CONFERENCE ABSTRACTS

Economic Long Wave

The System Dynamics National Model–Objectives, Philosophy, and Status
Jay W. Forrester

Abstract: The System Dynamics National Model represents a typical, modern, industrial economy. Although parameters have been chosen for the United States, the behavior modes exhibited by the model are those being experienced in most economies in Western developed countries. The National Model incorporates a wide range of dynamic structures that allow its behavior to span from the short-term business cycle of 3-to-7 year periodicity to the much longer-term behaviors represented by growth and by major depressions that recur at intervals of some fifty years.
The System Dynamics National Model has been under development for about twelve years. An evolutionary process has been followed during which we have extended the scope of the model, added sectors, identified and corrected misbehavior, and simplified unnecessarily complex structures. There have been more than a thousand modifications and extensions of the Model. The National Model is now close to meeting our primary objectives, and we have started writing four books describing the Model and its implications for economic behavior.

Introduction to the System Dynamics National Model Structure
Alan K. Graham

Abstract: The System Dynamics National Model is a large computer simulation model of a typical industrialized economy, with its parameters adjusted to reflect the size and character of the United States. The model’s purpose is twofold: understanding the major difficulties of the aggregate economy such as inflation, business cycles, and slowing productivity growth; and to facilitate the evaluation of policies to influence those behaviors. In the existing publications on results from the National Model, the structure of the model is described in a page or two, doing no more than supplying a flavor for the scope of the model. This paper goes to the next stage in describing the content and structure of the model for those readers with some previous exposure to the results of the National Model research. The discussion starts with the overall architecture, then goes through the major connections among the sectors of the model, and concludes with one example of more detailed structure: the interrelations among selected decisions in the corporate sector of the model.

A Long-Wave Theory of Real Interest Rate Behavior
Peter M. Senge

Abstract: Businessmen, bankers, private citizens, and government officials share deep concerns over the high values of interest rates in today’s economy. Of particular concern has been real interest rate, the rate of interest adjusted for inflation. Although nominal interest rates have followed a generally declining trend over the past year, this decline has generally lagged declining inflation and has failed to keep pace with the drop in inflation.
This paper is the first of two on the problem of high real interest rates. It focuses on developing a theoretical framework for understanding the role played by real interest rates in the long wave. The second part of the study will focus on the effects of government deficits and alternative monetary policies. The primary purpose of this study is to show that the downturn of the long wave can cause rising real interest rates even with no government deficit or change in monetary policy.

An Integrated Theory of the Economic Long Wave
John D. Sterman

Abstract: The economic crisis of the 1980s has revived interest in the economic long wave or Kondratiev cycle. Since 1975 the System Dynamics National Model has been the vehicle for development of an endogenous, dynamic theory of the economic long wave. The model has now reached the point where an integrated theory of the long wave can be described. The theory incorporates many of he partial theories that have been proposed by others. Simulations of the model are presented to show the wide range of empirical evidence accounted for by the model.
In particular, the theory suggests the long wave arises from the interaction of two fundamental facets of modern industrial economies. First, the existence of physical lags in the economy, limited information available to decisionmakers, and bounded rationality in economic decisionmaking creates the potential for inherently oscillatory behavior. Second, a wide range of self-reinforcing processes exist which destabilize the inherently oscillatory tendencies of our economy, leading to the long wave. These processes involve many sectors of the economy including capital investment, labor markets and workforce participation, real interest rates, inflation, debt, savings and consumption, and international trade. The paper discusses the relative strengths of these mechanisms and the amplification of the long wave through their interactions. The linkages of the long wave theory to innovation, technological progress, and political value change are discussed.

An Alternative, Simple Economic Long-Wave Model
Erik Mosekilde, Steen Rasmussen

Abstract: The simple two-sector Kondratieff model developed by John Sterman has contributed significantly to our understanding of some of the basic mechanisms underlying the economic long wave. The dynamic hypothesis of this model is that the positive feed-back associated with the so-called self-ordering of capital reinforces and prolongs the characteristic expansions and contractions of the capital sector as it adjusts its capacity to the required production. It is assumed that this feed-back can be strong enough to produce a self-sustained oscillation (a limit cycle) with a period which is about twice as long as usual capital lifetimes.
Concentrating on the ordering and production of capital, the Sterman model only depicts a relatively small fraction of our economic system. At least in its original version, the model doesn’t deal with several of the basic phenomena involved in the verbal description of the economic long wave, as it is usually presented. There is no account of variations in employment, buying power or political attitudes, for instance, and changes in the rate of innovations are also outside the model boundary.
We do not think that one can presently develop a complete and satisfactory model of the economic long wave. We have therefore adopted an alternative starting point by assuming that the alternating phases of economic expansion and stagnation arrise from the succession of technical-economic cultures each characterized by its own infrastructure, leading industrial sectors, typical production methods and main products. Even the geographical location of the dominant political-economic center may shift from wave to wave. This is Mensch’s process of metamorphosis.
Where the Sterman approach emphasizes the cyclic character of the wave, our model is meant to describe the qualitative changes through which one set of technologies replaces the next. In our model, the economic system has no equilibrium point to oscillate around. As long as technology develops and new discoveries are made, the potential for economic activity continues to grow. A purpose of the model is therefore to show how randomly distributed discoveries can be bunched into waves of innovations with a relatively well defined period.

Method and Theory

Using the Liapunov Principles in the Analysis of System Dynamics Models
Qifan Wang

Abstract: A new analytic method combining Piapunov’s methods and eigenvalue analysis approach, a technique for identifying dominant loop analysis contributed by Nathan B. Forrester, is developed to search for the feasible and most policies in system dynamics models. The paper briefly introduces the Liapunov methods of stability analysis (the first and second methods of Liapunov). Liapunov’s first method, under certain conditions, enables one to arrive at conclusions about a nonlinear system (original system) by studying the behavior of linearized systems. Liapunov’s second method gives sufficient conditions for the stability of linear systems. Criteria of Liapunov’s first method and Krasovskii’s method, an extended method of Liapunov’s second method, are both applied in the analytic method. The structure of the method and how the method is used are described. It is expected that the analytic method will become a new approach to testing models in order to seek the best feasible policies automatically in system dynamics.

Bifurcations and Chaotic Behaviour in a Simple Model of the Economic Long Wave
Steen Rasmussen, Erik Mosekilde, John D. Sterman

Abstract: This paper presents a total stability analysis of a simplified Kondratieff-wave model. The purpose is to show how such an analysis can be carried out and to illustrate the kind of information one obtains.
For normal parameter values the Kondratieff wave model has a single unstable equilibrium point. Combined with non-linear constraints in the model’s table-functions, this instability creates a characteristic limit cycle behavior. For other parameter values, however, the model is stable and generates damped oscillations instead of the limit cycle. For yet other combinations of parameters, the non-linear constraints yield to the instability, and sustained exponential growth or total collapse result.
By means of linear stability analysis we first determine the conditions for the transition between a stable and an unstable equilibrium to take place. This transition is known as a Hopf-bifurcation. Using global analysis we outline the phase-portrait of a fully developed limit cycle. By the same method, we examine the conditions under which the non-linear functions fail to contain the system so that exponential run-away or collapse occur. A DYNAMO-program is then developed which calculates the Lyapunov exponents of the system during a simulation, and we discuss how these exponents can be used as a measure of the divergence or convergence of nearby trajectories. Finally, we illustrate how subsequent period doublings and chaotic behaviour can occur if the model is driven exogenously by a weak sine-wave, representing for instance the short term business cycle.

Towards a General Theory of Adaptive Systems
Ulrich Goluke

Abstract: A generic model of adaptive systems behaviour is developed in causal loop form. Examples from many different living systems are given.
Living systems do adapt: plants turn towards the light; birds fly south in the winter; people acquire a taste for champagne; revolutionaries become government bureaucrats; and cultures have dealt with horseless carriages and jet travel.
Living systems also collapse: lakes get polluted and die; dinosaurs are no more; people commit suicide; there is no more Federalist party; and the Indian Nations of North America have all disappeared.
As a system dynamist I am interested in the attribute or, more exactly, the minimal set of attributes of all these systems that can explain the capability to adapt and also the obvious limits to that same capability.

Experiences in Teaching System Dynamics
Leif Gustafsson, Miroslaw Wiechowski

Abstract: The scope of this paper is to present our views on teaching System Dynamics and Dynamo in our courses in System Analysis at Uppsala University. We treat the pedagogical aspects as well as the hardware and software system we built around Dynamo. A large part of this article is devoted to ideas and constructive criticism of System Dynamics and Dynamo which we have acquired from our experiences in education and research.

Focus on Feedback: Application of System Dynamics to Public Speaking
Julia M. DiStefano

Abstract: The interaction between the speaker and his audience is a subject of universal interest, especially to professionals. It is a subject, moreover, requiring a dynamic method of analysis. This paper presents a conceptual model of public speaking. The purpose of this preliminary study is to identify the essential factors needed for (1) the effective delivery of a prepared speech in a conversational manner and (2) the growth of the speaker’s abilities over time. As a result of my preliminary analysis of the feedback loops operating during a technical presentation, my approach to teaching novice speakers has changed. One benefit of my new approach is that it accelerates the process by which novices develop the competencies they need to give successful informative speeches. Further study of the interaction between speaker and audience using System Dynamics will contribute significantly to our understanding of human communication.

Loop Polarity, Loop Dominance, and the Concept of Dominant Polarity
George P. Richardson

Abstract: There is a conspicuous gap in the literature about feedback and circular causality between intuitive statements about shifts in loop dominance and precise statements about how to define and detect such important nonlinear phenomena. This paper provides a consistent, rigorous, and useful set of definitions of loop polarities, dominant polarity, shift in dominant polarity, and shift in loop dominance, and illustrates their application in a range of system dynamics models.
Consistent with the usual intuitive definitions, the polarity of a first-order feedback loop involving a level x and a single inflow ẋ is defined to be the sign dẋ/dx. Loop polarity is shown to depend upon the sign of parameters not usually considered part of the loop itself. This expression of loop polarity is then applied to multi-loop first-order systems to define the polarity of such systems. All positive loops with gain less than one, such as economic multipliers, are shown to be multi-loop systems with dominant negative polarity. The shifts in loop dominance that occur in nonlinear systems arise naturally as changes in the sign of the dominant polarity. Examples applying the notion of dominant polarity reveal a useful geometric characterization of shifts in loop dominance in nonlinear first-order systems.
The concepts developed in the paper are then applied to simple higher-order nonlinear feedback systems. The final application to a bifurcating system suggests that all bifurcations in continuous systems can be understood as consequences of shifts in loop dominance at equilibrium points.

A New Generation of DYNAMOs
Alexander L. Pugh

Abstract: The emergence of powerful personal computers and CAD/CAM machines offers a new opportunity for DYNAMO. Although users are generally satisfies with the language, a survey shows they want expanded simulation capabilities including single simulations, eigenvalue analysis, sensitivity analysis, and the optimization by multiple simulation and hill climbing. Novices want easier access to models and simulation.
The modular version of DYNAMO now in development will meet these goals. It will break DYNAMO’s normal functions into separate programs that users can reassemble in different ways. For example, one compiler will translate both conventional models and games. The simulation controller will work with a regular rerun, a game, or a sensitivity analysis package. The report generator will display output from any of these packages.
These modules will communicate through standard data files, which users can also access for other purposes such as statistical analysis.

Regression and Case Studies of Public Programs: Discrepant Findings and a Suggested Bridge
David F. Anderson, David P. McCaffrey, Paul McCold, Doa Hoon Kim

Abstract: Case studies of regulatory and social programs suggest that policy systems are dynamic. In the systems described, outcomes depend on how variables interact over time, and feedback among variables–“simultaneous” causation over multiple time periods–is more a rule than an exception. However, the most influential evaluations of public programs are studies using multiple regression. A recognized limitation of multiple regression is its relative insensitivity to multiperiod strategies, feedback among variables, and other dynamics. Accordingly, we maintain, the findings of regression-based and case studies commonly conflict. Simulation modeling can serve as a methodological bridge between case studies and regression-based studies of policy systems, improving theoretical models of the system and providing a way to evaluate the robustness of alternative regression models. The results of some early experiments along these lines are presented.

The Art of Causal Loop Diagramming
Erling Moxnes

Abstract: How should a causal loop diagram be drawn to explain structure as clearly as possible? Two basic rules are formulated: Feedback-loops should be drawn with loop-form, and influence should be unidirectional through each variable. An example shows that application of the two rules leads to enhanced clarity. Artistic derivations from the two rules can be used to produce memorable figures. Current practice in causal loops diagramming indicates a potential for improvements.

Improving System Dynamics Models Trough Use of Management Games
Donella H. Meadows, Dennis L. Meadows

Abstract: N/A, Paper: N/A

Modelling for Decision Making and Management

The Feedback Viewpoint in Business Strategy for the 1980’s
John D. W. Morecroft

Abstract: This paper presents a flexible, model-based approach to strategic program design–the process of putting together consistent business programs and policies to support new strategic initiatives. The new approach combines ideas from administrative theory and feedback theory. Administrative theory reveals the organizational and diffusion processes that connect business programs and customers. Feedback theory reveals patterns (feedback loops) in the connections between programs and policies of a business and its market. This conceptual framework is applied to strategic program design in a two-phase analysis which is much more flexible than traditional system dynamics business modeling. Phase 1 is a descriptive analysis that explores business-market structure in terms of organizational and diffusion processes, showing where conflicts of responsibility, confused incentives, misinformation, and administrative inertia may degrade business performance. Phase 2 uses simulation modeling and the descriptive information from phase 1 to debate policy options and program design. The style of analysis is illustrated with business cases and applications projects.

System Dynamics Modelling in a Cable Manufacturing Corporation
Peter Gottschalk

Abstract: The paper describes eight problems within the Cable Division of Standard Telefon og Kablefabrik A/S which are currently being analyzed using system dynamics. Problem 7, concerned with information system projects, is described in detail.

A System Dynamics Approach to Corporate Modelling
Vincenzo Gervasio

Abstract: The acronym “MDS” refers to the methodology and a series of computing techniques which are suitable for the simulation of corporate processes. These “Dynamic Models for Corporate Strategies” allow the description of such processes as structures of a unified nature, into which one may insert all the necessary data (real or hypothetical) deriving from the initial and boundary conditions, to clearly define the possible future developments being studied.
With respect to other, currently available, decisional aids, MDS differs both by its purely simulative approach and by its use of the basic descriptive structure capable of completely representing the dynamism of corporate phenomena. Compared to a “company microcosm” description using the now classical methods of Industrial Dynamics, MDS offers open and interactive systems also introducing several “corporate variants”. (These correspond both to certain types of sub-division of the complete system into given sub-system, and to relationships which may also be described in the same terms, such as the ‘accounts plan’, for example).
The main aim of this paper is to analyse the effects of promotional activity- recently developed in Italy amongst medium and large companies- whose main objective is the introduction of MDS as an imprtant instrument in the practice of corporate planning.

Prediction of Pulp Prices – A Review Two Years After
Jørgen Randers

Abstract: During the summer of 1982 the author made predictions of wood pulp prices for the period 1982 to 1986. The predictions were part of a decision on whether to sell a large pulping plant in Norway. This paper presents the predictions and the basis on which they were made. Next, the predictions are compared with actual data for the period 1982 to 1984.

Systems Thinking and the New Management Style
Peter M. Senge

Abstract: This paper summarizes the purpose, design, and initial results of the New Management Style Project.

System Dynamics and the User: A View from the Trenches
Rolf Clark

Abstract: Practitioners of system dynamics working in the government sector will often operate in environments filled with administrative complexities and bureaucratic inconsistencies. Some examples of less than ideal conditions encountered in a fairly large policy planning effort are here offered for the student of system dynamics.

Applications of System Dynamics in R&D Project Planning and Policy Analysis
Ching-rui Xu

Abstract: Emphasis on economic effectiveness and benefit in our country results in the emphasis of economic analysis in project planning and evaluation during recent several years.
The weakness of existing approaches in project planning and analysis to certain extent is lack of dynamic in nature.
The effectiveness of system dynamic approach in project planning and analysis is not only due to its systematic and dynamic analysis, but also due to its value in quantitative analysis and policy analysis. The idea and model of R&D project planning is useful in solving the above-mentioned problems.
The learning curve nature in development activities.
Adoption of task-performance coefficient as a factor in R&D system dynamics modeling.
The labor psychological factor in our country and its characteristics in formulation of system dynamics simulation model.
R&D as a major element is involved in the model.
Policy analysis through simulation running is an important basis for decision-making in R&D project planning.

A Simple Model of Energy Dynamics
Qifan Wang, Brian McKeller, Randy Schweickart, John Sterman

Abstract: This paper discusses the impact of the energy supply transition on the U.S. economy. An energy supply transition occurs when one resource base is replaced by a new source of energy due to some shift in the comparative economic attractiveness of the two sources. The effects of an energy transition on an industrial economy are long-term and far-reaching. The recently witnessed depletion of the 1970s may foreshadow a major turn in the path of economic development.

A Dynamic Model for the Planning of Human Resources
Habib Sedehi

Abstract: The methodology which this article deals with, is the fruit of the experience gathered thanks to the contributions of experts in the fields of programming, personnel and organisation.
The willingness of such people has given rise to the instruments now available in the field of Industrial Dynamics. It is thus possible to design a methodology and simulation models which, with the help of a computer, offer an instrument which can answer the needs of those involved in the planning of human resources in a company environment.
This model has so far been applied with satisfactory results in two technically different realities. At the present time, other applications are in progress which confirm the validity of this instrument.

The Study of Policy

Evaluating Alternative Scenarios in Agricultural Development in India
E.F. Wolstenholme, P Mandal

Abstract: This paper describes a current research project in national development, aimed at constructing a system dynamics model to evaluate development problems in India. The underlying premise on which the model construction is based is that the economy of India can be conveniently divided into two major sectors: those of agriculture and non-agriculture. Both these sectors are defined as being controlled by the government through the use of its own financial policies for generating investment in the development process. The investment is generated by assessing the domestic aspects of the economy and the government ability to borrow from external sources. The performance of the non-agriculture sector is, however, modeled in outline only. This limitation has been imposed since the study is basically concerned with agricultural development problems.

Theoretical Approach to Long Term Company Behavior
R. Serra, H. Sedehi, S. Vassalo

Abstract: In order to study the long term behaviour of complex systems, such as industrial enterprises, it is necessary to use reduced models with a limited number of variables. Here we investigate theoretically the relationship between these “mesoscopic” models and more detailed, “microscopic” models of the same physical systems. When the relevant variables evolve more slowly than the irrelevant degrees of freedom, a powerful projection technique is presented (Adiabatic Elimination Procedure). A pedagogical example is discussed, dealing with a large company in the field of computer science, which wants to increase its presence in a particular market segment by starting a cooperation with a small but aggressive company, already in that market segment.

Applications

Energy Development and Economic Growth in India
P. Raghavendran, Qifan Wang

Abstract: A dynamic simulation model of the Indian economy has been developed which captures the important linkages between economic growth and the development of various forms of energy. Non-commercial forms of energy which supplied the bulk of total energy requirements of the economy so far have clearly reached their saturation limits. Capital costs for coal and petroleum increase with resource depletion. The cost of hydroelectricity increases as the cheaper and more accessible resources are exhausted. The costs of renewable energy sources such as solar, wind and biomass decrease with cumulative production due to technical progress. Such sources of energy become more important sources in the future though their current share of the total energy production is negligible.
The thesis examines the dynamics of the transition to the new era as well as responses of the economy to energy shocks such as steep increases in international oil prices. It investigates the possibility of an interim crisis if the domestic energy industry is slow to develop or if the response of energy demand to rising energy prices is sluggish. Such a difficult transition may be marked by persistent import dependence, high energy prices and high outlays in the energy sectors that reduce the resources available to the non-energy sectors for consumption and growth.
An aggregate production function utilizing capital, labour and energy as factor inputs has been utilized for the economy along with a neo-classical formulation for consumption and saving in the economy. The model generates the energy demand of the economy endogenously and incorporates the adaptation of energy intensity to rising real energy prices through more efficient new capital equipment as well as retrofits of inefficient equipment.
The model has been calibrated using Indian data. Where parameters or assumptions are based on uncertain facts, sensitivity tests have been carried out. The effect of government policies such as taxation of energy or emphasis on conservation have been investigated.

Simulating the Absorption of Insulin from a Subcutaneous Depot
Klaus Skovbo Jensen, Jesper Skavin, Erik Mosekilde, Christian Binder, Stig Pramming

Abstract: The System Dynamics model described in this paper presents a new approach to the mechanisms of subcutaneous absorption of dissolved insulin. Experimental investigations have shown that the apparent absorption constant varies in time, and that this variation depends both on the volume and the concentration of the injected insulin.
Our model assumes that insulin is present in the subcutaneous depot in three forms: (i) a dimeric form, (ii) a hexameric form, and (iii) an immobile form in which the molecules are bound in the tissue. The model describes how diffusion and absorption gradually reduce the insulin concentrations and thereby shift the balance between three forms according to usual laws of chemical kinetics. By assuming that only dimeric molecules can penetrate the capillary wall, we have found that the model can fully account for the observed variations in the absorption rate. At the same time the model can be used to determine at least 5 parameters characterizing the involved processes: the diffusion constant for insulin in the subcutaneous tissue, the absorption constant for dimeric insulin, the equilibrium constant for the dimeric/hexameric polymerization process, the binding capacity for the insulin in the tissue, and the average life time for insulin in bound state.
Combined with a simplified model of the distribution and degradation of insulin in the body, the diffusion-absorption model has been used to simulate different insulin delivery schedules, i.e. a single major injection contra dosage with infusion pump. The model has shown that a pump repetition frequency of 1-2/hr can secure a sufficiently constant plasma insulin concentration.

Water Resources Management of Algarve-Interfacing System Dynamics and Multiobjective Programming
António S. Cámara, José G. A. de Meneses, João P. A. Fernandes, Ana P. N. Amoro, M. Garca Viegas

Abstract: The Algarve province in southern Portugal has been undergoing a rapid growth due to a large increase in tourist demand. The mismanagement of the region’s water resources is leading those growth trends to halt.
This paper introduces a model developed to provide a needed rational framework for Algarve water resources management, interfacing a system dynamics model with multiobjective programming formulations. The definition of water supply and demand sectors, on a spatially disaggregated basis, is an essential component of the model, with attempts to provide a tool to evaluate the effects of different strategies controlling water supply and demand upon a set of impact variables.
To select an optimal strategy one has to solve a multiobjective programming problem, where the components of the objective function are the impact variables referred above. Solution methods include the analytic hierarchy process and the value display approach.
The model written in Z-BASIC was run using a simulation period of 10 years.

Capacity Adjustments in a Textile Division: Management Response to a System Dynamics Study
H. Paul, Karen S. Eichman

Abstract: A division of a large textile company was chosen as the focus of a system dynamics study to determine how management would respond to any capacity adjustment problem. The company produces fabrics for household as well as industrial uses and the annual sales of the company are several billion dollars.
The division under study produces yarn and piece dyed draperies, mattress tickings, and upholstery fabrics. The four major manufacturing processes in the division are spinning, yarn preparation, fabric formation and fabric dyeing and finishing.
Although not aimed at any particular perceived problems, the study was undertaken with two purposes, firstly to develop a system dynamics model that would describe the performance of the division and secondly to use the mode to investigate the effects of demand changes on various capacity adjustment policies practiced in the division.
The study includes interactions among a large number of factors in forecasting and inventory control, raw material supplies, employment, and production capacity. These factors related to some ten points and four processes of the division.
Data and other information have been collected by questionnaires and interviews with management. The model has been tested for its validity in representing the actual operations. The model is now being used in testing some of the policies in response to change in customer order rate.

A System Dynamics Approach to the Analysis of Indian Cement Industry
N. Singh, D. Prasad

Abstract: The production of cement pays the most important role in all the construction activities in the country. Due to rapid growth in the industrialisation and the development there is fast growing internal demand of cement. However, cement industry in India has not been able to cope up with the demand. Therefore, it is essential to study the demand and production aspects in order to evolve strategies to meet the demand. For this purpose, a System Dynamics model for cement production is developed. The production model is run for 16 years covering a period from 1974 to 1990 at three conditions, such as basic, optimistic and pessimistic. The different sensitivity runs are also carried out by changing the different parameters influencing the production. Different scenarios are generated and the gap between demand and production is analysed at different conditions. It is observed that this gap is closed under certain conditions.

A System Dynamic Study of Commodity Price Stabilization by Buffer Stock and its Effect on Industry Performance: A Case of Indian Tea
Pratap Mohapatra, Kailas C. Sahu, Madhab C. Bora

Abstract: Using System Dynamics as the primary tool of investigation, an attempt has been made in this paper to present (i) a general model of commodity price fluctuation, (ii) a price stabilization policy based on buffer stock, and (iii) the impact of this policy on the long term growth of the commodity industry. The model has been tested for the case of Indian Tea.
Average unit cost of the commodity at the point of sale, operating profit margin desired by the sellers (computed on the basis of average quality of supply), actual inventory, and the average sales rate are considered as the chief determinants of the commodity price. Circular relationships among these variables have been considered to generate the price fluctuation over time. While testing the price stabilization policy, the model considers its operation phase. It is shown in this paper that such a price stabilization policy tremendously boosts the overall long term growth of the industry.

Aid to Families with Dependent Children: A System Dynamics Model
David Daniels, Jane K. Boorstein

Abstract: The purpose of this model is to gain insight into the relationship between poverty and AFDC assistance, to diagnose and explain causes and- on the basis of these findings- to test policy alternatives to alleviate poverty.

Worker Burnout: A Dynamic Model with Implications for Prevention and Control
Jack B. Homer

Abstract: This paper examines the dynamics of “worker burnout”, the process in which a hard-working individual becomes increasingly exhausted, frustrated, and unproductive. The author’s own two-year experience with repeated cycles of burnout is qualitatively reproduced by a small system dynamics model which portrays the underlying psychology of “workaholism”. Model tests demonstrate that the limit cycle seen in the base run can be stabilized through techniques which diminish work related stress or enhance relaxation. These stabilizing techniques also serve to raise overall productivity, since they support a higher level of energy and more working hours on average. One important policy lever is the maximum workweek or “work limit”; an “optimal work limit” at which overall productivity is at its peak is shown to exist within a region of stability where burnout is avoided. The paper concludes with a strategy for preventing burnout which emphasizes the individual’s responsibility for understanding the self-inflicted nature of this problem and pursuing an effective course of stability.

Separating Static and Dynamic Effects in an Oil Price Model
Erling Moxnes

Abstract: A static and a dynamic model of the oil market are compared. Three major differences appear in forecasts. The dynamic model fluctuates around the static mode equilibrium price. The dynamic model shows greater uncertainty in trend development. The dynamic model forecast overshoots the cost level of synthetic oil.