketing and Teaching System Dynamics
Janet M. Gould, David P. Kreutzer

Abstract: Several interactive computer graphics technologies are now available that can provide powerful tools which enhance our ability to conceptualize, implement, and communicate complicated system dynamics model structure and behavior thereby giving us opportunities to improve our effectiveness as researchers, consultants and educators. This paper gives an overview of several projects utilizing interactive computer graphics and evaluates their significance for system dynamics. Included in this discussion are: 1) computer aided design systems for “automagic” design and updating of overview, policy structure, flow, and causal loop diagrams, 2) computer teaching games and self-paced interactive computer aided instruction packages designed for personal computers; 3) review of the new Micro-DYNAMO and Hewlett-Packard plotting software from Pugh-Roberts, 4) computer networks, computer conference based academic programs for the general public, and network indexed video cassette extension libraries of system dynamics presentations and seminars; 5) interactive computer driven video disk processors with touch sensitive screens allowing a modeller multimodal access to overview, subsystem, policy-structure, causal loop and flow diagrams, table functions, documentors, and DYNAMO equations on the same system; and 6) two- and three- dimensional representations and animations of model behavior on multicolor dynamic displays driven by computer and video disks.
These developments are assessed with respect to their possible contribution to the growth of system dynamics as a field, dissemination of system dynamics methodologies and to the implementation of policy recommendations. Because of falling prices for software and hardware, the explosion in interest in personal computers, the exponential growth in their functionality, and the current state of the field, we believe the next two decades will be the phase of most rapid growth for system dynamics.

Section 4: Formulation and Analysis

Synthetic Design of Policy Decisions in System Dynamics Models-A Modal Control Theoretic Approach
Pratap K. J. Mohapatra, Sushil K. Sharma

Abstract: Researchers and practitioners in System Dynamics usually folllow a trial-and-error process to design new policy decisions. They mainly use causal loop diagrams for this purpose. However, these diagrams portray ‘directions’ of influence and not its ‘strength’. Therefore, the process of policy design becomes time consuming especially for a beginner and those working with insufficient computer facility. This paper presents an alternative approach for policy design using Modal Control Theory. In this approach, policy variables are treated as control variables by delinking them from other variables. This generally leads to greatly simplified models which are free from many nonlinearities. Providing that this reduced system is linear and controllable, it is possible to synthetically generate control policies by modal control theory to ensure any prescribed degree of stability. These theoretical control policies can then be used to design realistic policy decisions. The Chapter-8 problem of Coyle is used here as a test example. It is shown that policies designed in the light of modeal control theoretic results are superior to those suggested by Coyle.

Some Dynamic Effects of the Aggregation of Generic Model Systems- The Master Equation Approach
R. J. Rahn

Abstract: The relationship between the dynamic behavior of individual components of a large system and the overall behavior of the large system has rarely been analyzed in the system dynamics literature. The usual approach is to treat the large system (e.g. a national economy) as a lumped-parameter version of the component systems.
A number of examples from physical systems (plasma instabilities, fluid and chemical-reaction waves) suggest that the lumped parameter approach is not always adequate as a representation of the dynamics of systems or as a cogent explanation of the behavior of aggregate systems. In particular, new collective modes of behavior are found when the stochastic distribution of micro-level systems over internal states is considered. The proper treatment of the aggregation of micro-systems can reveal novel dynamic behavior modes and can indicate under what conditions these modes may become active. The explicit treatment of the aggregation of micro-systems can also clarify the relationships between the structure and parameters of the micro-systems and those of a lumped-parameter representation of the macro-system, thus giving some precision to arguments based on macro-level models of interacting micro-level systems.
One approach to the study of the collective behavior of elementary systems uses the concept of a “dissipative structure” as developed by Prigogine and colleagues over the past fifteen years.
This paper continues the work of a previous paper on the subject by applying the Master Equation Formulation to several generic models of first and second order (including delays, sigmoid growth, predator-prey and other oscillatory systems). Conditions under which novel aggregate behavior may be expected to appear are determined. Some linear systems do not present any novelty in the theory, most attention is focused on non-linear examples.

A New Kind of Sensitivity Testing in System Dynamics Modeling for Sensitive Results from Aggregation Assumptions
Fiona Feng Chen

Abstract: This study has illustrated that simulating an aggregate model, using the same data set at the same level of aggregation, can lead to different model conclusions when different aggregation criteria are applied. This study’s conclusion to the effect of aggregation of individuals can have significant influence on the results of the model is expected to have different implications for system-dynamics modeling.
For the field of system-dynamics modeling, the study has identified a kind of model sensitivity that can not be tested by the methods of sensitivity testing presently used. For future research in the field, the concept of aggregation of individuals has to be clearly established and differentiated from the concept of aggregation of variables before general rules for this type of sensitivity testing can be identified. Similar sensitivity testing should be adopted in the system-dynamics modeling technique. If this has not been done, this simulation approach should be interpreted conservatively. This paper also discusses the problem of whether a universal aggregation scheme is the only highest aggregation scheme.

Antithetic Random Variables, for the Simulation of Complex Stochastic Systems
R. Rubinstein

Abstract: This paper deals with the optimality and efficiency of antithetic random variates in estimating output parameters of general complex stochastic systems (e.g., reliability systems, stochastic networks, queues, etc.) with elements linked by multivariate dependence. It is shown that antithetic random variates are much more accurate than the crude Monte Carlo method, requires less CPU time and can be efficiently used by simulation practitions. The validity of the theory is demonstrated by simulation queueings and reliability systems and stochastic networks of different complexity.

Parallel 2
Section 1: Private Sector Analysis

The Design of Colliery Information and Control Systems
R. K. Holmes, E. F. Wolstenholme

Abstract: The paper is concerned with describing an investigation of information usage in the control of colliery operations. The premise of the work is that to make the most of new information retrieval technology currently being installed in collieries research is needed to provide compatible advances in the methods of information usage. The approach adopted was to construct a continuous simulation model using system dynamics capable of providing a laboratory assessment of alternative managerial control policies based on alternative sources and levels of aggregation of information.
The model developed represents a typical colliery situation composed of three working coalfaces and incorporating planning production, development and manpower sectors. The face sectors transform coal reserves to mined coal output, under manpower constraints and geological shocks, and these are all interlinked by means of allocation policies for manpower and shifts.
A range of policies for for the exercise of control through these allocations are considered subject to a range of shocks. It is concluded that, although there are difficulties in designing single policies which are universally best, there are clear advantages associated with fully integrated colliery policies based on information inputs from all aspects of the operations.

A Generic System Dynamics Model of Software Project Management
John D. W. Morecroft, Tarek K. Abdel-Hamid

Abstract: Our objective in this research effort is to provide both software development managers and researchers with a useful way of thinking about organizational improvement issues. Our aim is to develop an integrative model of software project management that can help them answer the difficult questions they need to raise when assessing organizational health, selecting improvement tools (from many that are readily available), and implementing their choices.

Looking at ‘Human Factors’ in the Automation of Job Service Offices – A System Dynamics Approach
Thomas G. Kelly

Abstract: This paper presents a system dynamics model of human factors in the implementation of office automation in the Job Service. The model includes sectors representing model acceptance by managers, supervisors, professionals, and clerks with the various factors impacting on such acceptance. Since the perceived usefulness of the automated system for office performance is quite important (especially for managers), sectors representing workflow and efficiency are also included.

System Dynamics Modeling for Long Range Strategic Planning
Merle McKenzie

Abstract: A system dynamics model of a major telecommunications network has been developed to support managers in the function of long range strategic planning. Application of system dynamics to the strategic planning area was found to be, in some respects, quite unique. The article discusses this type of application in the areas of model requirements, sponsorship, scope, development, and review.
In the area of requirements, it was found that a system dynamics model developed to support long range strategic planning should be quite broad in scope, must satisfy a potentially large community of planners, yet also must pass the review of tactical planners as well. A baseline-model approach is proposed as an effective way to satisfy these requirements. Guidelines for the modeler are proposed for obtaining sponsorship, for avoiding pitfalls in the model development process, and for interacting with model users and reviewers. The baseline-model approach, coupled with the guidelines, has been found to work quite effectively within one organization to support long range strategic planning.

Section 2: Public Sector Applications

Economic Analysis with System Dynamics: A Forestry Example
Lee Rogge, Stephen G. Boyce

Abstract: It is important to begin any modeling attempt by determining the primary objectives of the decision makers in the field. In forestry there are two interests: production of multiple resources and profit (or cost). Conventional methods of analysis are incapable of handling the two foci adequately; one is always subsumed in the other. The DYNAST model, with the addition of an economic algorithm, provides a means of analyzing the system from both viewpoints without forcing one to dominate the other. This balance is achieved through using capital budgeting techniques such as net present value to represent both the multiple use and profit aspects of money. The economic algorithm can be used to analyze money as one of a host of multiple benefits in comparing management options, or as a method of estimating profitability independent of the context of the model. This latter application makes the algorithm potentially useful in many modeling contexts simulating business investment decisions.

A Model of Hydrological and Biological Interactions in a Water Course
Ulrich Goluke

Abstract: The model described in this report is meant to show how some of the practical problems of combining hydrological and biological processes can be addressed, how models can be used to examine specific questions, and along what lines the present model ought to be developed to eventually arrive at a useful policy tool.

System Dynamics and Industrial Channels Analysis
Example: French Timber Channel

Marcel Ovide-Etienne

Abstract: In our thesis we show that the advantage of using D.S. methods for the modelling of economic processes. Some practitioners of econometry have already seen the D.S. as a preliminary to the formalisation of model economy subject.
In a recent article, we showed how the optimum of production may sometimes not be given primacy in a sector, in a grouping of firms , or a firm and it is sometimes profitable to analyse the weaknesses which can be found in a whole industrial network in order to understand the lack of competitiveness in national products.
The aim of this paper is to apply methods of the system dynamics to the analysis and modelling of the process of pricing certain products in the French timber industry.

Dynamic Models for Planning Tourist Complexes
Habib Sedehi,  Paola Valli, Paolo Verrecchia

Abstract: Planning tourist facilities is a highly complex task. It is necessary to evaluate carefully, with an interdisciplinary approach, all the variables of a technical, architectural, commercial, economical and financial nature that may be involved in a given project, without however ignoring the natural resources of the environment where facilities are to be set up.
For a correct evaluation, these resources must be considered limited and seen as a wealth that can be exploited but not wasted, used but not destroyed.
The approach outlined above is all the more important in countries like Italy, for instance, where there is a risk of over-exploiting the natural resources of the environment.
In all but exceptional cases, an evaluation that does not take the above principles into account will result in a tourist enterprise that is ultimately a failure, as it degrades, often irreparably, the natural environment until it ceases to be an adequate source of revenue.
This paper describes an integrated approach which provides, by means of simulation techniques, tools for a proper implementation of tourist facilities taking into due account all the variables and constraints involved, and likewise for the assessment by the Public Administration authorities of the wisdom and soundness of projects submitted to them for approval.

Section 3: Public Sector Applications

Implementing Effective School Improvement Policies: A System Dynamics Policy Analysis
Alan K. Gaynor, Karl H. Clauset

Abstract: At the last System Dynamics research conference held in the United States, we presented a paper which described a computer simulation model of an elementary school. The purpose of the model was to examine the structural differences between schools which are effective and ineffective for what we have come to call “initially low-achieving children.” In that paper (Clauset & Gaynor, 1981), in a subsequent paper (Clauset and Gaynor, 1982), and in a book manuscript (Clauset and Gaynor, in preparation), we have described in varying degrees of details tests which examined a number of school improvement policies. Policies testes included the following: Changing policies affection time allocations, Improving teacher skills, Encouraging teachers to  place more emphasis on low achievers, Raising teacher expectations for low-achievers, Improving classroom of school-wide behavior, Changing class size, Changing the demographics of the student body (e.g., size low achievers).

Using System Dynamics to Model a University Library System
David A. Lopez

Abstract: The application of management science techniques to problems of managing libraries has been a relatively recent development. The paper describes construction, development, and application of an interactive System Dynamics computer simulation model to a large university library system. Actual experience gained in developing and applying this System Dynamics model is reported. Operational tactics and strategies a library might be considering in it’s daily operation are simulated and evaluated. Possible improvements to this model are also discussed.

Results and Experience with a Model of Adjustment of Student Enrollment at the Berlin School of Economics with Medium-term Consequences for Room Planning
Helmut Maier

Abstract: This paper presents results of a model which has been used to avoid the consequences of a spatial expert opinion concerning the further development of the Berlin School of Economics in West Berlin in the year 1982. Starting point is the so called “HIS-Gutachten” of February 1982. This expert opinion was commissioned by the Senator for Science and Culture of the West Berlin government to show the possibilities of finding free capacity for a different institution in the building used by the Berlin School of Economics during the current period of limited financial resources.

Section 4: Philosophy/Paradigm

The Paradigms of Psychology and System Dynamics
Ralph L. Levine

Abstract: This paper compares and contrasts the philosophical and methodological paradigms used by psychologists and system dynamicists. Currently, psychologists collect huge amounts of data, use open loop methods of experimental design, and think that classical statistical models, such as analysis of variance and regression analysis, provide the most useful methods for studying social phenomina. Behavioral approaches to psychology differ sharply with the system dynamicists concerning the relative importance of external vs. internal sources of influence on behavior.The behaviorists focus on controlling the external environment, even denying the existance or importance of internal states. The problems of using external control are illustrate by contrasting two simple attitude change models; one which modifies attitudes solely through outside influences and another which makes the change in attitudes a function of the state variables. System dynamicists attempt to understand the dynamics of social processes through the study and analysis of dynamic loop structure. These techniques would be extremely useful for those psychologists using correlational analysis and causal modeling methods, where the implications of dynamic structure are not always fully understood.

Some Methodological and Epistemological Problems Involved in System Dynamics Modelling
Ian Moffatt

Abstract: This paper reviews the application of system dynamics modelling in a variety of substantive studies published between 1961 and 1981. A five-fold typology of system dynamics models is presented and this is followed by a mehodological critique of many of these studies. On the basis of this review four fundamental epistemological problems are identified. These problems include the difficulties involved in closing complex, sub-global models, the various behavioural modes exhibited by dynamic models, the distinction between teleological and teleonomic perspectives and, finally, some aspects of the ideology of control are discussed in terms of conservative, reformist and radical uses of system dynamics models. It is argued that the methodological weaknesses and epistemological problems associated with many system dynamics models cast grave doubts on both their scientific content and usefulness to policy makers.

A Typology of Adaptive Organizational Changes
Arkalgud Ramaprasad

Abstract: Three types of changes are proposed as being generic to an organization’s adaptation to its environment. They are: (a) Change in pattern, (b) Change in Structure, and (c ) Change of elements. The typology is based on Atkin’s mathematical structure. The typology attempts to characterize change on the basis of what is changed and what is held constant, instead of on the basis of the effects of the change is done in a number of current typologies. The three types of changes are described and discussed with reference to a problem faced by a diverse and fragmented academic department. The typology provides a framework for a strategist to delineate alternative ways in which an organization can be changed to adapt to its environment, to evaluate the pros and cons of each alternative, and to make a choice.

Modeling Stochastic Processes with System Dynamics
William T. Wood

Abstract: System Dynamics as a methodology has traditionally been concerned with the study of processes that can be described by continuous variables. Discrete or integer events, such as the number of sales made in a day or the number of factory closings in a year have either been approximated as continuous variables or else not dealt with. This paper examines another way of dealing with discrete events through the realization that any discrete event has a certain probability of occurance. These probabilities are continuous and conserved quantities and can be modeled as system dynamic levels.
Treating probabilities as levels in dynamic simulations is a standard technique in stochastic modeling, markov models being one example. System dynamics’ advantage over these other methods is that it can represent the impact of the results of the probabilistic study of the social feedback systems.
This paper focuses on examples demonstrating the use of system dynamics to model uncertain events. These examples deal with the simple case of a Poisson process with a time varying event arrival rate. Extensions incorporating conditional and independent probabilities are also considered.

Reflecting Decision-Making in Models of Dynamic Systems
G. Arthur Mihram

Abstract: System Dynamics has been virtually defined with a requirement for authoring a model in the language, DYNAMO. The present paper extends the previously established [Theory and Decision 7: 67-94 (1976)] result that DYNAMO esentially requires the author of a model of a dynamic system write a set of difference equations.

The Evolution of a Model: Computational Aid, Policy Making, Planning and Scheduling
William S. Bonnell

Abstract: This paper describes the development of a limited resource, backward scheduling, network model for an assembly department using DYNAMO. The model evolved in three stages: a calculation device, a policy exploration tool and a planning and scheduling system. An interesting feature of the model is the representation of the complex flow through various disassembly operations. Graphics and report interfaces with DYNAMO are discussed. The enclosed programs are provided on an as-is basis, without warranty either express or implied. No assurance of successful installation can be given.

Extended Planning in the Navy and the Resource Dynamics Project
Rolf Clark, Samuel B. Graves, Kathleen Sheehan

Abstract: The U.S. Navy’s need for better long-range planning is discussed in light of recent dynamic increases to force plans. The difficulties embedded in the current planning and programming process, and the problems they cause in developing valid approaches are reviewed. The ongoing “Navy Resource Dynamics” project at The George Washington University is then presented as a means of overcoming the difficulties, and providing a timely planning model. The basis of the model is a lagged feedback analysis linking budget “flows” over time to weapon system asset “stocks.” The trade-off between naval force levels and the cost of owning the forces is emphasized with force readiness being a relevant measure.

Model Documentation: Hinderance or Help
John M. Corliss

Abstract: Just as the cobbler’s children are the last to have their shoes repaired, simulators—individuals who spend careers structuring the world into systematic models—have not developed tools and techniques to systematize and structure their own procedures. As a result, quick and easy communication among all interested parties during modek development is often made extremely difficult. Inputs which might be helpful to the modeller are consequently lost. It is also typically impossible for a client to maintain control over the implementation of his or her model design especially when the client and model builder are physically separated. Finally, when a version of the model is completed, there can be a considerable delay while an entirely new model description, in laymans terms, is prepared. Unfortunately, as a result of time constraints such as a description is sometimes never completed.
Based on the work done at Purdue University and the frustration of designing and overseeing the implementation of a system dynamics simulation model at the Department of Energy, this paper describes a structured development and documentation approach to modelling. A systematic approach of this type forces the analyst to think out the implications of a given representation of the world before sitting down at a terminal. It provides a living (continually updated), standardized, written document which not only helps improve the quality of the work but allows for efficient communication between the client and the implementor and eliminates the need for most post model development documentation efforts.

Volume II
Parallel 3
Private Sector Applications

Modeling a Professional Service Firm
John D. W. Morecroft, Geoffrey P. Mott, Zafer J. Achi

Abstract: Practitioners of Management Science have repeatedly confronted the problem of assessing the impact of variables such as job satisfaction and career aspirations on the performance of organizations. This problem is most acutely felt by service firms where the quality of ‘output’ is directly determined by factors that, because intangible, are difficult to define and control. In this article the authors use the methodology of System Dynamics to model the behavior of a professional CPA firm. The impact of qualitative variables on the behavior of a typical office is explicitly analyzed and translated into ‘hard’ economic terms. The results make some interesting observations about the key factors influencing long-term behavior in a people-intensive system, particularly in terms of the relationship between actions at senior levels and consequences further down the system. For instance, the way managers and partners allocate their time between apparently ‘competing’ activities is a critical factor influencing not only short-term behavior at junior levels but also the process whereby long-term judgments are made about the organization. Each activity has a different return profile (particularly with respect to time) and a different set of associated risks. The study contributes to an understanding of how critical aspects of human resource planning such as management time allocation contribute to the broader, strategic direction of the firm.

Systems Dynamics Applied to Railroad Planning
Petter Gottschalk

Abstract: In 1981 a preliminary system dynamics model was developed for the Norwegian State Railways to study passenger and freight traffic for the complete network. In addition, a particular model was developed to study commuter traffic in Oslo. This paper describes modeling work done for the Norwegian State Railways (NSB).

Modeling Small Surface Coal Operator to Study the Effect of Government’s Permitting and Bonding Review Process
Patrick A. Kinek, Anil B. Jambekar

Abstract: This paper presents the discussion and the application of system dynamic methodology to study the consequences of government regulations on small surface coal operators. In 1977 Congress promulgated the surface Mining and Reclamation Act, which brought about some critical changes such as lengthy and costly permit application procedures, lengthy local and state review of permits and lands, increased bond fees and costly reclamation requirements. Small surface coal operators appeared to be particularly vulnerable. Policies frequently considered by the surface mining industry and the government to alleviate the hardship caused by the regulations are mechanisms to offset increased bond fees. It is a purpose of this paper to demonstrate the utility of system dynamics as any effective methodology to study the long term effects of such policies.

A Technico-economical Simulation Model Focusing on Enhanced Recovery in Oil Fields
Bertrand Braunschweig

Abstract:We present a technico-economical simulation model focusing on enhances recovery in oil fields.
The model simulates several assumptions on the quantity of injected fluids, the operation’s start date, as well as the incidence on recovery. It is also possible to place one’s interest on financial and economical parameters. It can also be used for any oil field for which precise physical data may be obtained.
Paper: N/A

Section 2: Public Sector Applications

The World Oil Market: Two Models with Similar Policy Oriented Results
N. Choucri, M. Karsky

Abstract: The paper will deal very briefly with the model structures, and insist rather on comparison of some of the policy oriented results.
Paper: N/A

Economic Growth and Political Instability in the Developing Countries: A Systems View
Khalid Saeed

Abstract: Accelerating the rate of economic growth in developing countries has been the important aim of almost all development policies implemented over the past three decades. Experience has shown that such growth is often not sustainable and is likely to be interrupted due to the occurrence of violent political changes. The paper attempts to identify the organizational factors which limit economic growth and which create conditions conducive to the outbreak of political violence. A mathematical model of the socio-political system of the developing country is developed and its behavior is studied using simulation.

System Dynamics Model of Indian Economy for Studying Behavior of Inflation
Rakesh Kumar

Abstract: N/A
Paper: N/A

The Business Cycle and Money, An Analysis of the Inventory Investment Hypothesis
James H. Hines

Abstract: Among the most stable phase relationships between economic variables is that between money, the change in money, and general economic activity. Both the change in money and money itself lead production over the business cycle. This relationship buttressed with results of the Granger/Sims test for causality, has been used to support the notion that money causes real activity. This notion, in turn, is used to argue both that monetary policy causes the business cycle and that monetary policy can ameliorate the business cycle.
This paper examines a hypothesis for the phase relationships which assume that money does not cause real activity, but, rather, real activity causes money. According to the hypothesis inventory assessment, which leads business activity, induces corporate borrowing, which in turn causes a money expansion with a lead similar to that observed. This has been a working hypothesis for the phasing in money of the System Dynamics National Model project. It is concluded that the hypothesis, by itself, is insufficient to account for the observed timing relationships. However, the inventory investment hypothesis combined with additional hypotheses such as a mechanism for household portfolio adjustment, can account for the phasing. These results do not depend on a causal flow from money to real activity. As a consequence, business cycle phase relationships should not be taken to imply money causes the business cycle nor that monetary policy can influence the business cycle.

Section 3: Philosophy/Paradigm

The Use of Optimisation Methods for Policy Design in a System Dynamics Model
R. G. Coyle, R. K. Appiah

Abstract: The present paper carries these converging strands of work forward to address the problem of parameter selection for a given control structure and the comparison of the resultant performance of two competing policy designs.

System Dynamics: A Possible Artifact for the Systems Age
Peter M. Senge

Abstract: The purpose of this paper is to expand our thinking about the possible role system dynamics may play in the evolution of western thought and society. While such a theme may seem presumptuous when applied to a toll known to only a small fraction of people at present, it is my intention to give it some credibility by showing that western society may already be in the midst of evolving fundamental assumptions, beliefs and perceptions more consistent with a systemic world view. Pulled by this undercurrent, tools like system dynamics can focus the forces of change and bring them to bear more directly on pressing societal problems. 

Exemplary System Dynamics—Input-Output Analysis Model
Charles H. Braden

Abstract: An exemplary model has been formulated using a methodology which casts a modified version of input-output analysis into system dynamics format. The intent is to utilize the methodology for further study of the concept of a geeignet (appropriate) population for a society. The exemplary model represents a highly aggregated socio-economic system with six sectors. Evaluation of the quality of the society is an important issue in the geeignet population study, and to that end the technique of multi-attribute utility measurement (MAUM) has been included in the model. In order to study a mechanism that can minimize the marginal production cost during the time evolution of the system, a Cobb-Douglas production function that permits substitution between two factors has been incorporated into the agricultural sector. Model runs are shown which demonstrate the approach to equilibrium for the society and the time evolution of the society as the agricultural sector changes from a labor intensive to a capital intensive configuration.

The Natural Logic of Management Policy Making: Its Implications for the Survival of an Organization
Roger I. Hall

Abstract: A process-theoretic approach, seldom used but not without promise for organizational behavior research, is employed to postulate a process model of the natural logic evident in organizational policy making. The model is used to explain how the policies of a sample firm (for which twenty years of data are available) became adopted and how, together with critical events, this caused the firm to evolve in particular directions rather than others. Implications of the study are put forward in terms of identifying the pathologies of the policy making process. Some prescriptions are put forward for the proper control of organizations by supervisory bodies, such as boards of directors. It is suggested that Management Science, in the form of systematic procedures for adaptive organizational design and updatable cause maps, may have an important future role to play in senior management affairs. Questions are raised for government and society concerning sustaining and regulating firms in both the public and private sectors in the light of the study.

Section 4: Health, Medical and Biological Systems

Fluid Therapy in Acute Large Area Burns: A System Dynamics Analysis
James W. Bush, Alan M. Schneider, Thomas L. Wachtel, John E. Brimm

Abstract: A preliminary mathematical model of fluid dynamics in acute large area burns presently incorporates plasma water, urine output, burn water loss, insensible losses via the non-burned skin, lungs, and G-I tract, as well as inputs of maintenance water and theraputic (Brooke Formula) fluids. The model is an initial step in a longer-term project to identify the pathogenetic mechanisms that control fluid shifts and to evaluate the effects of crystalloid (sodium ion), colloid (albumin), and other guidelines for fluid resuscitation. The model is initialized in homeodynamic equilibrium for a standard 70 KG person, and gives reasonable, realistic responses to a wide range of parameter variations (body sizes, burn wound loss factors), step functions (burn size, discontinuation of maintenance water), and rates of therapeutic fluid administration, given its present structure. The addition of burn and nonburn interstitial and intracellular spaces and their constituents (water, sodium, albumin and potassium) will: 1) permit validation against a wide body of clinical and experimental data, 2) suggest refinements of current resuscitation guidelines, 3) suggest more incisive research on pathogenetic mechanisms and treatment modalities, and 4) permit comparison of System Dynamics with alternative modeling and simulation approaches.

System Models in the Health Sciences
Norman F. White

Abstract: In the health sciences, concepts are shifting toward system models which recognize multiple factors interacting to determine health phenomena. The hybrid biomedical disease model has proven insufficient for the analysis of modern health problems. A population perspective and an expansion in the influence of the behavioral and social sciences have required conceptual models with greater breadth, and facility in relations between models. Morbidity is portrayed here as two domains of phenomena, the disease process and the illness state, each seen as part of a socio-ecological dynamic. Applied to major disease problems, the utility of these propositions can be examined. In the McMaster M.D. program, this set of models has been translated into a curricular structure which has the individual in all her/his healthy or morbid aspects as the interface between biological and social systems. Perplexing dilemmas in health care thus become not only understandable but predictable. Adopting this approach creates a new generation of problems. Just as our students have become familiar with the critical appraisal of evidence, the testing of conceptual models becomes a necessary skill. The background of this analysis is the socio-ecological niche of concepts. A model of models is proposed in which concepts interact with problem environments and modern medicine emerges as a case study for socio-ecological epistemology.

Assessing the Economic Impact of Medical Interventions: What is the Price of Success?
Michael R. Goodman, Gary B. Hirsch, Ben R. Forsyth, William H. Luginbuhl

Abstract: Certain medical interventions may result in reducesd costs to society. Others, however, by keeping people alive longer, may cause higher costs to be incurred for continuing health care and disability and retirement payments. A generic disease process model for projecting the implications of various medical interventions is presented. The model is applied to myocardial infarction in the U.S. male population and results of simulating several interventions specific to that disease process are discussed. Conclusions are drawn and it is argued that this model is useful for identifying interventions that result in higher costs to society in order that adequate resources be set aside to cover these costs.
The work reported in this paper was funded by a grant from the Kaiser Family Foundation.

Rabies-A Suitable Case for Treatment
R. K. Holmes

Abstract: It is envisaged that although the rabies system is a special case whereby there is no recovery from the disease, the principles generated by the analysis may be applicable to epidemiology in general. Such applications providing a definition of a disease system such that effective control policies may be elucidated.
The work presented here is complete in itself forming a qualitative analysis of the system. It also provides the basis for a quantitative analysis using a derived computer simulation model.

Regulatory Policy and the Performance of Electric Utilities: a System Dynamics Analysis
James M. Lyneis, Dominic Geraghty

Abstract: In response to the need for an integrated look at the problems of electric utilities, Pugh-Roberts Associates, Inc. has developed a strategic planning model for electric utilities. In various forms, it has been used by utility industry investors, by individual utilities, and by research organizations for analyzing alternative investment, management, and regulatory strategies.

Using System Dynamics to Improve the Management of Working Capital in a Small Business
Ray Thompson, R. C. Shreckengost

Abstract: Many firms use financial ratio analysis to monitor their control over the operating cycle and to serve as the basis for policy formation. Ratios are based on data produced through the accounting information system which is analyzed according to intuitively plausible concepts in order to make normative judgement about the financial health of the firm. A model is constructed to simulate the operating cycle of a business which generates financial ratios in a manner analogous to the accounting system. It is shown that noise and seasonality produce distortions in the ratio measures are spread throughout the system in a dynamic and complex fashion. Further experiments reveal that plausible control policies based upon financial ratios may make performance worse rather than better. System Dynamics appears to be a useful approach both to redesigning financial ratio measures and testing policies which could enhance out ability to manage such systems.

Development of a Casual User Interface for Simulation Models
Gregory Van Buren, David H. Goodstein

Abstract:One of the traditional obstacles to effective utilization of simulation models has been the great deal of time spent learning languages in which models are written and keeping track of the specific variable names and equations within models. To remove the excessive psychological burden from busy executives and to refocus attention towards the actual behavior being replicated, Inter/Consult has been researching development of highly supportive user interfaces to models. These interfaces prompt users by stating the nature of the model’s assumptions then asking what changes they would like to make. Through this on-line question-and-answer dialog users can build and compare scenarios without prior knowledge of computer languages and mathematical formulas or specific model components.
Our paper presents reactions to the interface by members of the graphic arts industry who have used it. We discuss further improvements which are being made to the interface to make our models more accessible to non-expert users. Finally we explain why we feel that tightly-focused, easy-to-use, dynamic simulation models are of invaluable benefit to any industry such as graphic arts where craft-oriented skills are being replaced by rapidly evolving new technologies.

The Effect of Government Policy on Alternate Energy Technology Market Penetration
John L. Mitchiner

Abstract: Federal Support for alternate energy technologies has gone through a boom/bust cycle during the Carter and Regan administrations. To investigate the effects of these policies, I use a system dynamics model of the industrial market penetration of parabolic troughs as a case study. The Regan policy, a laissez-faire policy, lets free market forces determine the market penetration. The Carter policy, an active government policy, combines research, development and demonstration with information dissemination and market financial incentives. The optimal policy depends upon future energy prices. If the price of conventional energy remains low, parabolic troughs never become competitive even with significant government support and thus the laissez-faire policy reduces federal expenditures by ~ $60 million with no negative effects. If the price of unconventional energy increases significantly, however, free-market forces do not develop parabolic troughs into a practical energy source without the benefit of an active government program. If this case study is generalizable to other alternate energy technologies, an active government role in alternate energy technology development should be thought as an insurance policy. How much is it worth to the U.S. today to insure future price stability?

The Dutch Disease: Causes, Consequences and Cures
Erling Moxnes

Abstract: The Dutch Disease is the name of macroeconomic effects of natural gas income spending in the Netherlands in the 1970’s. Spending resulted in increases in the national wage level, problems for exporting industries and economic instability. A system dynamics model of the Norwegian economy replicates the Dutch Disease for the case of oil income spending in Norway. The underlying causes of the Dutch Disease are discussed, and policies to cure problems are investigated. Subsidies to exporting industries have little effect on the problems in this sector of the economy, and they exacerbate economic instability. A wage freeze has some positive effects on the Dutch Disease. However, this policy causes other problems. An attempt to increase labor mobility has some positive effects. The most effective policy has been found to be a smooth and slow increase in oil income spending, the original cause of the disease. All problems cannot be avoided, and inevitable problems must be balanced against the benefits of oil income spending.

Dynamics of Growth in Solar Markets
Olav Fjellså

Abstract: As a step towards increasing our understanding of the dynamics of growth in solar markets, a simlpe generic System Dynamics model describing market penetration by a characteristic renewable energy technology is employed. The analysis demonstrates that for some classes of renewable energy, incentives are now adequate to provide for the necessary rates of growth. Technologies with slightly different features in our model are never able to sustain themselves in the market, no matter what federal subsidies they receive. A third group of solar technologies still needs support, even though it will evolve to become very competitive in the market without any subsidies as little as a decade from now. Relatively modest federal supports of these technologies now can bring them quickly to levels where they are economically, environmentally, and socially attractive energy options that provide significant oil savings. For these technologies federal support through initial stages of commercialization would be appropriate.

Scenario and Policy Evaluation in Electrical Supply Decisions, the Argentine Case
R. G. Coyle, J. C. Rego

Abstract: The Argentine energy authorities elaborated a Plan for the Electricity National Sector, made known in 1979, where the policies to be followed for the period 1979-2000, were established. The Plan proposed basically a dramatic change in the structure of the present generating capacity configuration at the national level, toward a scheme predominantly hydro based. Apparently, the idea of an Electricity Sector less oil dependent, together with the utilization of a huge hydro-potential, which had been neglected until that moment, appeared promising. However, the study of the robustness of such plan, that is, its capability to perform well under different scenarios, became indispensible. The System Dynamics technique provided the possibility of analysing such robustness, by means of a continuous-time simulation model of the Argentine Electricity Sector. This paper presents the results of experimenting with that model, in order to determine the soundness of the policies proposed.

Equilibrium, Critical Points, and Structural Stability and Change in System Dynamics and Systems Science
Kenyon B. De Greene

Abstract: The need for grand unifying principles of the evolution of societal systems is stressed. Examples of such principles from other sciences are given. The economic long-wave or Kondratieff cycle is taken as a reference basis for the study fo the evolution of contemporary technological societies. A number of qualifications to the basic paradigm are made. Several areas of recent structural stability theory are discussed in terms their relevance to societal evolution. Particular stress is placed on the nonequilibrium and bifurcation situations. Structure-function-behavior interrelationships at and near critical points are considered the most important features pertinent to system change or reconfiguration. Attempts are made to provide a fuller integrated theory of societal evolution and structural change. A number of problems relative to system dynamics theory and modeling, and to the use of models in societal management, are introduced and suggestions for improvements are made.

On the Rules of the Game in System Dynamics
Raimo Keloharju

Abstract: The strengths of the SD approach are as follows: explicit use of causal relations, the admission of qualitative information into the model and the potential for methodological ‘merges’. The drawback of the methodology is that it is difficult for the uninitiated and considerable effort is required in the modeling of SD.
The purpose of strategic planning is to find a new product/market combination which accurately reflects the company’s strengths and weaknesses. In our case the SD community is the “company’; the methodology of SD is the product and different types of models correspond to market areas.

A Structural Linguistics Approach to Method in System Dynamic Modeling
Richard G. Fritz

Abstract: This paper will address the relative utility of employing the linguistic structure used by system dynamics compared to translating the modeler’s perception of reality into other symbolic language systems. The first section will review the relation of language to the method of scientific inquiry. This will include a discussion of the debate over the problem of evaluating policy alternatives of social systems. The final section of the paper will specifically identify some of the differences between the imposed linguistic structure of system dynamic models and the symbolic language systems often employed in orthodox economic analysis.

Sociology and System Dynamics
Chanoch Jacobsen

Abstract: The most basic problem of sociology as an empirical science is the difficulty of replicating studies within reasonable time limits and in genuinely comparable conditions. Sociologists aspire to make correct predictions based on verifiable statements about causal relationships, but cannot, the nature of macro-social phenomena precluding experimental designs with adequate controls.
System Dynamics promises a way out of this dilemma. Four things need to be done. (1) Formulate the sociological theory as a causal loop diagram, making all causal reasoning explicit. (2) State what variables are involved in the functioning of the system. Calibrate the model until it is internally consistent. (3) Refine and adjust the constants until the model can reproduce a known time-series of relevant data. Repeat this on number of data-sets. (4) Systematically vary each constant in turn while controlling for the others. This is, in fact, the quasi-experimental procedure for testing the conditions under which the theory will stand or fall, and why.
An illustrative example of the proposed strategy is presented, with encouraging results.

A System Dynamics Model for Managing Aircraft Survivability
Donald R. Drew

Abstract: The aircraft survivability model developed is comprised of five submodels: 1) Economy Submodel, 2) Budget Submodel, 3) Procurement Submodel, 4) Attrition Submodel, and 5) Survivability Submodel.
The economy submodel generates the annual “Gross National Product” of the United States and “Federal Government Budget”.
The budget Submodel uses the military output of the economy Submodel to determine the “Department of Defense Military Budget”. The DOD budget is broken down by service and function (Procurement, Operations and Maintenance, and RDT&E).
In the Procurement Submodel, the “Procurement Budget for combat Aircraft” determined in the Budget Submodel is used to generate the parameters: “Acquisition Budget for Combat Aircraft” and “Modification Budget for Combat Aircraft”. The outputs of this submodel are the “Procurement Rate for Combat Aircraft”, and the “Modification Rate for Combat Aircraft”.
The Attrition Submodel acts on the inventory of “Combat Aircraft” in the event of war. The number of combat aircraft increased by the outputs of the Procurement Submodel over years of peacetime are reduced in wartime through the “Attrition rate for Combat Aircraft”, which depends on the number of “Combat Aircraft”, the “Sortie Rate for Combat Aircraft”, “Mission Survivability for Combat Aircraft”, and the “Availability of Combat Aircraft”.
The Survivability Submodel outputs are the “Mission Survivability for Combat Aircraft” and the “Availability of Combat Aircraft”. The former is the product of the “Susceptibility of Combat Aircraft” and “Vulnerability of Combat Aircraft”, both of which depend on the magnitude of the “Aircraft Survivability RDT&E Budget” outputed from the Budget Submodel. Reductions in the “Susceptibility of Combat Aircraft” and “Vulnerability of Combat Aircraft” affect the “Acquisition Cost of combat Aircraft” and “Modification Cost of Combat Aircraft” used in the Procurement Submodel.
Additional feedback lops between the submodels are generated by monitoring the “Relative Strengths of U.S.S.R./U.S. Airpower” and incorporating the effects of this perception on the Economy Submodel, the Budget Submodel, the Procurement Submodel, and the Survivability Submodel. Thus the five submodels interact to form a series of interacting positive and negative feedback loops. The positive loops reinforce themselves leading to increased air power over time. The negative loops act through such constraints as resource availability and spiraling procurement costs to suppress the growth of air power.

Defense Weapons Acquisition: A Systems Study
Thomas D. Clark, Edward L. Whitenberg, Alan H. Woodruff

Abstract: The research reported in this paper was directed toward understanding and modeling acquisition policy within the DOD. The acquisition model presented was developed at the departmental level and primarily is intended to portray the strategic policy structure of the acquisition system. Lower levels of aggregation were used only where the detail involved was required to capture a major concept. The model parameters and outputs were designated to show what trends would be associated with the implementation of various policy alternatives.
Emphasis was placed on the dynamic nature of the relationships within the acquisition system and how they are affected by the policies and external pressures. Exogenous factors input to the model include broad representations of the United States and Soviet economic conditions. The Soviet threat, so key to many of the political battles surrounding weapon acquisition, is generated in the model as a response to threat perceived by them, subject to the economic and political constraints. Incorporation of these and other key relationships was controlled through careful application of a design methodology.

An Application of SD to Military Combat Modelling
Carl Simonsen

Abstract: The paper discusses an application of SD to the modelling of ground force combat at about Corps level.
The model is based on Lanchester’s equation incorporating concepts for the build-up of combat-ready forces and alternative strategies for their commitment in relation to beak-through criteria. These alternative strategies, together with the appropriate tactical rules for force employment and deployment, determine what may be regarded as policies for the use of forces.
The model has been used to investigate these policies and the effect of delays in their implementation. Some illustrative results and conclusions are also discussed.
Note: There is no paper available.

Dynamics of Consumer Demand in India
Naresh K. Gupta, K. K. Garga

Abstract: A steel demand model consisting of 15 sub-sectors was formulated by the authors to dynamically estimate the steel demand from GNP per capita. Attempt is now being made to develop a more general consumer demand model specific to India, which, among other things, takes into consideration inflation as caused by increase in money supply to finance development plans of the country, remittances from expatriate workers, foreign loans, and wage increase to increase in production ratio. Existing model has been further modified by giving due weightage to the effect of income distribution among low, middle and high income groups of population on the dynamics of demand. Attempt has also been made to study the sensitivity of the economy, and hence the consumer demand, to changes in the saving to consumption ratio. The positive effect of increase in saving on capital formation on the one side, and negative effect of decrease in demand on the other side, has been discussed.

Rice Crop Production Policies and Food Supply in Bangladesh
Khalid Saeed, M. A. Satter, Gajendra Singh

Abstract: This paper examines the role of food producers, population, and the government on the present availability of food in Bangladesh. The study employs a system dynamics model of the population-food-production system for its analysis. This model incorporates mechanisms of production and consumption of food, and population growth. Government policies are considered exogenously. The analysis suggests that, due to the presence of a feedback relationship between food availability and population growth, any policy for improving food supply cannot be considered independently of time. In the long run, none of the policies tested alleviates the shortage, although in the short and intermediate runs, agricultural development and population control policies may improve food consumption per capita. The paper thus seriously questions the rationale of agricultural development policies aimed at increasing food production. However, since many food surplus countries support small populations which are also growing at slow rates, points of entry for policies that effectively alleviate the food shortage should exist. Thus, food policy models for the developing countries should aim at identifying such entry points into the system instead of attempting to increase the food supply.

A Disaggregate Population Model of China
Qifan Wang, John D. Sterman

Abstract: A disaggregate population model of China is presented. The age structure is represented by one-year cohorts. Urban and rural populations are distinguished. Birth and death rates, family size, life expectancy, and other demographic variables are determined endogenously. The model can be used to analyze population problems and to project population size, the age structure, the adult labor force, the elderly population, and so on. The model can be used in two modes. It can be used to project the consequences of various exogenous fertility levels. Alternatively, birth rates and fertility can be determined endogenously by economic inputs such as food supply, GDP, and services. The model incorporates socioeconomic factors important in the demographic transition, such as the effect of perceived life expectancy on fertility, the effects of traditional values, and the ability of government to influence family fertility choices. The model can be used to evaluate policies and programs designed to control population growth, such as delayed marriage age, improved contraception, and restrictions on family size.
The model requires industrial, service, and food output per worker as inputs, and also the level of pollution. The model should be thought of as a component of a comprehensive planning model which generates these inputs endogenously.
Based on the system dynamics approach to modeling complex systems, the model is implemented in the DYNAMO simulation language.

System Dynamics as a Heuristic for Systems Design
Fahriye H. Sancar

Abstract: Socio-economic planning primarily addresses the solution of problems relating to inherently indeterminate systems. The class of systems exhibits two sources of complexity which can be conceptualized as the complexity of the idea system and the complexity of the actual physical system. The idea system introduces a multiplicity of available theories, disciplinary differences between the stakeholder roles. The actual system is complex because there usually is not sufficient empirical data relevant to the particular problem since the situational context is unprecedented and non-repeating.
It can be argued that problem solving in this context involves designing a new system structure to facilitate social learning, using a heuristic approach. Such a heuristic is different from the more conventional approaches to modeling and problem solving in that it bounds the search space and enhances further inquiry rather than just reflecting the real world conditions. In this paper the main characteristics of this approach are discussed and methodological implications for System Dynamics modeling are drawn.

An Introduction to System Dynamics in a Non-Traditional Graduate Program
Raymond C. Shreckengost, Sheryl P. Shreckengost

Abstract: System dynamics has been taught for over two years in two doctoral programs offered by Nova University, Fort Lauderdale , Florida. These programs are designed for working professionals in public and business administration and feature the inverse of the usual arrangement in which instruction is given on the university campus. For this reason, a traditional teaching approach cannot be used.
This paper describes the Nova teaching environment, the format and teaching materials used for system dynamics, student characteristics and performance, and the present trends which affect instruction in system dynamics at Nova University.
The introduction of the course in system dynamics has generated a positive response among the students and a limited amount of turbulence in the organization and administration of the program.

Formal Expression of the Evolution of Knowledge
Eugéne Chouraqui

Abstract: In this paper we present a formal system S, in order to characterise the evolution of knowledge. In addition to the connectors of classical logic, we introduce two dynamic connectors- the mediate future and the immediate future-expressing the transformations that may affect data in the course of time. The axiomatisation of these connectors and their semantic characterisation lead us to define a model of interpretation for the formal system which is comparable to that of Kripke for modal logic. With this model we prove the intrinsic consistence and the validity of S. Similarly we demonstrate completeness and other propositions connecting the immediate future and the mediate future.
The formal system S is one of the component modules of the ARCHES system, a symbolic system for the representation and treatment of knowledge whose objective is to produce new knowledge through two modes of reasoning-deduction and analogy-based upon specific processes of inference.

Are French Metropolitan Areas Evolving as Self-Organizing Systems?
Denise Pumain, Bertrand Roehner, Lena Sanders, Thérèse Saint-Julien

Abstract: Peter Allan’s Intra-urban model is a very appealing application of bifurcation theory for simulating the evolution of an urban spatial structure. It is actually a spatial dynamic model, and it brings together many well-known empirical regularities and well-established theoretic proposals, as logistic growth, economic base theory, distance-decay functions, urban ecology and actor’s behaviour in an urban context. Until now, this model has only been tested in fictitious urban situations and did prove its ability to simulate various urban evolutions, especially of the north-american type. However, it needs to be tested in real-world situations. Main questions are: Until which extent the same set of equations is able to simulate various observed urban evolution; and how many changes in parameters’ values are necessary to reproduce observed evolution in different towns. So we tried to apply the model to a sample of fench metropolitan areas.

The Representation of Values in System Dynamics Models of Organizational Performance
James E. Ryan

Abstract: A theoretical framework from the field of Organizational Theory called the “Competing Values Approach to Organizational Effectiveness” was used to analyze five System Dynamics models of organizations. This framework is a perceptual ordering of criteria that are often used to evaluate organizational performance. An example of the procedures involved is discussed using Richmond’s “Organization Evolution” model. The purpose of the exercise was to (1) determine if it was possible to express the behavior a dynamic model in terms of the Competing Values Framework, (2) discover what conceptual and technical problems might arise, and (3) draw some conclusions about the usefulness of the Competing Values Approach to system dynamicists and the usefulness of System Dynamics to organizational theorists. It was found that it is possible to formulate dynamic models in terms of the Competing Values Framework. However, conceptual and technical problems arise since organizational theorists and system dynamicists tend to work at different levels of abstraction. The Competing Values Approach may be used as one of many theoretical frameworks by system Dynamicists as an aid to organizational inquiry. Organizational theorists, on the other hand, can make use of System Dynamics since it allows a researcher to study structure and complex interactions over time.

Some Ideas for a History Dynamics Model
F. J. Torrealdea, M. Graña

Abstract: In this paper some of the ideas of Ortega y Gasset about the dynamics of history have been gathered and organized according to the system dynamics diagrams. A cyclic process, characteristic of every normal course of history, is described as well as the dynamics hypothesis responsible for it. Human life, as far as it affects history, is shown as being composed of five age groups each of them covering fifteen years of life. Two of these groups, two generations acting simultaneously in the field of history, are presented as taking the main responsibility for the dynamics of history.

Partial-Model Testing as a Validation Tool for System Dynamics
Jack B. Homer

Abstract: This paper discusses an approach to model refinement which involves testing the behavior of individual pieces of a model in response to empirical input data for comparison with empirical output data. Partial-model tests should be used for selecting formulations or estimating parameters only when appropriate case-specific or logical information is not available for this purpose. The smaller the model components used for partial-model testing, the more likely it is that the model will prove useful for anticipating events outside the historical experience and the less likely it is that observed behavior will be incorrectly attributed to certain relationships or parameters. Thus, from the standpoint of structural validity, partial-model testing is an improvement over whole-model testing for the purpose of structural adjustment. The paper presents a detailed example of partial-model testing in the context of a generic model of the evolving use of a new medical technology. Specifically, the technique is used for adjusting and validating a model subsystem that can explain why the reporting of clinical information on cardiac pacemakers has been marked by regular oscillations over time.

Data Management for System Dynamics Modeling
Krista C. Kelly, Merle McKenzie

Abstract: Proper data management is an essential component of system dynamic modeling. The authors have developed an approach to data management, as set forth in this article.
The article first describes the modeling and data management activities from a critical path point of view. The approach to handling the data associated activities is then developed. This approach asserts the following: 1. it is appropriate to address data relates activities at each stage of the model development process, and 2. when properly linked, a synergism exists between each model development stage and its associated data handling activity.
It is claimed that this approach, including sequenced data handling and synergism between data and modeling activities, can produce a more comprehensive and timely model.

Validation Testing: A Case Study
C. Y. Lin

Abstract: Validation testing provides the tool for building confidence in a model. It enables an analyst to verify the correctness and usefulness of a model and to gain better insight into, and understanding of, the system being modeled. Although important, validation testing is sometimes difficult to conduct. This paper presents the author’s experiences with using the model validation tests to validate a system dynamics model. The paper describes the tests and applications that were most useful in examining the validity of the model, identifies difficulties that can arise during validation testing and offers suggestions for reducing their impact on the process of model validation.

Validation of Oscillatory Behavior Modes Using Spectral Analysis
Robert L. Eberlein, Qifan Wang

Abstract: In this paper we outline and evaluate a simple technique for analyzing the ability of a model to reproduce an oscillatory behavior mode. The technique consists of using a model as a predictor, and then performing spectral analysis on the prediction errors. The technique is referred to as the spectral analysis of residuals or SAR test. The paper motivates the use of prediction residuals and illustrates the technique with a simple model of inventory oscillation. The SAR test appears to yield a substantial amount of information about the performance of a model. However, the technique breaks down if the observed behavior is a result of the system being subjected to shocks with similar dynamic characteristics to the system output or if the system has more than one set of mechanisms generating the behavior of interest. The SAR test is not capable of distinguishing between models which can explain the behavior equally well using different state space representations.

last updated by ng on 1/19/09
System Dynamics Admins
System Dynamics Admins

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