CONFERENCE ABSTRACTS

Volume 1

A Road Provision Model Using System Dynamics
Khaled A. Abbas

Abstract: One of the most difficult tasks facing highway administrators is how to efficiently manage the allocation of road funds. In this paper a comprehensible, easy-to-use, highway management tool is presented. This tool takes the form of a computer simulation model which is intended to assist managers of a network of highways to make better decisions concerning the allocation of scarce funds. It mainly simulates the effects of different investment strategies and maintenance options on the road network. This is done by tracing the life-cycle costs of the major activities of providing and maintaining the road system, and by considering the effects that these activities have on the state and performance of the road network.

The Use of System Dynamics in Modeling Transportation System with Respect to New Cities in Egypt
Khaled A. Abbas

Abstract:Since the development of System Dynamics, it has been applied successfully to a range of complex problems in different areas. However, relatively little use of the methodology has been made in the field of transportation. This paper attempts to review and evaluate the utility of the System Dynamics methodology for transportation studies, showing that it is well suited to the needs of various analytical problems in transportation. In fact, System Dynamics offers a potential way forward for transportation planning in general. The focus of this paper is on appreciating the strengths and weakness of the methodology of System Dynamics as an aid to reach a better understanding and appreciation of the dynamic, feedback relationships between the transport system and the other major sectors contributing to the development of a new city in the Egyptian desert.

Issues in Designing Interactive Game Based on System Dynamics Model
David F. Andersen, IK Jae Chung, George P. Richardson, Thomas R. Stewart

Abstract:The advent of the micro-computer revolution brings about the potential for people to increase their understanding of our environment. Technologies are becoming available that enable people to become more active learners about their environment. Along with technological advance, system dynamics modelers are paying more attention to gaming environments as a means to increase the interactions that a wide variety of game-players or audiences have with system dynamics models. That is, by creating easy to use and graphical gaming interfaces, users are able to interact directly with a model with little or no prior training. Throughout the iterative gaming processes, they can learn not only the system under investigation, but also the relations that give rise to the phenomenon of interest: “Learning by playing around.”
However, it is difficult to find general guidelines on how to create computer-based games, or, how to design gaming screens. Many researchers wishing to move into the area of gaming can look at existing gaming situations and attempt to emulate the best features of existing games. Although the “How to” depends upon the research purpose, the researchers and the game-player’s interests, the time frame of game, etc., general principles for designing games would reduce the ambiguity and the uncertainty in designing games in new areas, and heighten the utility and the applicability of the state of the art. This research proposes to advance our understanding of how to create gaming screens to support simulation-based games such as one linked to the STELLA software package. The research will document the experience of two teams of experts – one system dynamics modeling team and the other team of psychologists expert in human judgment and decision making – as they interact to create an interactive gaming simulation. In other words, the main purpose of the research is to examine issues that will be of use to modelers who are beginning the process of building system dynamics-based games. These issues will both reflect on “best practice” and attempt to articulate unresolved issues based upon interactions with the two expert teams.
The case chosen for study will be the financing of solid waste disposal in New York State, focusing on the mutual responses of the state and local governments in the presence of a waste crisis. The research proceeds by documenting the various versions of the gaming screens that have been developed during several iteration of the development process. After this history of the project is given, reactions and suggestions from both system dynamics and judgment experts are summarized into a series of issues. These reflections are based upon a research journal that documents how and why various versions of the gaming interfaces were developed.

The Use of System Dynamics to Measure the Value of Information in the Business Firm
Fred K. Augustine, Jr., Thomas D. Clark, Jr.

Abstract:The primary focus of the research reported in this paper was on the measurement of the value of information in the business firm. It involved development of a system dynamic model of a typical business firm and calibration of the model to an average firm in the can industry in the United States. The model has the five sectors of marketing, finance, production, research and development, and personnel. Data to calibrate the model came primarily from the Industrial Compustat data base. The model was used to test several propositions about the economic value of management information. This topic has been addressed by Morecroft (1977, 1979), Jones (1981) and others. The research extends work by them as well as demonstrating the multidimensional nature of information using the Gorry and Scott-Morton framework of typical information structure. A framework in which to assess information value is developed and discussed.
The performance of the firm was assessed using cost, profitability and efficiency measures under various values for the information attributes of accuracy, timeliness, relevance and reliability at the strategic, managerial and operational levels of the firm. Several propositions about information value are offered given the results of the testing.

Dynamics of Food Policy in a Centrally-Planned Economy: The Case of Vietnam
N.L. Bach, K. Saeed, J.E. Lukens

Abstract: This paper attempts to asses the impact of past and presently contemplated policies to maintain food self-sufficiency in a centrally-planned economy. The case of Vietnam is used as an illustration. Experimentation with a system dynamics model of the food production system incorporating relationships concerning soil ecology and agricultural land management policy serves as a basis for this assessment. Short-run policies to increase production are detrimental to maintaining food self-sufficiency in the long-run. A sustainable food production policy must incorporate soil conservation and improvement, control of population and possibly, finding food sources alternative to grain. Although difficult to implement in a market system, such a policy agenda may be feasible in a centrally-planned economy.

Simulation of Food Grain Storage Management System In Bangladesh
B.K. Bala, M.A Satter, Md. Golam Mohiuddin

Abstract: A system dynamics model of food grain storage, government procurement and release, and import in Bangladesh is presented. The simulation results of the model for govt. procurement and release, and import policies are also presented. Finally, the policy implications of the model are discussed.

Technical Education Modeling and Simulation
John D. Bernard, D. Henry Pate

Abstract: Initial testing is now complete on the TEMS instrument, the Technical Education Modeling and Simulation system. This research in the Industrial Education Department at Clemson University is a three phased project. The phases include developing an instrument (TEMS) similar to DYNAMO II (Pugh, 1970) for the modeling of socio-econ-educational systems, reducing world model concepts to a regional model for the state of South Carolina, and integrating technical education attributes and effects into the classical capital sector for this regional model.
The TEMS system is developed in dBASE IV and ’C’. It has all the model definition building features and run characteristics of DYNAMO II. Written for an IBM AT class of equipment, TEMS will replicate the WORLD2 model (Forrester, 1971) results in 40 minutes for a 100 year run. TEMS supports both the real time graphic mappings of selected variables and post analysis graphics. It has both an integrated statistical interface to SPSS statistics and a reporting system for model runs, definitions, user created functions and run time statistics.
Experimentation is in progress to calculate a CHAOS mapping for the class of level variable equations. Using this Verhulst equation mapping, TEMS should then dampen any wild ramping and explosiveness for these selected variables during the simulation.

Simulation as a Tool for Planning of Rural Development Programmes:
A Case in Southern Sudan
Tjark Struif Bontkes  

Abstract: Planning of rural development in developing countries requires participation and integration of various disciplines, such as economics, sociology, agriculture and health. Very often not all relevant disciplines participate and if they do, they analyze, plan and implement their programs separately. This paper presents an example of how simulation modeling can be helpful for interdisciplinary analysis of rural areas in the Third World. The analysis of the Bor District, an area in Southern Sudan, serves as an example.
First a general verbal and graphical overview of the situation in the rural area of the Bor District is provided. This is followed by a more detailed analysis regarding the population, the food consumption, the agricultural production and the livestock production of the area.
Due to lack of data, a common problem in remote areas in the Third World, many parameters has to be derived from studies of other, but to some extent similar, areas. Validation was therefore carried out by means of a sensitivity analysis and by comparing the model results with development in other areas. Experiments have been carried out by simulating the effects of one or more interventions, such as improvement of health services, veterinary services, the availability of water and schools, employment opportunity and the quantity of imported food, and the introduction of improved agricultural methods. The results indicate, that several interventions that initially seem to benefit the development of the area, prove to be disastrous after a number of years. In addition to that, some processes, that are unimportant in periods of stability, appear to become important when the system becomes unstable.

Contrasting Perspectives on Rationality and the Analysis of Performance Outcomes
Michael G. Bowen

Abstract: The normative view of rationality has been used for many years as the principal framework from which to analyze performance outcomes. Analyses of managerial behavior from this essentially reductionist view contain the argument that decision makers often fail to “correctly” observe and act upon the situations they face. A growing number of behavioral decision theorists, however, argue that the conclusions about behavior which have been derived from the normative view are misleading because they may be artifacts of the theoretical assumptions or empirical approaches used by analysts. The questions that this distinction raises are particularly important to systems scientists because they bear directly on whether powerful reductionist models of inquiry and evaluation, firmly entrenched in traditional scientific norms, will or should continue to dominate holistic perspectives for thinking about behavior in complex systems. The purpose of this paper is thus to review and explore differences that exist between the normative and non-normative views, and to use this synthesis as a framework for understanding the relative importance of the viewpoints as they relate to evaluating managerial performance.

Exemplary Computer Model for a Natural History Museum
Charles H. Braden

Abstract: A new Fernbank Museum of National History, to be located in Atlanta, is in the planning stage. A major series of exhibits is entitled “A Walk Through Time.” The walk culminates in exhibits which address the future. The museum planners wish to introduce the museum audience to computer modeling as an increasingly powerful tool with which to address societal problems. One exhibit is to present an exemplary computer model whose role is primarily tutorial. The model will treat limited facets of an urban system. The exhibit will present the model at two, or perhaps three, tiers of sophistication. The simplest presentation will utilize stored computer output in order to demonstrate model structure, interactions within the system, and some behavior patterns. Another presentation, also utilizing stored computer output, will allow audience participation in a restricted choice of model parameters. There may be a third exhibit tier in which less restricted parameter changes can be made in an interactive model.

Dynamics of Company Excellence Through Motivation of Employees
Andres E. Breiter

Abstract: Excellence of organizations over time requires high performance on the job by ever broader groups of employees. As technology evolves and population’s education improves typical employees are required less and less frequently to perform mechanical tasks or even to make limited repetitive decisions. The trend is for humans to carry out jobs with an ever greater context of complex analysis, creativity or non programmable decisions or human interactions. These activities can be performed on a consistent level of excellence only by well directed and highly motivated people.
A schematic model is proposed that generalizes observations and actual experience on how management may ensure that the essential conditions for outstanding job performance by all individuals within an organization be realized consistently over time.
Outstanding job performance over time occurs when: an adequate match between job requirements and individual skills and attitudes exists, a strong motivation is felt by all individuals, the social climate is favorable to excellent job performance and adequate equipment to do the job is available. These conditions are the result of complex dynamic interactions by viewing them as an integrated system.
Employees’ motivation, development, growth in responsibilities and mutual trust between employees and management are a key portion of the model. Substantial attention is given to interactive shaping of realistic expectations regarding job conditions, self realization and compensation, both material and psychological.
The management most likely to achieve excellence appears to be the one that sees its role as that of generating wealth, providing wellbeing for employees and distributing wealth fairly between shareholders and employees.

Using Complex System Dynamics Models; an Example Concerning the Dutch Dental Health Care System
E.M. Bronkhorst, T. Wiersma, G.J. Truin

Abstract: Recently a System Dynamic simulation model of supply and demand of the dental health care system in The Netherlands has been developed. This model includes major demographical, pathological, psychological, sociological and economical processes comprising the demand side. The supply side covers the availability of dentists, dental hygienists and factors which determine their productivity.
The main purpose of the model is to create an instrument for analyzing the Dutch dental health care system. A relatively simple model with e.g. 20 state variables just describing the main concepts of this system was not considered to be sufficient. Therefore, starting from a simple model, during the past decade a far more complex model has been developed. It contains for instance 440 state variables. This model has already proven to be very satisfactory with regard to its descriptive qualities. However, the necessity for working with complex models also has negative side-effects. Apart from the great effects needed constructing, validating and analyzing the model, it is well known that the more complex the model, the more difficult to communicate about its results and properties, with people for whom the model might be useful. This is even more so if it concerns people from outside the academic world (in this case for instance the dental profession or policy makers).
In this paper attention will be focused firstly on a short introduction concerning the model and its structure. Secondly, our experiences with the model will be used as an example of our ideas about how to construct sophisticated models with a high descriptive quality, while at the same time making them at least acceptable for those who might use its results, but were not directly involve in the construction of it.

Improving Education In Public Schools: Innovative Teachers to the Rescue
Gordon S. Brown

Abstract: This paper addresses the widespread belief that today’s public schools are not preparing our youth to conquer the problems of tomorrow. Although there is consensus within both academia and business that the need for reform is urgent, there is no generally accepted strategy for achieving improvement, nor is money to finance the job readily available. Creative ideas by great teachers are certainly the nucleus for reform, and, contrary to common opinion, there are many good ideas, and many great teachers.
But teachers are not the only players. All schools are dynamic systems of great complexity. Unfortunately, many essential features of school-system structures are poorly understood. As a result, well intended attempts at reform since World War II have often merely tweaked the system rather than implanting permanent improvement. Most proposals have focused on more math, more science, longer school days or more homework, without understanding why there is such small yield from what already exists in the schools. This author believes that only by a major restructuring of the relations between student and teacher, by the adoption of a new paradigm for the teaching-learning process, and by the introduction of much modern technology into the classroom, will our schools fulfill the demands that the future will make on students.
The restructuring program, described herein has been carried out in the Orange Grove Middle School in the Catalina Foothills School Districts (CFSD), Tucson, Arizona.

Anarquia-Interfacing Hypermedia and System Dynamics for Urban Management
Antonio Camara, Paula Antunes, Julia Seixas, Lia Vasconcelos

Abstract: A game for environmental urban management based on system dynamics models is being developed. Named ANARQUIA, this game uses Hypercard as a front end. ANARQUIA, considers a town managed without a government. The goal of the game, played by teams of five players operating under anarchist principles, is to manage the environment of a city optimizing environmental quality during the maximum amount of time. The game was applied to the town of Caparica, a traditional fishermen’s town in Portugal.

Exploring “Ideas”, A Multidimensional Dynamic Simulation Approach
Antonio Camara, Francisco Ferreira, Maria Julia Seixas

Abstract: There are three types of variables and relationships: numerical, linguistic and pictorial. Traditional system dynamics models are defined by a set of numerical equations which are defined from causal diagrams. Expert systems modeling has shown that one could also develop and use linguistic dynamic models. IDEAS is an integrated simulation approach that considers state of the art numerical and linguistic formulations and introduces pictorial models.
Pictorial models consider pictographs, symbols and signs defined by their color, shape, size and position. Operations in these models include reproduction, mutation and fertile and sterile encounters, following a biological analogy.
IDEAS may be applied to variety of problems. Two simple natural resource management models are presented to illustrate its potential applications.

The Cost of Instability in Defense Spending
Rolf Clark

Abstract: Budget instability like that seen in defense over the past 20 years cost defense about 15 percent of its force levels. This result derives from a dynamic simulation of the defense resource allocation process. The simulation assumes fiscal constraints, and uncertainty in planned future budgets. Inefficiencies depend on the severity of budget changes from budgets planned to those actually received. The effects of instability on the Army, Navy, and Air Force are shown to be quite different, with major determinants being the relative size of acquisition budgets and the life span of assets.

End User Computing Growth and Management in Organizations
Thomas D. Clark, Jr., Victoria L. Mitchell, Karen L. Williams

Abstract: The research reported in this paper involved the study of end-user computing in typical organizational settings. An extensive literature review was conducted and a number of executives consulted about the effects and position of the end user computing phenomenon within their organizations. The data served as a basis for a system dynamics model that focused on the forces that create growth in end-user computing. The “tiered infrastructure” of computing in the organization is demonstrated and discussed. One problem with the study of end-user computing has been the lack of testable theory about it. The majority of research has used case studies or relatively narrow field studies as a methodology. The key purpose in using the system dynamics approach has been to provide a vehicle to capture the ideas cataloged in the various case studies and cast them in the causal map format as a dynamic theory of systems organization and behavior.

A Model for Future HIV/AIDS Incidence in New York City
Catherine M. Crawford

Abstract: An earlier effort at projecting the future incidence of AIDS among adult homosexuals in New York City is reviewed in the light of data for 18 more months. One of the previous models holds up well against the new data. The model projects a temporary leveling off or reduction in new AIDS incidence, followed by a long, slower resurge. The HIV transmission probability, given an infected partner, is estimated at around 0.003. This level is barely sufficient to sustain endogenous growth in the homosexual population. From this it may tentatively be concluded that the epidemic will not start to spread exponentially among the heterosexuals provided they engage in less risky sexual behaviors than homosexuals.

A Behavioral Simulation Model Of Single And Iterative Negotiations
Thomas A Darling, George P. Richardson

Abstract: A simple simulation model demonstrates that the outcome of a negotiation may critically be affected by (i) the structure of the negotiating problem — the joint distribution of negotiators’ evaluations of potential settlements; and (ii) the negotiators’ tactical approach to the problem — the decision rules that guide the choice of concessionary offers made during the bargaining process. Hampered by cognitive limits and faced with imperfect information about the other party’s interests, negotiators may relay on simple heuristics in choosing among possible concessions during the negotiating process. The model of single negotiations is extended to examine how the outcome of one negotiation may impact future negotiations. Focusing on two negotiator interests — concern for self and concern for fairness — the model shows how adjustments in tactical decision rules from one negotiation to the next sometimes leads to an unwarranted deterioration in the parties’ relationship.

Introducing System Dynamics in Schools – the Nordic Experience
Pal I. Davidsen, Margaretha Bjurklo, Hugo Wikstrom

Abstract: This paper contains a snapshot of some of the activities in the Nordic countries, regarding the utilization of system dynamics as a basis for educational development. In particular we provide a brief description of the background for introducing system dynamics into public education, point out software developed in Norway for this purpose, present some of the methodological issues addressed and summarize the classroom experiences reported by two Swedish teachers.

A System Dynamics Approach to the Structure and the Economy of Fur Farming and Trade
Pal I. Davidsen, Leif Jarle Asheim

Abstract: The purpose of this paper is to explain the expansion and the contraction of the Norwegian mink supply in an expanding market, as a consequence of the mink pelt price and the mink farming costs. Significant variations in price, and time lags between capacity adjustments, breeding decisions and the fur sales, makes fur farming speculative, and only a small fraction of farmers generate their main income from such farming.
Moreover, we estimate, using a Bayesian approach, the farmers’ loan fraction, their response to profitability and a few delays in economic perception and capacity adjustments. This model is the first one in a series under development, portraying the national and the international fur production and market. In addition to reflecting the Norwegian mink production, this model may be considered generic for international fur production. An international demand model is under development.
Finally, empirical evidence indicates the relevance of our model to the current development in the Danish mink farming and to the Norwegian fox farming.

Building an Organizational Learning Environment
John P. Davulis, Ulrich Goluke

Abstract: This paper highlights the authors’ attempts to develop a software environment to help analysts (1) improve their understanding of the dynamics of the energy system and (2) build confidence in a complex, highly defined system dynamics model of energy supply and demand. The envisioned organizational learning environment has at its center a human interface design from which the user controls simulations, exercises, guided tours, model modifications, experiments, etc. While efforts to date have focused upon developing a micro-computer based system, the learning environment will be extended to workshops in the future.
Any energy simulation model can be intimidating to users who lack a sufficient understanding of supply/demand concepts and knowledge of the computer language employed. The situation becomes more complicated as the complexity of the simulation model increases and new operational (or system performance) concepts are introduced.
We provide a brief description of an energy supply/demand simulation model, ENERGY 2020, that central Maine Power uses for demand forecasting. Developed by George Backus and Jeffrey Amlin, the long-term energy policy model is used by analysts for both utility-level planning as well as state energy policy analysis. The model is coded in PROMULA for IBM-compatible personal computers.
The problem is to create a means by which new users can explore and understand the complexity of the energy system (the ENERGY 2020 Model) in a structured and non- intimidating manner. The goal is to bring the users to a higher level of understanding, mastery, and ownership of the model.

Manager Training Environment For Setting Complex Problems
D.J. de Tombe

Abstract: Managers of profit and non-profit organizations are often confronted with complex problems. Ill-structured diffuse problems which involve more than one domain. Problems that are hard to set let alone to solve. They differ a lot from the structured domain related problems we used to work with in school. In education little attention is given to the training of complex domain exceeded problems.
In order to be able to get domain exceeded problems, managers should get the opportunity to experience this kind of problems setting in a special learning environment. In order to enhance transfer the learning environment should be as close as possible to the real-life situation. A conference room can be a good learning environment in which managers can be trained to set complex problems. Setting complex problems is teamwork. It demands knowledge of various domains. Therefore different experts should work together in making a conceptual model of the problem. This can cause serious communication problems.
A free form game with a case as a prototype of a complex problem can be a good didactical instrument for training problem setting. Problem setting is defining the scope of the problem, the domains and the level of aggregation. What can be the role of computer programs like decision support system, simulations, expert systems and general problem solvers like SOAR and ACT* in the setting of domain exceeded problems?
In problem setting the computer can play a part by information retrieval. An expert-system as front-end of a database can assist the experts to get the relevant data out of the database in order to form in cooperation with each other a conceptual model of the problem.

Negotiating Reality: Using Language and Influence Diagrams To Articulate Knowledge
Julia M. Di Stefano

Abstract: This paper analyzes some of the recent literature on language and information processing, focusing on graphic representations which model the interactions between those transmitting and those receiving messages. Having examined four models concerning interpersonal communication and information processing, I concluded that today’s most promising research on dyadic communication is that based on the model of cybernetic control systems. Most useful are the models which 1. recognize the need for the speaker and listener to commit themselves to continue the dialog until they arrive at consensus and 2. also recognize that the recursive interactions between the two individuals are based on the principle of feedback, which, in the words of Norbert Wiener, “is the property of being able to adjust future conduct by past performance” (Wiener, 1954, 33).
“A fool sees not the same tree a wise man sees.” William Blake (1790)
For much more than 200 years poets and philosophers have been struggling with the mysteries of the human mind, imagination and perception. Increasingly, researchers in artificial intelligence (AI), in their attempt “to design computer tools suited to human use and human purposes” (Winograd and Flores, 1986, 8) are studying what happens when two people use language. What happens when the fool tries to communicate to the wise man about the tree the fool sees? And how can the wise man communicate about the tree he sees? We now know that Korzybski was correct in recognizing that “The map is not the territory,” and that each individual carries in his/her own head maps or mental models of reality formed by that individual’s own life experiences. In other words, the word or symbol is not the reality it represents, and the words represent different interpretations of reality to each individual. Small wonder then that our lives, professional and personal, are fraught with miscommunication.

Translating Systems Thinking for People in the World of Business
Linda Dolny

Abstract: New ideas are being implemented in business today with little thought of being given to the philosophical and emotional shifts that everyone in these organizations must make if American business is to succeed as an industrial power.
For programs such as continuous improvement, peer review, team concept and total quality management to succeed, an understanding of systems thinking and system dynamics is necessary. It is at the root of these philosophical shifts. Business needs people who can translate a complex, technical and sometimes frustrating subject. This requires innovative and creative ways of teaching adults at all levels in the workplace.
This paper deals with some of these methods and brings together a list of resources that have proven successful in communicating these ideas.

The Dynamics of Behavior and Motivation
Gerard Donnadieu, Michel Karsky

Abstract: MODERE (MOtivation, DEsire, REality), the model described in this paper, is the result of an international cooperation between a System Dynamicist and a specialist in applied Social Sciences.
This model is based on several current theories of human behavior and motivation, some of which were developed several decades ago, others more recently, but all of which have proven in daily practice to be helpful in the analysis and understanding of human motivation and corresponding behavior in the context of real environment.

Regional Energy Planning
I. Dyner, I.M. Giraldo, A. Moreno, D. Valencia, A. Lobo

Abstract: The general objective of this paper is to present a method for integral regional energy planning within the frame of national politics on energy and economic development.
A historical database and energy balances of supply and demand allow to analyze and model the dynamics of the sector and its interaction with other economic sectors and social and technological variables.
This paper contributes to understand how to mix econometric and system dynamics techniques. Whenever data is abundant and reliable, statistical analysis and modeling could be useful to reproduce historical behavior, but in order to study possible future scenarios it is required to set hypotheses on parameters evolution, probably based on system dynamics methods.
On the other hand, in order to model interactions among demand, supply, prices and other economic variables, system dynamics is particularly suitable. In this context, techniques that seem to be confronted appear to be as each one complementing the other.
The model was implemented by the Department of Antioquia in Colombia, which possesses a considerable amount of energy resources, particularly hydroelectricity. Specific methodological aspects for planning energy resources were considered to analyze the feasibility to introduce new elements such as gas.
Recommendations on policy considered integral development of different regional energy resources in accordance with supply potentials, requirements and economic efficiency.

Causal Tracing: One Technical Solution to the Modeling Dilemma
Robert L. Eberlein, David W. Peterson and William T. Wood

Abstract: A central dilemma for system dynamics is the fact that the same human limitations that motivate the use of models also make models hard to create, debug and even hard to use. Two commonly proposed escapes from this dilemma are education and generic models. We propose a third, technical approach and give an example. The example approach, “causal tracing,” is a computer tool that makes it much easier to find the feedback loop or input responsible for a given variable’s behavior. Correctly implemented, this tool reduces the time required for causal tracing by a factor of 10 to 100. The payoff is faster and more accurate creation of models and use of models.

Developing a Communication-Oriented Ontology for Using Computer Modeling in Negotiation
John R. Ehrenfeld

Abstract: Computers have been used as tools to facilitate complex negotiations and to resolve disputes that arise in that context. These past efforts have been limited by a view of both negotiation and of computers arising out of out pervasive technical rationality paradigm. This paper, an initial inquiry onto a new ontology for design, suggests an alternative model for negotiation and disputes based on an interpretive, communicative model that points to a richer set of possibilities for computers than merely the provision of information to the parties involved. In particular, the concepts of communicative rationality, developed primarily by Habermas, point to specific functions for computers in assisting the parties in establishing claims in rational domains beyond the positivist domain of technical rationality.

System Dynamics as a Foundation for Pre-College Education
Jay W. Forrester  

Abstract: Educational systems are serving poorly. The public response is apt to call for more of what is already not working, rather than seeking fundamentally new and more effective approaches to education. Promising new approaches are now being successfully demonstrated–system dynamics as a framework for giving cohesion and meaning to individual facts, and “learner-directed learning” to harness the creativity, curiosity and energy of young people. Together these reverse two fundamental roadblocks in traditional education. System dynamics reverses the educational sequences where deadening years of learning facts precede the use of those facts. System thinking through computer simulation introduces synthesis (putting it all together) based on facts that even elementary school students already have gleaned from life. Learner-directed learning reverses the process of a teacher’s lecturing facts at resistant students; learners take the leadership in exploration, information gathering, and creating a unity out of their educational experiences with the “teacher” acting as guide and participating learner and as a resource person.

Policy Design in Oscillating Systems
Douglas Franco

Abstract: Policy design is a key issue in System Dynamics. It consists in the introduction of changes into the system, in order to track the objectives trajectories. Those changes are either numerical or structural. Oscillations require more structural than numerical changes.
Oscillatory systems are usually undesirable because of the ups and downs they bring into the system components. For instance, the labor instability in the Labor Backlog model. (Lyneis 1980, pp 182-210).
Oscillations have been found very insensitive to numerical changes in the parameters (Graham(1977)); but, they have been found very sensitive to changes in the sign, and presence of them. Where presence denotes changes from zero to something. Therefore, the design of effective policies to control oscillations is a problem that goes beyond the Classical Optimal Control Theory of nonlinear systems (Coyle 1985), and it belongs to the Structural Control Theory. However, the Optimal Control Theory is a valuable tool to model the control structure. (Ozvern; Cuneyt; Sterman J., 1989, pp 130 – 147), (Keloharu 1982).
In this paper, some guiding principles for policy design in oscillatory systems are presented. The construction of the management structure is illustrated.
Two classical models: Labor- Backlog and the version of Kondratieff cycles presented by (Mosekilde; Rasmussen; Sterman (1985)), serve as prototypes to try the proposed principles on.

An Appraisal of System Dynamics in Assessing the Impact of Computer Information Systems
A. W. Gavine, E.F. Wolstenholme

Abstract: Any attempt to impose a computerized information system (CIS) upon an organization requires an assessment of its impact in terns of costs, benefits and procedural change. This paper briefly describes the capacity of the System Dynamics technique to capture the essence of an organization’s management structure and to assess, from a system-wide perspective, the impact of imposing a CIS. The paper employs, as a basis, two case studies set in a military context and a particular methodology developed with these applications in mind.
The efficacy of system dynamics in assessing the true impact of CIS on the enterprise and the user, is appraised, based on a set of independent criteria. The significance of the methodology for CIS development generally is considered and encompasses an elaboration of its place in the software life cycle.

Cognitive Biases, Modeling and Performance: An Experimental Analysis
Nicholas C. Geogantzas

Abstract: Producing (or constructing) strategic decision entails numerous cognitive and other bounds on human rationality, which often cause systematic errors and biases. Yet among the economic and management models used in strategic planning, few try to explain why decision makers remain so stubbornly and extravagantly irrational, ignoring logic, principle of optimization, and even postulated self-interest. One explanation may be the difficulty of extending methods used to study individual choice and decision-making behavior to dynamic group settings. This experimental analysis assessed the impact of cognitive simplification processes on the performance of 118 graduate business students who worked in a simulated strategic context. Randomly assigned to twenty-four teams, the subjects run international conglomerates with multiples actors, feedback loops, non-linearities and time lags and delays. The teams’ interaction, expectations, choice and model selection produced results that systematically diverged over time. Within a crossed factorial design, these results support the hypothesis that cognitive biases interact with strategic management models to influence performance. Poor performers chose models that reinforced their cognitive limits and bounds. Conversely, good performers constructed models which helped them recognize and overcome the negative effects of cognitive simplification processes. They produced effective decisions, not by optimizing functions, but through searching for recognizable patterns when they received feedback.

A Nonequilibrium, Nonlinear Approach to Organizational Change
Jeffrey Goldstein  

Abstract: Equilibrium models of organizational change are contrasted with a new model derived from nonequilibrium, nonlinear and dynamical system research. Kurt Lewin’s force-field theory is used as an example of the traditional equilibrium-seeking model. The characteristics of the new model are: nonlinearity; change in attractors; environmental gradience and nonequilibrium constraints; internal gradience; bifurcation; and self-organization. Advantages of the new model are described.

Freud’s Theories in the Light of Far-from-Equilibrium Research
Jeffrey Goldstein

Abstract: Freud’s theories are shown to rely on an equilibrium-seeking model derived from nineteenth century physics. This model is traced through Freud’s concepts of neuronal inertia; the pleasure principle; the primarily and secondary systems; instincts; the compulsion to repeat; the Nirvana Principle; the death instinct; and resistance. Quandaries concerning adaptation as well as the delay of discharge are attributed to the limitations of Freud’s equilibrium model. Next, the main features of far-from-equilibrium research are recounted, primarily from the work of Prigogine but properties of chaotic systems. The concepts of self-organization and dissipative structure, sensitivity to the environment, energy exchange, and nonlinearity help resolve the quandaries of adaptation in Freud’s theories.

Discontinuous Innovation Diffusion Analysis
M. Govindarajan, N. Ramaswamy

Abstract: The market place derives its dynamism from the inherent willingness of a consuming population to innovate. Many technological firms have been exploiting the consumer markets with their technology based discontinuous innovations. Several companies have been marketing small computers that, in pricing and programming structure, are amenable to adoption by individual consumers. This study is an attempt to study the diffusion/adoption process of personal computers in the Indian context from both a behavioral theory and marketing strategy perspective.

System Dynamics Combined with Monte Carlo Simulation
Norodd Hagenson

Abstract: The author suggests that a combination of System Dynamics (SD) thinking combined with Monte Carlo simulation models can yield new insight and be a useful tool. Systems with feedback loops often contain elements of uncertainty or randomness which can be modeled by Monte Carlo methods. On the other hand, feedback loop analysis could certainly benefit Mont Carlo simulation models. Studying single runs of SD models may yield considerable insight. But when a parameter is set to a constant or average value, variance is lost. Variance plays an important role in portraying any risk involved in a system.
These points will be illustrated by an example from an analysis performed at NDRE where SD thinking applied to a Monte Carlo model was the key to solving an important question. The example concerns dimensioning Airfield Damage Repair (ADR) capacity on Norwegian airbases subject to hostile attacks. One key question was: How long time must the runway be open per day in order to obtain acceptable operating conditions for air defense fighter aircraft? Does there exist some minimum threshold?
The main feedback loops concern damage on the runway and attribution between attacking aircraft, ground based air defense and defending air defense aircraft (depending on open runways). The elements of randomness concern the damage inflicted on the runway, and the repair time.
It is shown that under certain conditions (too low repair capacity) there is a risk of defending aircraft either being pinned in or wining the battle. The feedback loop between defending aircraft and the runway state plays a key role along with the randomness in the early damage. The statistical distribution of the fraction of day open may over time develop into having one peak close to 0 (closed), one peak close to 1 (open), and little in between. The average value is merely a weighted average between two extremes.
On the other hand, with sufficient repair capacity, the risk of being pinned in was eliminated. The effects were easily understood when thinking in terms of feedback loops, but the element of randomness was essential in order to recognize the threshold when the risk of being pinned in occurred.
The author believes that a similar combination of techniques could benefit traditional SD models, too.

The Application of a Dynamic Methodology to Assess the Benefit of a Battlefield Information System
Simon M. Henderson, Eric F. Wolstenholme

Abstract: This paper describes the application of the system dynamics method to the study of a conceptual military Command, Control, Communications and Information System (CIS) in the early phases of procurement. The work from which this paper was drawn constitutes one half of two parallel study streams to investigate the usefulness of the system dynamics technique in this area (the work did not attempt to assess the CIS itself). The conclusions from both streams are discussed in a separate paper (Gavine, 1990).

Volume 2

Cocaine Use in America: The Evolution of a Dynamic Model
Jack B. Homer

Abstract: This paper describes the development of a System Dynamics model of cocaine use in the United States of America. The model’s evolution is presented chronologically as a story in which theory and data have interacted and changed over time. This story may be particularly instructive for those System Dynamics modelers working, under conditions of some change and uncertainty, on extended studies of social behavior. An approach which combines skepticism, flexibility and attention to detail throughout such studies is advocated. When a variety of alternative theories and hypotheses is available, as in many social science applications, it is important to gather a wide spectrum of relevant evidence in order to reduce the risk of model misspecification and improve the study’s effectiveness.

System Dynamics Mapping Applied to Influence Mental Models: A Case Study
Anil B. Jambekar

Abstract: This paper is based on the results of experience working with a small firm, which experienced loss of key customers due to quality problems. One another large customer threatened to take their business somewhere else. These customers had been doing business with the firm for at least 10 years. It is at this point in time, i.e., Summer of 1986, the author was brought in to help the management develop a quality assurance program. After initial discussion, it became clear that the clamor for quality as found in popular and professional media did not permeate the management thinking. The expectation was to have someone install SPC charts and initiate Quality Circle Activities. Ultimately, the responsibility for maintenance of these black boxes would be assigned to their Quality Supervisor. It was clear that if the plant manager and the production supervisor did not assume the responsibility by making serious efforts to develop the quality perspective and did not involve in the learning process, the probability of successful implementation would be close to zero. The paper discusses how system dynamics symbols were used to map the mental models and to provide focus for generating dialogue. There was never any need to build a full scale model.

Challenge and Opportunity: The View of Management on the Employment Problem of China
Xiaodong Jiang

Abstract: The problem of labor employment is a major problem of global issues. It is also an especially pronounced problem in a country such as ours, with tremendous population and relatively poor background of economy. Under the leadership of the Central Committee and the State Council, and with the coordinated effort of all the localities, departments in society, we have achieved in the area of labor employment a tremendous success that has captured the attention of the entire world. However, owing to some reasons of irrational policies, we have also got the experience of failure in it.
The problem of employment is becoming more and more urgent and serious with the policy of deepening reformation. Showing by the experience and theory, any effort that merely aims at resolving the employment problem can be effective only in a short-term and have less success when it faces new situation.
To resolve the employment problem at present, we must begin with our employment philosophy and set up a system of strategic management in terms of employment that keeps on defending and promoting the stability and unity of society. The tremendous population of China is both a huge obstacle and a great motive force for the development of our society. We are facing selection– challenge and opportunity– that only depends on our effort and creation.

The Development of System Dynamics in France
Michel Karsky

Abstract: In this paper, we will sum up the situation, the achievements and successes of System Dynamics in France, but we will also analyze some of the practical difficulties to which it is confronted.
This expose will include three parts: -the teaching of S.D.,-its practical applications, particularly within industry,- an example of a successful application, illustrating some the practical difficulties in using our S.D. models.

Total Quality and System Dynamics: Complementary Approaches to Organizational Learning
Daniel H. Kim

Abstract: Total Quality (TQ) has received a great deal of attention in the business world in recent years. American companies, slow to enhance it at first, are joining in the TQ movement as they become convinced of its ability to enhance competitiveness. TQ is based on a philosophy and set of tools that focus on continuous improvement, and the fuel that drives the quality improvement engine is measurable data. TQ can be viewed as an effective means for advancing organizational learning whose current bag of tools are especially well-equipped to advance learning at the operational level. These TQ tools, however, are not as effective in dealing with problems that are ill-defined, where variables are fuzzy and hard to quantify or measure, where time delays are long, and where the system is loosely coupled but highly inter-related. These types of issues are precisely the ones for which system dynamics is well suited– issues of a dynamically complex nature where feedback loops drive the behavior of interest. Complementing the TQ approach, system dynamics focuses on advancing organizational learning at the conceptual level. Organizational learning, however, requires learning at both the conceptual and operational level. This paper briefly lays out the background of both fields, compares their common holistic approach, and provides examples of possible integration of the two approaches to enhance organizational learning.

Management Decision Support Simulations for Technology Investment Planning
Thomas Klaue

Abstract: Today’s investment decisions in the production industry require – as this industry becomes more and more integrated by information systems – a careful long-range planning. Investment projects have to be seen within the network of their environment, and their interdependent impacts can be assessed in a systematic investigation, as part of a Technology Strategy. Furthermore a Systems approach helps to clarify the complex process of Technology Innovations.

Modeling Complex Economic-Ecological Interactions in the Agricultural Sector in the Netherlands
Onno M. Knol, Geert O. Nijland, Marcel W.L. Bovy, Pieter Jan M.T. Stallen, Floor M. Brouwer, Paul J.J. Veenendaal

Abstract: In the Netherlands, ammonia emissions from agriculture contribute significantly to the acidification of soil and water. A 50-70 % reduction of these emissions within the next ten years is one of the great challenges for agricultural practice. This paper presents an outline of a combined system dynamics-optimization model of this problem, which will be used to study the effect of three different abatement scenarios.
A concise analysis of the acidification problem is given. The main causes of the current environmental problems of the agricultural system are described.
Next the choice of modeling techniques is discussed. System dynamics was applied because of the many (non-linear) interactions and delayed feedback relations in the agricultural system. The flexible responses to policy measures shown by the system’s actors in the past, urged including economic optimization procedures in the model.
Some remarks are made on technical problems, using Professional DYNAMO linked with a FORTRAN optimization module.
The model contains an integrated description of the ecological problem in its economic context, with links to the related policy field of eutrophication. Interaction with reference groups consisting of experts and governmental officials, and interviews with representatives of interest groups have greatly contributed to the development of the model.
Only tentative conclusions can be presented at this stage, as results are still being worked on. However, a better understanding of the acidification problem had been reached, by the reference groups and the researchers. An interesting aspect is the link between emission reduction policy scenarios and possible shifts in land-related agricultural activities.

Complex Dynamics in Bacterium-Phage Interactions
Heidi Kristensen, Lars Risbo, Erik Mosekilde, Jacob Engelbrecht

Abstract: In order to examine different strategies in the search for more resistant bacterial cultures, we have simulated a variety of growth, mutation, competition and selection processes that may arise in interacting populations of bacteria and phages. Our model considers a culture containing several variants of the same bacterium, each sensitive to attacks from a specific phage. The culture is growing in a chemostat with a continuous supply of nutrients. Surplus bacteria and vira are removed through dilution. Depending on the rate of dilution, the model exhibits a stable equilibrium, self-sustained oscillations, quasi-periodic behavior, deterministic chaos, or extinction of certain species. The model can also be used to describe evolutionary changes in the composition of the microbiological system.

Organizing Home Care in the Future: Using System Dynamics to Assess Organizational Changes
Hans A. Kuipers, Jac. A.M. Vennix, Sjoerd Kooiker

Abstract: In the near future the organization of home care in the Netherlands will be reorganized. In order to show some of the dynamic consequences of these changes, a preliminary model was developed. In this paper we will discuss the use of the preliminary model to elicit the ideas from policy makers about future changes in the organization of home care. This is done by conducting a Delphi study to keep the time investment of the policy makers as limited as possible.

Simulation Experiments in Corporate Planning For a Steel Plant
Rakesh Kumar

Abstract: Corporate planning process uses tools that are inadequate for present day environment of complexity and rapid change. Managements must supplement their intuition and experience with planning using corporate planning models. The key to assist managements to plan effectively lies in better and greater use of computerized corporate planning models. System Dynamics is one of the latest modeling innovations that provide a flexible framework in which to view the interdependent operations of a system in a coherent and orderly manner. With this in view, a modular approach using System Dynamics principles has been adopted to model an integrated steel plant. The model so developed has been applied to conduct simulation experiments in the area of corporate planning. For the purpose of modular construction the corporate model has been considered to be constituted of three modules of marketing production and finance. The production system has been taken for detailed investigation in this model. The physical flow of men, materials and machines in various capacity centers of the steel plant have been separately modeled and then integrated. The financial consequences of these flows have also been considered to simulate indicators of corporate performance such as profit and return on investment. The model has been applied to study the behavior of a large number of variables of interest in response to controllable as well as uncontrollable variables. The model has also been used to conduct “what if” type simulation experiments. It also has been used to identify debottlenecking priorities and evaluate modernization, expansion and debottlenecking projects. 

Urban Growth Modeling Under the Limitation of Transportation Facilities – Case of Bangkok
Koji Kuroda, T.H. Mark Tsaur

Abstract: This study introduces the concept of linking together the Urban Transportation Planning (UTP) and urban Dynamic (UD) models by means of some key indices, such as transportation accessibility, population and economic development (i.e. Gross Provincial Project, GPP). It is found that, by repeating the procedure several times, a certain level of socio-economic development can be achieved which will reflect future transportation conditions in the city. In addition, this study also found some new MOE’s (Measures of Effectiveness) concerned with socio-economic development which can be used to measure and evaluate the effectiveness of transportation investment policies on urban growth.

Simulation of Interactive Business Strategies and Operations
U. La Roche, Georg Fischer  

Abstract: There is growing application of simulation to practical training in management of business on strategic and operational level. In use are simple models where a business is immersed in a much bigger market which sets the context, and others where the context is set dynamically by the actions of the competitors (3), (4).
The simulation exercises reported are centered on the question of how to appreciate the impact of a reactive context in managing a business (1). The Implementation of Simulation with continuous simulation (Dynamo, etc.) gives easy appreciation of the impact of operational dynamics in a reactive strategic context.

System Dynamics Analysis as a First Step to Implement Flexible Operation Manufacturing
U. La Roche, Georg Fischer  

Abstract: Changing and improving manufacturing operations in such a way that optimum flexibility is achieved is a standard task nowadays.
Enhanced by the availability of CIM concepts and techniques the pervading paradigm how to solve the problem tends to be based on the structure of the data processing systems.
Since management of data systems and inventory are often handled as different functional entities the complex relations of the effects of goods flows and data flows that make up the dynamic behavior of the operations as a whole often evade appropriate treatment.
CIM related practice, doing the easy things first, is to follow a hands-on bottom-up approach in optimizing first individual process steps using preferably discrete simulations and then trying to add those optimized islands to a system.
If we follow the original ideas of J. Forrester and his group a quite different approach is proposed. In a combination of top-down analysis and bottom-up implementation we would first apply S.D.A. with continuous simulation to understand the operations in their context as is. After optimization we would implement the upgraded system bottom-up.
The approach used two levels of imaging the real system to a model. Top level simulation with a continuous model is used to analyze and define dynamic behavior, feed back loops and embedding of operations in the context of sales and supply.
Bottom level simulation thereafter serves to check detailed implementation of single tasks within the dynamic specifications arrived at by the continuous overlay model.
The procedure allows to exploit the strong points of both continuous and discrete simulation, namely analysis of the dynamic behavior of complex and intertwined systems of flows of goods and data on the one hand and detailed analysis of process steps involving clearly defined operations with work pieces handled.
A few examples serve as illustration how this first step of a top-down optimizing with the aid of S.D.A. worked in defining manufacturing systems as a whole before starting bottom-up implementation.
As the S.D.A. model is a lumped together model of the real system, its use for on-line prognosis can be a welcome byproduct.

On Reliability Improvement of S.D. Model
Li Zhouwei

Abstract: This article expounds the necessity of improving reliability of the S.D. model and based on the concepts of “Big System”, “Strictness” and “Parameter Accuracy” when developing a model puts forward some tentative methods to improve reliability of the S.D. model.

The Application of S.D. – I/O/O Model to the Improvement of Regional Industrial Structure and the Economic Development
Li Zhou Wei, Zhou Yong  

Abstract: This paper introduces an effective Model, which is the combination of the methods of S.D. – I/O/O (input-occupancy – output) in studying the improvement of regional industrial structure and the problems in economic development.

Designing a Manufacturing Function as a Competitive Weapon Using the Reference Approach
Julio Macedo

Abstract: The reference approach is a new system dynamics support method. This paper explores the possibility of using this method to design strategies that transform the production function into a competitive weapon. First, the requirements of a manufacturing strategy design tool are identified. Next, the manufacturing strategy of a case study is designed using the reference approach. Based on this application, the possibility of using the reference approach as a tool for the design of the manufacturing strategy is discussed. The analysis concludes that the reference approach is a valuable tool for the computer aided design of a manufacturing strategy.

Economic Policy and Monetary Policy: A System Dynamics Conceptualization
Jose A. D. Machuca, Carlos Roman

Abstract: The progress experimented by the Systems Approach and by its instruments is in our judgments well known and undeniable. Nevertheless, the economic analysis seems to remain immune to such advances and is maintained, for the most part, within an analytical-reductionist framework quite far from reality. In this work, we intend to use the Systems Approach and, within it, the methodology offered by the stage of conceptualization of System Dynamics modeling in order to relate the different objectives of the Economic Policy in Spain, as well as to relate those objectives with the Monetary Policy, whose goals should always be subordinated to the former. By this example, we will try to show the weaknesses and deficiencies which appear with the conventional approach traditionally used in the study of the Economy.

Dynamics of Flow of Scientist in Government Research Establishments
Purnendu Mandal, Pratap K. J. Mohapatra, Ashok Jain, V.K.C. Sanghi

Abstract: The paper reports the findings of an ongoing project on manpower modeling for a government research organization. The flow of scientists from one grade to an other has been modeled considering recruitment, promotion and retirement policies. Age distributions of scientists have been incorporated in the formulations and it has helped in retirement calculations from various grades. Future scenarios with alternative policies are generated and discussed.

Systems, Science, and Schools
Ellen B. Mandinach, Hugh F. Cline

Abstract: The SYSTEMS Thinking and Curriculum Innovation Network (STACI n) Project is a multi-year implementation and research effort intended to examine the impact of implementing and learning from a systems thinking approach to instruction and from using simulation modeling software. Systems thinking is an analytic problem solving tool that can be integrated into courses to enhance instruction. The purpose of the project is to test the potentials and effects of using the technology-based approach in precollege curricula to teach problem solving skills as well as content-specific knowledge .

System Dynamics in Strategic Planning
Ali N. Mashayekhi

Abstract: One approach to strategic planning is called “gap analysis”. In gap analysis, the future of an organization under its present strategy is forecasted. Then, objectives, or the desired future for that organization, is identified and the gap between the objectives and the future conditions under current strategy is determined. Finally, new strategies which will help to close the gap will be designed. System Dynamics can be used two important ways in the gap analysis. First, System Dynamics model can be used to forecast the future of an organization under current strategies and identify the gap between that future and the objectives. Second, System Dynamics model can be used to examine how much each strategy can be helpful to close the gap. The application of System Dynamics in gap analysis method is shown by an example of developing a strategy for water resource development in Iran.

A Numerical Sensitivity Analysis of Process Delay in the Incarceration of Juvenile Offenders
Paul E. McCold

Abstract: The analysis unit of the New York State Division for Youth is responsible for providing admission forecasts to allow the Division to anticipate changes in demands for facility space. Arrests of the most serious offenders had shown a 38% growth between 1987 and 1988, yet the annual admission rate declined 19%. In an effort to understand the reasons and account for this difference, a Stella model of the offender processing system was created and simulated using historical exogenous time serious inputs. Utilizing linear processing ratios and simple causal assumptions, the model reproduced the historical admission rates without any changes in processing trends. The results indicate that the admission rate was proportional to the arrest rate, given the long lag time involved in the conviction process. Further, the growth in cases backlogged due to an increase in processing time during 1987 did not imply that a small increase in processing resources would cause a surge of admissions.

Time – A Key Factor in Corporate Strategy
Peter M. Milling

Abstract: Empirical analyses indicate that the firm which is the first in bringing new products to the market has a major competitive advantage. The development time for sophisticated and high quality products is shortening. The time span of the market cycle is decreasing, and for high technology firms, even rather short delays can cause a deep cut in the overall profit performance. In the “Factory of the Future” the capability for immediate and reliable delivery of custom designed products is a crucial aspect.
Speed is becoming a decisive factor for corporate management. In Management Science, however, this development is not yet taken into account adequately. Different stages of the same process are still analyzed separately. Models of research and development e.g., do not investigate how delays influence the market performance of the eventually achieved product. Studies of innovation diffusion focus solely on the market cycle, thereby neglecting the lengthy and costly R&D processes. With such a limited perspective, those models must fail to support effectively decision making in a dynamic high technology environment.
The paper discusses System Dynamics’ role in such a setting. It presents a model for innovation management which integrates the stages of R&D with the production and marketing cycle. It is designed as a microworld for learning about the system and for studying possible ways of influencing its behavior. The model consists of two modules: a C-written algorithm, based on biological evolution theory, maps the firm’s research and development processes; the second module is a Dynamo-representation of innovation policies and market dynamics. Both modules are tightly coupled through flows of information. Their interactions allow the testing of corporate strategies for R&D planning and innovation management.
Although still in the development stage, the model provides insights into the timing of decisions. The results from this integrative view underline the importance of speed in the strive for competitive advantage.

Modelling the Oil Producers: Capturing Oil Industry Knowledge in a Behavioural Simulation Model
John D.W. Morecroft, Kees A J M van der Heijden

Abstract: A group of senior managers and planners from a major oil company met to discuss the changing structure of the oil industry stemming from the moves of traditional producers into refining and retailing. This broad ranging discussion led to a system dynamics simulation model of the oil producers. The model produced new insights into the power and stability of OPEC (the major oil producers’ organization), the dynamics of oil prices, and the investment opportunities of non-OPEC producers.
The paper traces the model development process, starting from group discussions, to flip chart drawings, to STELLA maps and finally to working simulations models. Particular attention is paid to the methods used to capture team knowledge and to ensure that the STELLA models reflected opinions and ideas from the meetings. The paper describes how diagrams of behavioral decision functions were used to collect ideas about the ‘logic’ of the principal producers’ production decisions. The diagrams served as a record of the meetings and the basis for first-cut STELLA maps. A selection of diagrams is used to illustrate the content of the model.
A sub-group of the project team was involved in developing and testing an algebraic model. The paper shows partial model simulations similar to those used by the sub-group to build confidence and a sense of ‘ownership’ in the algebraic formulations. Further simulations show how the full model can simulate thinking about producers’ behavior and oil prices.

System Dynamics and Decisions Under Uncertainty
Erling Moxnes

Abstract: The theory of decisions under uncertainty share basic assumptions with system dynamics. Both methods require that decisions are based on only available information, and both methods focus on the development of policy rules that improve system performance. Both methods have other implications for parameter estimation than conventional deterministic analysis. Fluctuations are frequently studied in system dynamics, and fluctuations and randomness are of great importance for decisions under uncertainty. Decisions under uncertainty can be studied by analytical methods, dynamic programming and Monte Carlo simulations. The latter method is quite easily applied to system dynamics models. Using Monte Carlo simulations we show that uncertainty has important implications for decisions influencing the “greenhouse” effect. Note that risk aversion is not an issue in this example. The theory of decisions under uncertainty brings new qualitative insights to system dynamics, and facilitates quantitative improvements of policy rules. Referring to or applying the theory of decisions under uncertainty might help to get a wider academic acceptance of system dynamics models, which are often thought of as being realistic but quite uncertain. The principles of system dynamics might bring the field of decisions under uncertainty in the direction of greater realism. The focus on real life interpretation of system dynamics models is most useful for the application of apriori information. Apriori information is needed to establish important autocorrelation in cases where short time-series do not contain sufficient information.

Computer Simulation of Shipbuilding Production Process Management
Ante Munitic, Tonko Bakovic, Dusan Ramic, Slavko Simundic

Abstract: The business-production managements of shipbuilding- PPBP, namely with one shipyard, in today’s too complex business conditions, is one of the most complex management organization systems. For this organization system, the intuitive collective management is not efficient enough especially today. For the management of such complex systems it is necessary today to apply the most contemporary method of management with obligatory computer support. In this paper, the authors are going to present the results achieved in researching the efficiency of System Dynamics Computer Modeling of the Business-Production Shipbuilding Process-PPBP, which they did in 1988 and are continuing in the “BRODOGRADEVNA INDUSTRIJA SPLIT, YUGOSLAVIA, one of the biggest shipyards in Yugoslavia.

An Analysis of the Cost-Effectiveness of U.S. Energy Policies to Mitigate Global Warming
Roger Naill, Sharon Belanger, Adam Klinger, Eric Petersen

Abstract: The issue of global warming has sparked debate among scientists and policy makers over the last two years. Many studies have been undertaken in the U.S. and other nations to determine the potential severity of global climate change and appropriate policy responses.
The U.S. Department of Energy is now conducting one such study of energy technology and policy options to mitigate greenhouse gas emissions. The study is an attempt to assess the emissions reductions potential and costs of several policies, using the FOSSIL2 integrated energy model. This paper focuses on preliminary results of a subset of eight policy cases. It discusses the modeling methodology, the formulation of these policies, draft results and some policy insights gained.

A Decision Support System for System Dynamics Modeling
Pei Weimin, Liu Shu-an, Wang Dingwei

Abstract: In this study, a decision support system for system dynamics modeling is designed. The intelligent part of the system is composed of a knowledge base, a data base and an inference engine. The function part of the system is composed of some modules for model construction, model generation, model simulation, model interpretation, model management, and PD interface. The proposed system is a production system written in PROLOG, and it can join up with the professional Dynamo plus software by means of the PD interface. Whole process from modeling to simulation can be realized by the support of the system. An application example is given in this paper.

Designing Learning Environments
Steve Peterson

Abstract: For the past 18 months, individuals at High Performance Systems have been engaged in the development of Learning Environments — personal computer based arenas for learner-directed learning. These learning environments have been used in a variety of settings, in grades 8-12, in colleges, and in corporations. Our experience suggests that learning environments can be of great utility in facilitating the learning process.
In this paper, I summarize what we have learned from our development activities. I begin by developing a generic learning environment framework. Then, I illustrate this generic framework with two examples. The first example learning environment is developed from the classic “Deer of the Kaibab Plateau” model. The second learning environment is motivated by the “Tracking Experiment” described by Richardson (1984). I conclude the paper with a set of learning environment design principles.

Microstructure and Macrobehavior of Centralized and Decentralized Systems
Jan Polowczyk

Abstract: The paper presents some results of research regarding the relationship between the centralization degree and the efficiency of economic systems. A simple system dynamics model has been used in these studies. The model has applied certain J.Kornai’s ideas concerning economic systems. Simulation experiments have confirmed the viewpoint that overall economic behavior arises from within feedback loops creating microstructure of each system. Two basic kinds of microstructure have been distinguished: centralized and decentralized. Macro behavior generated by them is close to these observed in planned and market economies. The paper is divided into four parts. In the first one, basic Kornai’s ideas are outlined. In the second part, model is presented, whereas in the third one, some results of simulation are analyzed. Conclusions drawn from the experiments are presented in the fourth part.

An Evaluation of Behavioral Simulation Models of OPEC
Stephen G. Powell

Abstract: Behavioral simulation models of OPEC have typically been built on the assumption that OPEC price changes are determined by capacity utilization. We evaluate this model by examining its empirical and behavioral justifications, and by observing how it performs in a simple world oil market model. We also briefly explore and evaluate alternative behavioral rules for OPEC.

Building Large Dynamic Models for Fun and Profit
Anne Quaadgras

Abstract: Building large dynamic simulation model of an industry requires sound organizing principles and appropriate tools combined with a thorough understanding of the industry being modeled. In this paper I will describe how we build a simulation model for a client’s business to answer the client’s key strategic questions.
The models are large because they are based on physical, observable phenomena in the industry. They must take into account the stocks and flows of product and money as well as represent managers’ decision-making processes and the key variables that impact each producer’s decisions. Most corporate decisions are based on physical or financial parameters, so the model structure is clearly understandable to the final user.
At Federal Group we use an effective methodology for building large-scale structural dynamic simulation models to address the real world problems of business decision makers. This paper presents how we have successfully constructed such models for oligopolistic, capital-intensive industries. However, our methodology can be generalized to a broad range of other business environments.

Pasion: Object-Oriented Simulation on the PC
Stanislaw Raczynski

Abstract: PASION is a process- and event-oriented simulation language designed for those who already know and use PASCAL. The language has a two level (process/event) structure and permits the use of all the Pascal Structures. It also offers the main features of object-oriented programming. PASION provides necessary facilities to handle sequences of random events, queues and quasi-parallel processes, both discrete and continuous. A PASION source program consists of a sequence of process declarations and a main segment which initializes the simulation. At run time the program generates objects which represent model processes due to the process declarations. PASION provides tools which facilitate the building of complex models by the mechanism of inheritance.

Effects of Stochasticity on an Aggregate Dynamic Model of Commodity Cycles
R. Joel Rahn, Song Yuzhu

Abstract: In previous papers, various approaches to studying the relationships between an aggregate dynamic model and an underlying, stochastic system have been reported. These approaches include the use of a Master Equation model to derive the aggregate model from stochastic hypotheses, and the summation over a population of dynamic sub-models to estimate the aggregate behavior. In this paper, a commodity cycle model is re-formulated as a stochastic, discrete simulation model to study the effects of stochasticity on the aggregate behavior of the system. Global variables provide aggregate information links to control the arrival and departure of new entities (commodity units and capacity units). A comparison of the aggregate dynamics of the stochastic and the equivalent system dynamics models is made under conditions in which the dynamic models is made under conditions in which the dynamic model is oscillatory and undergoing period-doubling bifurcations leading to chaos.

The Implementation of Welfare Reform Initiatives: A Preliminary System Dynamics Model
Sauwakon Ratanawijitrasin, David F. Andersen, George P. Richardson, Irene Lurie  

Abstract: Successful welfare reform is difficult to achieve in practice and to study in theory because the linkages between policy reforms and the actions of clients of the system are many, long, and loose. Reformers can change organizational structure, funding amounts and requirements, as well as mandates. They hope that these reforms will change the behavior of workers who will implement the reforms. In turn, changed behavior of employees and welfare agencies are presumed to change the behavior of clients. Evaluating welfare reforms requires that information about policy changes, organizational changes, changed behavior by workers, and ultimately changed client behavior all be examined empirically and the results combined into a coherent whole.
This paper proposes that system dynamics models may be a new tool in the analyst’s toolchest that can help to create integrated theories of welfare reform as well as help to integrate results from empirical studies of welfare reform. Below we present a first cut system dynamics model of the implementation of portions of the welfare reform legislation of 1988. This effort is designed to illustrate how system changes, changes in worker behavior, and client behavioral choices might be simultaneously analyzed within the context of a singe feedback system. Of course, the hard work of elaborating and empirically validating the structure of this simple model still remains before us.

Systems Thinking: A Critical Set of Critical Thinking Skills for the 90’s and Beyond
Barry Richmond

Abstract: The problems we are facing at all levels in the world today are growing more intractable. In particular, our problems are becoming increasingly resistant to unilateral solutions. I will argue that this growing resistance and intractability result from the fact that while the evolving web of interdependencies, of which we all are part, is rapidly tightening, the development of our capacity for thinking in terms of dynamic interdependency has not kept pace. As the gap between the nature of our problems, and our ability to grok this nature grows, the planet will face increasing peril on a multitude of fronts. System Dynamics and System Thinking — the larger framework of which it is a subset — are an important part of an effective strategy for closing the gap between challenge and capacity for addressing challenge. Unfortunately, we as System Dynamacists and Systems Thinkers have been woefully inadequate in transferring our framework, skills and technology to the population at large. Although we have “seen the light” for some thirty years now, we have not opened the door to our inner sanctum wide enough to let others share in our insight- generation capabilities with respect to the inner workings of closed-loop systems. In order to be more effective in transferring our very valuable capabilities to a broader swath of humanity, we need to see more clearly precisely what these capabilities really are, and also to understand the forces driving the evolution of the education system into which these capabilities — if they are to be transferred on a board scale — must be assimilated. My purpose in writing this paper is to shed some (hopefully new) light on both what it is we have to bestow, and also on where the educational system that is to receive our bounty is headed. My intended audience therefore is both Systems Thinkers and educators. My highest hope for the paper is that it will serve to further eradicate the distinction between the two.

Teaching Experiments with a Simulation Model of Universal Commodity Production
Alexander V. Ryzhenkov  

Abstract: The paper considers how students learn commodity production and circulation via gaming experiments. We review two of them.
In the first, players run into reproduction on a decreasing scale aggravated if not caused by their non-cooperative behavior. In this economy social and private benefits and costs diverge. Undertaking an investment a capitalist firm chooses typically that technique which maximizes profitability, while the society is interested in that which requires the minimum input of labor.
In the second, players bring up extended reproduction receiving incompatible norms and setting new priorities with associated strategies of cooperative behavior. Social and individual interests draw together consequently.

Bringing Practicum to Theory-based Social Science Disciplines: An Illustration with a User-friendly Simulation Laboratory on Issues of Economic Development
Khalid Saeed

Abstract: This paper suggests that the possibility to experiment with relationships using system dynamics should lend the method easily to introducing practicum in the theory-based disciplines. This would however, require modifying teaching formats and creating new text materials and user-friendly computer programs suitable for use by students with little computer or mathematical expertise. A simulation laboratory consisting of a text and a user-friendly simulation program developed recently by the author on issues of economic development is presented as an example of material needed for integrating practicum with teaching.

Is Deterministic Chaos Only a Property of Models?
Khalid Saeed, Nguyen Luong Bach

Abstract: This paper presents results of extended experimentation with selected models of social phenomena widely used by the system dynamicists in their studies on deterministic chaos. The models selected include various versions of a simple model of migratory dynamics and a model of resource allocation in a firm, and a simple model of long-term economic fluctuations. Chaotic modes seem to appear in each of the experimented model, either due to non-robust or unrealistic rate formulation, or from unrealistic parameter or input specifications or both. Minor changes on the models experimented with, which improve their correspondence to reality, eliminate chaotic modes. The paper raises the issue of the relevance of the chaotic models to real-world phenomena and policy design for system improvement.

Comments on the Close Similarityy Between Indian Population Projections from the Constrained Coalition and Logistic Model and the Census, Government of India and U.N. Estimates
V.K.C. Sanghi

Abstract: The close similarity between the Indian census, Government of India and U.N. population estimates and those from the Constrained Coalition and Logistic Model (CCLM) has been demonstrated which enhances the usage of differential equation modeling for studies on population growth processes. The CCLM incorporates the legitimate requirement of an upper bound for the aggregate population thereby implying the rate of natural increase to reach the zero level. The numerical value assumed for the upper bound is based on food supply – arable land availability, and accounts for advances in agriculture productivity. However, other factors such as quality of life, environmental degradation, per capita income, etc. can also be used to arrive at an upper bound. The model holds good promise for usage for other developing countries.

A Dynamic Model to Evaluate Mixed Automobile Fuel Market in Italian Environment
Habib Sedehi, Alessandro Gambaro, Federico Lanza

Abstract: The automobile fuel market in Italy is appreciably different from that in other European countries and even more unlike the American context.
As a matter of fact, the alternative and available automobile fuels in this country are the following: -gasoline (petrol),-gas oil (diesel oil),-liquefied gas (LPG), plus a very small amount of natural gas, each with its own price. In addition, price differences are considerably greater than in other countries.
In view of the fact that gasoline is the most expensive fuel and gas oil the least expensive, the Italian Government has adopted a peculiar tax called “Superbollo” meant to penalize car owners with diesel powered engines and those with both gasoline and LPG powered engines, but to a different degree.
The alternatives access by drivers (car-users) to different fuel resources has influenced and countries to influence the automobile industry’s approach to the Italian market.
On the other hand, the different fuel prices, plus the varying annual amount of the ‘Superbollo” tax, influences the motorist’s decision in buying and using differently powered cars.
The decision is obviously affected by the consumption rate for each type of fuel and the driver’s expected mileage per year.
This paper aims to underline and analyze the hypothesis on the mix of the three main fuels used in Italy, trying to give results principally on the basis of: -price-changing of each fuel, -tax-value of “Supperbollo”, -different driver-mileage taking into account the pollution-cost of each of the three fuel solutions. The system, which is the subject of the study, will be analyzed using System Dynamics methodology, with a dynamic model.

Volume 3

Systems Thinking and Organizational Learning: Acting Locally and Thinking Globally in the Organization of the Future
Peter M. Senge, John D. Sterman

Abstract: Eroding competitiveness, declining productivity growth, explosive technological, political and environmental change, and dissolution of market and national boundaries form the familiar litany of problems which threaten traditional organizational structures and management practices. In the turbulence at the close of the century it is widely argued that organizations must change more rapidly than ever before.

Synthetic Policy Design in System Dynamics Model: Some Observations
S.K Sharma, P.K.J. Mohapatra, M.D. Tyagi

Abstract: The paper suggests a novel approach to policy design in system dynamics models. The approach is based on optimal control theory to evolve synthetic policy structures and then design realistic policies for the famous production – distribution model of Forrester. New policy sets have been presented for purchase decision rate at retail and distributor sectors and manufacturing decision rate at factory. It is shown that the suggested policy sets show a marked improvement of model behavior over that obtained by Forrester. The approach suggested here will enhance the art of policy design.

Simulation Model of Japanese Welfare Annuity System
Toshiro Shimada, Saburo Kameyama, Kinya Machida, Akira Uchino, Minoru Watanabe

Abstract: Japanese old age population is gradually increasing and this tendency weakens economic conditions of Japanese welfare annuity system. Therefore it is important for us to study future conditions of this system.
This model contains 4 sectors: Demography, total premium income, total pension expenditure and reserve of the welfare annuity system.
The demographic sector covers populations of 5 three-year age groups under 14 years of age and 13 five-year age groups above 15 years of age. This sector was first formulated for a simulation model of dental diseases and is now applied to this model. Total premium income for the welfare annuity system is the sum of premiums of workers, employer contribution and government contribution, for which populations of five-year age groups are used. Total pension expenditure is the sum of base pensions and earning related pensions. Here is used population of 60-64 age group. Total premiums plus interest income of the reserves of the welfare annuity system minus total pension expenditures flow into the reserves of the welfare annuity system.
The length of the simulation is 63 years from 1963 to 2025.
This study is a research project of the Japan Productivity Center.

New Technologies in Simulation Games
Kenneth L. Simons

Abstract: Advances in computer software allow modelers to design, with relative ease, sophisticated, realistic educational tools. With these advances, new issues arise about how to make this educational software productive and stimulating, without limiting the freedom of the user or creating simply a computerized workbook.
Such simulation games have great educational potential for people who play video and home computer games, and sometimes for students in classrooms. The games must address three information levels: (1) real-world details, (2) simulation of model, and (3) conceptual understanding of structure and dynamics. The systems viewpoint on the particular model must be clearly explained; otherwise users will have much fun but learn little. Feedback during the game teaches this system understanding without requiring textbook readings. Such feedback requires new modes of “expert” computer analysis which need to be developed. Other tools need to be developed to help in creation of simulation games and to give the games abilities that they do not yet have, such as access to database of models, pictures, and text, and connections between simulation games.

Application of System Dynamics to an Integrated Economic and Environmental Policy Assessment
William Steinhurst, George Backus

Abstract: An integrated system dynamics policy model was developed for a state level economic activity, population, energy demand, supply, and price with realistic feedback mechanisms. Environmental impacts and influences on technical and economic efficiency were also modeled. The model and its use to perform a joint analysis of several interacting policies, including electric and gas utility least cost planning and the construction of an interstate natural gas pipeline are described. A number of interesting results from a variety of perspectives are presented. These include an evaluation of the economic development; air quality and energy efficiency impacts of the pipeline proposal; their sensitivity to fuel prices; and some novel observed feedback relationships between energy price and air quality. The lessons learned in model development, implementation and utilization in both policy and regulatory arenas are discussed. The benefits of fully integrating economic and environmental impacts for policy modeling are evaluated.

The Spread of ‘88 Shanghai Type-A Hepatitis: A System Dynamics Model And Analysis
Mao-Kang Su, Huan-Chen Wang

Abstract: In this paper, first of all, a qualitative analysis is done on a general infections disease SD model, and a new epidemic threshold value and an epidemic scale forecasting formula are proposed. Then in consideration of the properties of type-A hepatitis and its eruptive spread SD model is put forward. A lot of work in various aspects is done, for example: the problem to simulate the type-A hepatitis incubation period is solved practically; the simulation results fitted in with the reality are achieved; through simulation analysis and qualitative analysis, the reason for that the predicted 2nd peak of this spread didn’t appear is found out; the short-term and long-term prospects of Shanghai type-A hepatitis situation are brought forward; especially, hypotheses about the mechanisms of the periodic epidemic and the eruptive spread of type-A hepatitis are put forward. These results are imbued with guiding significance for prevention and control of the type-A hepatitis and other infectious diseases.

Children’s Creative Development Training Program
Orasa Suksawang

Abstract: This paper reports on the annual summer training program of children’s creative development conducted since 1986. The training targets per program are between 80-100 children aged between 9-14 years coming from various urban and rural parts of Thailand to join the 8-10 day program for moral and technical development. The program is planned and coordinated by the author with considerable inputs from Buddha’s teaching in self-reliance: the potential of human being prevent their defilement; and from people who expertise in architecture and technology. The method approached for explaining human performance in nature, is a simulation game designed by the author with the help of her colleague in computers. The model concept is derived from a system dynamics method as a tool for dissemination of the law of cause-effect action in Buddhism. The children evaluated joyfully and rapidly understand the mechanism of mind in decision making whether to conduct good or bad actions according to the Buddha’s principle by playing and thinking themselves with this simulation game in a better way than they do in the traditional method of lectures by monks or teachers. The game simulates the interaction relationship between a human’s performance and his life expectancy. Later the workshop practice of the electronic application is approached for systematic problem-solving about peoples’ needs in terms of technological development in relation to promotion of moral values.

Dynamics of Cooperative Development
Orasa Suksawang

Abstract: This paper describes a System Dynamic approach to the study of the relationship between people participation in Agricultural Land Reform Cooperative performance and the economic performance over time. Two Cooperatives are examined- “successful” and “non-successful” -and policy changes are discussed in terms of the performance of these two Cooperatives.

System Dynamics Modeling of Group Behavior: A Conceptual Framework
Sushil and B. John

Abstract: This paper attempts to highlight how system dynamics methodology is useful in modeling and testing the dynamics involved in group interaction process to explain its behavior over time. Out of the prominent group models, Gladstein’s model of groups in context is taken as reference model. The SD model of group structure which is a system component consists of six modules; roles, goal clarity, specific work norms, task control, size and formal leadership. This paper deals in detail, the module of formal leadership, and studies how the interrelations and interdependence influence the system behavior.

A Conservation Model for Black Rhino
John Swart, Peter Goodman, John W. Hearne

Abstract: Over the past thirty years the black rhinoceros (Diceris bicornis) population in Africa has declined from about 30,000 to less than 3,000. In contrast the South African population has increased four-fold to 600 over the same period. The recently developed national conservation strategy for black rhino has as it main goal the increase of the current population to at least 2,000 in as short a period as possible. To achieve this, the growth rate of the population as a whole will have to be maximized. This involves removing animals from areas where the population is approaching the ecological carrying capacity and establishing new viable populations in other suitable reserves.
A model, incorporating what is known about the population biology of black rhino, was developed to give guidance to managers on the most appropriate harvesting strategy to adopt for their populations; in particular, to determine the rate of removals and the age and sex of individuals to be removed to attain a 2,000 strong Southern African population as soon as possible.

Mode-Locking and Chaos in a Periodically Driven Model of the Economic Long Wave
Jesper Skovhus Thomsen, Erik Mosekilde, Erik Reimer Larsen,John D. Sterman

Abstract: We have investigated the complex dynamic phenomena, which arise when the economic long wave model is perturbed by a sinusoidal variation in the orders for capital to the goods sector. The modulation represents a coupling to more short term oscillatory modes in the macroeconomic system. As the period of the external forcing is changed, a devil’s staircase of frequency -locked oscillations develops. For higher amplitudes of the perturbing signal, period-doubling bifurcations, simultaneously existing periodic solutions and deterministic chaos can be observed. The distribution of modes is determined as a function of the frequency and amplitude of the external signal. The phase diagram reveals characteristic bumps on the Arnol’d tongues, where they approach each other. The Lyapunov exponents are calculated, and the influence of noise is discussed in terms of the lock-in time for the periodic solutions.

Teaching Theory Building Modeling: Instructional Materials and Software for Theory Building
Robert F. Tinker

Abstract: This report is based on results of the TERC Modeling Project funded by the National Science Foundation grant MDR-8550373. Any options, findings, or recommendations expressed herein are those of the authors and do not necessarily reflect the views of the Foundation.
We gratefully acknowledge the support of Apple Computer, Inc.
Apple, Macintosh are trademarks of Apple Computer, Inc.
Stella is a trademark of High Performance Systems, Inc.
Excel is a trademark of Microsoft, Inc.

Interactive Multicriteria Optimization in System Dynamics Models
M. Toro, A. Ollero, J. Aracil

Abstract: In this paper we present a program package which combines System Dynamics Simulation with programs for Interactive Multicriteria Optimization (IMO)
The program package incorporates conventional well tested routines for nonlinear optimization, that do not require previous computations of derivatives, and methods to optimize a set of objective functions by progressive articulation of the user preferences between different criteria.
To facilitate the user interaction, a special purpose man-machine interface have been included in the package. By means of this interface, the user can impose the required preferences structure by only expressing, in a linguistic way, his/her opinion about each objective in the current solution of the Interactive Multicriteria Optimization algorithm.
The program package can be used to optimize a set of objective functions both in problems concerning the estimation of model parameters from historical data, and problems related with the search of optimal policies.
The man-machine interface and optimization programs have been written in C and linked with the DYNAMO continuous systems simulation language to configurate the program package. The package can be used in IBM PC (or compatible) with a hard disk.

Some Conceptual Problems in the System Dynamics Models Building Process
Margarita Vasquez, Javier Aracil, Manuel Liz

Abstract: System modeling and simulation is a complex technological activity, which methodological and conceptual analysis could suggest some new and interesting perspectives about the philosophical subject of the relationships between knowledge and reality.
Of the three kinds of knowledge involved in the system dynamics model building process (mental models, reference modes and operational knowledge), mental models look like specially important, because they let us to express the ideas we have about the internal interactions we find in a real system and that produce a known behavior. From this mental model, we build the formal model, the system dynamics model.
But, after that, it is very difficult to find out formal restrictions that let us to select a single model, because a behavior can be generated by different structures ( Searle 1980,1984; Zeigler 1976,1984). The internal realism of Hilary Putnam (Putnam 1981,1983,1987) allows us to understand why there is not an unique model able to pick up every single aspect of a real system and to clarify the interactive character of the modeling process and the important role that mental models, as a kind of knowledge, play.

Eliciting Group Knowledge in a Computer-Based Learning Environment
Jac A. M. Vennix, Jan Gubbels, Luc D. Verburgh, Doeke Post

Abstract: A key issue in building computer models for decision support with client groups is the elicitation of knowledge from the mental models of participants. The system dynamics model-building process is quite complex and consists of several stages each demanding different types of knowledge to be elicited from the client group. In this paper we discuss a structured approach, employing various techniques, for the elicitation of knowledge in formulating and analyzing a system dynamics model of the Dutch Health Care System.

Modeling as Organizational Learning: an Empirical Perspective
Jac A.M. Vennix, Willem J. Scheper  

Abstract: Many system dynamics modelers consider the process of model-building more important than the model itself. Model-building is supposed to generate considerable learning about a policy problem. Not only at the individual level but also at the organizational level. From the point of view of empirical evaluation research the question is how the occurrence of organizational learning as a consequence of a model-building process might be established. In this paper we will explore some of the key issues and difficulties involved in establishing organizational learning from model-building empirically.

Model-Based Analyses of the Dutch Health Care System
Luc Verburgh, Jan Gubbels, Doeke Post, Jac Vennix

Abstract: In the paper, a system dynamics model of the Dutch health care system will be discussed. The description of the model will start with so called ‘patients flows’. It will be followed by a description of the most important factors that affect the patient’s flows and the costs generated by the system. Having outlined the system dynamics model, the outcomes of three policy alternatives aimed at reducing the costs of health care will be examined. They will serve to demonstrate that the system dynamic model does have the potential to be used in workshops to elicit and increase the knowledge policy makers have regarding the problem of rising costs of health care.

A Simulation Support System for Public Education Investment Strategy Analysis
Wang Dingwei , Pei Weiming

Abstract: A simulation model of education and economy is used to analyze the education investment strategy in a region of China. The simulation results show the proportion of educational fees and investments must be suited to the economic developing level. Thus, it is necessary to continuously increase the proportions with economic growth. In order to be convenient for decision makers, a functional simulation support system is proposed.

Studying Decision Making of Enterprises Under New Circumstances
Qifan Wang, Huimin Fu, Ti Shi  

Abstract: This paper is focusing on study of influence of China’s recent economic adjustments and industrial structure changes on enterprises, particularly on these engaging in manufacturing. The paper analyzes major difficulties facing Shanghai, the largest industrial centre of China, and, using it as background, studies the decision-making strategy of a typical enterprise of Shanghai.

Studying the Impact of Science and Technology on the Economic Growth in a Central City
Wang Qifan, Xiao Chen, Yu Lijuan

Abstract: This paper study how to develop education, technology and economy coordinativetly in central cities. It outlines the kind of issues which analyze and study the ways of describing science and technology level. The importance of the paper has two points: out is an new method being applied to calculate industry output, another is the study guiding line to the three sectors(science and technology, education and economy) in their entirety. The policy suggestions will have significant reference to make central cities’ long term development strategies.

Strategy Study on Entire Coordinated Development of China
Wang Qifan, Li juan Yu

Abstract: By means of system dynamics, main development modes and strategies on entire coordinated development of science, technology, economy and society of China have been studied. The paper studies the existed development mode and the long term possible obstacles, unfavorable factors and some constraints to the development in its different stages are analyzed quantitatively in the paper. Some long term and short term strategies and policies for continuous and entire coordinated development are presented, based on the system simulation and quasi-optimization.

The Study of Dynamical Systems’ Nonlinear Characteristic
Wang Qifan, Yao Zhiping

Abstract: Nonlinearity is the source of complexity. It gives rise to the change of the system behaviors, the evolution of structures and such phenomena as bifurcation, catastrophe, and even chaos. It is these phenomena, dovetailed with others, that weave out our multicolor and multifold world synergentically. With the development of science and technology, people become more and more interested in and capable of the study of nonlinearity so as to shed light on the nature of the world. In order to deal with nonlinearity more systematically, this paper elaborates a comprehensive description for the dynamical system. Then, we focus on the relationships between the characters of nonlinearity. We have successfully expounded some controversial concepts, cast new light on some important relations, and unified several concepts which are the central topics of many modern theories.

A System Dynamics Model of Socio-Economic Development of Harbin in China
Wang Yanjia

Abstract: A system dynamics model of socio-economic development of Harbin in China has been Presented in the framework of the integrated economy-energy-environment system planning.
The model simulates the activity mechanism of national economy of Harbin by taking the fixed capital of each industrial sectors as a major variable and controls the system behavior by taking the gap of energy supply and the gap of energy investment as feedback signals. Therefore the pre-established development targets of national economy can be reached by readjusting the investment allocation and production structure towards elimination of the energy and investment gaps.
Through a series of policy stimulation, several socio-economic development planning scenarios of Harbin for year 2000 have been Compared with each other by examining some key issues, such as growth rate, investment ratio, investment allocation tenancy and production structure readjustment ad well as the improvement of scientific, technical and managemental level, etc. the resulted policy suggestions were proposed with much attention being paid by decision maker authority.
This model can run on the personal computer under the support of the Professional DYNAMO Plus software, and try to connect SD model to other technical model, such as energy forecasting model, multi-object optimum energy supple model, etc. An idea which is about SD co-operated with other methods has been presented and that is the direction of the system dynamics method development.

The Application of a Dynamic Methodology to Assess the Benefit of a Logistics Information System in Defense
K.M. Watts, E.F. Wolstenholme

Abstract: This paper describes the application of a system dynamics based three-stage methodology (Wolstenholme, 1990) for the assessment of computerized information (CIS), to a proposed military logistics information system.
The system in question was nearing the end of the Requirements Definition phase of the System Life Cycle process. A Benefit Assessment had been carried out by the consultants responsible for the design of the system. The Tools used by them had, however, encouraged the conclusion that any improvement in the information system must have a positive effect on organizational effectiveness directly proportional to that level of improvement, and that the overall level of improvement is the sum of individual gains. No study of the interaction of the physical operation and the information system had been carried out.

Introduction of System Dynamics in Urban (Regional) Coordinated Development Planning
Wei Hongsen

Abstract: This article presenting a summary and analysis of the theory and method of System Dynamics on the author’s experience in planning of the coordinated development of science, technology, economy and social advancement in such cities as Beijing, llarbin, Anshan and Baotou, is aimed to find out the advantage disadvantage of the S.D approach to urban planning as well as to improve upon it.
System Dynamics which is considered in this article to draw on system theory, information science and cybernetics, especially the feedback control principle and computer simulation, is a scientific theory and method that can find an effective application to improving and planning a multi-factor, non-linear, dynamic and/or strategy. In actual planning of coordinated development of the Chinese policy or strategy. In actual planning of coordinated development of the Chinese cities and regions, S.D is found superior in six (6) points while left five (5) respects to be desired, so the idea of establishing the S.D. dominated comprehensive model system is this developed to enhance and strengthen the above planning process.

System Dynamics in Dispute Resolution
Henry Birdseye Weil, Rayford L. Etherton, Jr.

Abstract: Since the mid 1970s, System Dynamics has contributed to the resolution of a wide range of business and legal disputes including contract claims and re-negotiations, management prudency hearings for nuclear power programs, and inquiries into the effects of government regulations on various industries. In these settings, a System Dynamics model can provide an objective, “transparent” view if a complex and emotional situation. The model can represent what happened and why, and what would have happened if certain events or conditions had not occurred. It can provide a basis for determining responsibility for delays, cost escalation, poor product performance, reliability and safety problems, complex situations are easier to understand and evaluate. The models and analyses become frameworks for debate and settlement.
This paper describes the context, processes, and behaviors associated with many business-related legal disputes. The role of System Dynamics is dispute resolution is discussed in general terms, and then illustrated with a recent example. The example is a large contract claim for “delay and disruption.” That term refers to the indirect, secondary, or ripple effects of events or conditions (e.g., design changes) impacting an aerospace, shipbuilding, software development, or similar program. Delay and disruption impacts can be very substantial. They are the most difficult aspect of a change negotiation or claim to handle, and are the source of the most acrimony and disagreement in such disputes. The background of this case, the lawsuit, how the model was introduced into the legal proceedings, and how it helped to achieve a settlement, are described in detail. The paper concludes with a discussion of the practical results obtained from using System Dynamics in dispute resolution.

Consensus Building in the Planning Process
Graham W. Winch

Abstract: This paper examines the role that building and using a System Dynamics model plays in developing consensus within the management teams facing key strategic decisions. It considers the concept of the shared view that emerges within the team as their individual views of the company, its industry, and the socioeconomic climate are articulated and compared as part of the model development process. Examples are given based on two actual consulting assignments in which differing views held with the team concerning the competitive environment and the general outlook for the business initially pointed to quite different strategies. During these studies the emergence of the consensus and an agreed strategy was considered a major benefit alongside the forecasts and quantitative evaluations the model provided. By adding to the commitment of the team, by assisting in the communication with others and in improving human resource management and organization design, the approach also offers further benefits in the implementation phase of strategy management.
In its analysis and use of examples drawn form consulting situations, this paper has emphasized the dual benefit of this approach in the hard sense of providing forecasts and an objective framework for quantitative evaluations, and the soft sense in terms of building consensus in the management team.

On the Very Idea of a System Dynamics Model of Kuhnian Science
Jason Wittenberg

Abstract: The appearance of Thomas Kuhn’s Structure of Scientific Revolutions engendered considerable discussion about the nature of scientific change. Kuhn challenges the prevailing view of science as a continuous, logical enterprise by attempting to debunk science’s myth of rationalism. As an historian as well as philosopher of science, he attempts to explain science’s extraordinary success not by developing methodological cannons divorced form scientific practice, but by looking at how scientists actually work.( Lakatos and Musgrave 1970, 236-237).
Acknowledging the philosophical importance of actual scientific practice is controversial. Kuhn’s critics question both his characterization of science as mostly “puzzle –solving”, as well as his claim that such practice is necessary for scientific development. It will not be the task of this essay to rehearse these still unresolved debates. That is better left to the historians and philosophers. Rather, I would like to recognize another important contribution to the discussion, one that is orthogonal to any other that I know of. In “The Growth of Knowledge: Testing a Theory of Scientific Revolutions with a Formal Model,” John Sterman has built a model of Kuhn’s account of scientific change. He asks not whether Kuhn’s theory is dynamically consistent. He is interested in whether the behavior Kuhn describes (i.e. , paradigm emergence, normal science, crisis and revolution) actually follows logically from the assumptions Kuhn makes. To do so he constructs a system Dynamics computer model.

The Design of a Dynamic Model Methodology for the Assessment of Computerized Information Systems
E.F. Wolstenholme, A. Gavine, S. Henderson, K.M. Watts

Abstract: The last decade has been the accelerated development of what Yadav and Chand term “Organization Support Systems”- large scale, complex and extremely expensive computer based information systems (Yadav, 1989). The cost associated with such systems has increased the requirement for a sound methodology to evaluate the expected operational benefits and drawbacks resulting from their implementation, at as early a stage in the system life cycle as possible.
An extensive survey of the literature in the field of information system evaluation, with a particular focus in the methodologies, tools and performance measures being used in practice, preceded the development of the methodology reported in this paper, and is presented in full elsewhere(Watts 1990).
This paper comments on the findings from the review and reports on the development of a system dynamics based methodology for the assessment of proposed computer-based information systems (CIS), in terms of their potential to support organizational objectives.
The methodology has been evaluated by application to two military CIS, at different stages in the system life cycle. These cases are reported separately(Watts and Wolstenholme, 1990; Henderson and Wolstenholme, 1990), but the indications are that the methodology can contribute throughout the system life cycle y providing a continuing reminder of the relevance of the CIS to the real-world system which is intended to support.

Modelling Patchy Ecological Systems Using the System Dynamics Approach
Wu Jianguo, Yaman Barlas John Vankat

Abstract: A System Dynamics model of an ecological system consisting of two patchily distributed populations is constructed to study the effects of inter-patch colonization on the persistence of the species. The model structure is primarily composed of the negative feedback loops dominant in local (within-patch) population regulation and a regional positive feedback loop coupled with two negative loops which regulate the inter-patch species colonization.
The simulation results show that with colonization the population system always persists if at least one of the populations is larger that a minimum viable population size (MVP). If the species has sufficiently large colonizing ability, the populations are always able to reach the carrying capacity. Otherwise, the population with below MVP, there are two possibilities depending on the magnitude of species colonization ability: (1) both stabilize at the carrying capacity level and (2) both go extinct. The simulations also demonstrate that delays in colonization and population regulation may have distinctive impacts on species persistence and dynamics of the population system. The study may provide useful information for species conservation and design of nature reserves.

Sowing Supply: Compensating Responses by Rural Coca Economics to Intervention in the Cocaine Market
Eric A. Wuestman

Abstract: In recent years, increased public awareness of the health and productivity costs associated with the use of cocaine and its potent derivative “crack” has served to heighten concern and renew debate over the most effective strategies for managing the drug problem. This paper presents a preliminary system dynamics model of the international cocaine trade. The initial model incorporates the various stages of the cocaine system from source country production to final consumption including: primary resource allocation and production; cocaine production; cocaine production and export; and U.S. demand, import, pricing, and consumption. The model is used to examine an ensemble of policies proposed by the National Strategy for Drug Control (White House 1989). Simulation results show the capacity of the system to exhibit a wide array of behavior modes depending on the type of intervention being applied and the aspect of the problem being targeted. Of particular interest from a policy standpoint is the implication of delays in physical and information flows for generating divergent short and long term policy results. Findings suggest a comprehensive approach combining demand and supply side policy leverage represents the most effective management strategy.

System Dynamic Research to China’s Inflation
Yan Guangle

Abstract: Inflation is one of the most troublesome problems China is recently faced with in the course of the economy reform. The inflation takes place in the form of general price rising. It becomes more serious and is greatly obstructing the healthy development of China’s economy. This situation results from many factors including the biased trend of the reform strategy, the deviations in implementation policies, the defects of the economic system, etc. The conventional theory about money amount has been used to analyze inflation before. This analytic method specially indicates the view point that inflation with no exception is a kind of money phenomenon by stressing the causal relationships between money amount and general price level, but it considers money supply as an exogenous variable controlled by the government’s policies and ignores the effect and restrictions from other economic factors. Therefore there are some limitations of this method in real uses. For this reason a new approach of system dynamic is put forward in the present paper. A dynamic model composed of a monetary market section, a commodity market section and a regulation section is developed. On the model a series of policy tests mainly concerning the two economy levers of price and interest rate are simulated with the consideration of china’s special situation. The cause and mechanism of suggestions are also made for elimination or controlling the inflation. The results of the paper may provide worthful references for China’s further economy reform.

A System Dynamic Approach to the Environmental Problems in Taiwan
Jen-Shou Yang and Showing H. Young

Abstract: The rapid growth caused very serious environmental pollutions in Taiwan. This paper attempts to use the system dynamics methodology to construct a simple model to study the trade-offs between economic growth and environmental pollutions. The model is structured with feedback loops among three sectors; The government, the general public, and the industries. Environmental regulations with various implementation times and strengths are tested in the model to examine their effects on the smoothness of the economy and pollution changing pattern. The results show that a timely not-so-strict environmental regulation combined with an environmental education measure focused on lowering expectation on economic rate may be a better choice for Taiwan to go through the tough time more smoothly.

System Dynamics Simulation for the Management of a College
Xiaoyong Zhang, Yu Zhang, Guangbin Mong

Abstract: This paper constructs a system dynamics model on macroscopic management of a college which is based on an actual system operation of the college. The students, staff, fixed capital, finance, teaching and research as sectors are included in the model. Facing several important problems influencing development of the college various policy experiments are operated on the model. The experimental results show that the key factors influencing the system and what the possible approaches solving these problems are.

Generic Computer Tools as Aids in Negotiation: The Issue of User Adoption
J.D. Nyhart, D.K. Samarasan

Abstract: Negotiating group can use generic computer tools to aid decision-making and problem solving activities in negotiation management. In attempting to create, apply, and evaluate such computer tools, the authors have had to address the issue of user acceptance. This paper reviews the basic framework of negotiation management and locates the issue of user acceptance within that framework. Focusing on system dynamic simulation models as tools for negotiators, the paper analyzes the reactions of potential and prospective users.

Negotiation as Discovery and Design
Dhanesh K. Samarasan

Abstract: The use of computer tools to aid in decision-making and problem-solving activities suggests a view of negotiation in which parties collaborate to improve the quality of the information and knowledge on which they base their joint decisions. In this view, negotiation is characterized as a process of discovery and design. The effectiveness of negotiation is defined in three dimensions: legitimacy, feasibility, and efficiency. Computer tools are discussed in the context of information strategies, or ways in which negotiators use information in their efforts to ‘discover and design’ solutions.

CONFERENCE ABSTRACTS

The System Dynamics National Model: Macrobehavior from Microstructure
Jay W. Forrester

Abstract: The System Dynamic National Model was undertaken to show how local policies governing decentralized decisions in an economy create observed overall economic behavior. I feel we have succeeded well beyond our original expectations. The model, endogenously, without any external driving time series, generates the major observed modes of economic behavior: business cycles, inflation, the economic long wave and growth.

The Structured Systems Approach for the for the Design of Optimisation and Simulation Models
Heiner Műller-Merbach

Abstract: The structured systems approach integrates the design of computerised models and information systems with comprehensive relational data bases. It can be applied to any kind of optimisation and simulation models including system dynamics. In addition, the structured systems approach supports the model design process and its documentation; it simulates the interdisciplinary and interpersonal participation in the model design process.

Misperceptions of Feedback in Dynamic Decision Making
John D. Sterman

Abstract: In recent years laboratory experiments have shed significant light on human behavior in a variety of microeconomic and decision-theoretic contexts including auctions, bargaining, and preference elicitation (Plott1986, Smith 1986, Slovic and Lichtenstein 1983). Despite the success of experimental techniques in the domain of the individual and small group, there has been comparatively little work relating the behavior of decision makers to the dynamics of larger organizations such as an industry or the macroeconomy.

Synergetics and Social Science
Wolfgang Weidlich

Abstract: General concepts for the quantitative description of the dynamics of social processes are introduced. They allow for embedding social science into the conceptual framework of synergetics. Equations of motion for the socioconfiguration are derived on the stochastic and quasideterministic level. As an application the migration of interacting human populations is treated. The solutions of the nonlinear migratory equations include limit cycles and strange attractors. The empiric evaluation of interregional migratory dynamics is exemplified in the case of Germany. 

Corporate Strategic Thinking: The Role of System Dynamics
Henry Birdseye Weil, Kenneth P. Veit

Abstract: System Dynamics began thirty years ago as a bold attempt to apply engineering analysis concepts to business systems. But from the late 1960s onward, most System Dynamic research focused on public policy problems. Business applications have grown steadily, though less visibly and primarily outside academia. For example, over the past twenty-five years, Pugh-Roberts Associates has completed hundreds of management consulting assignments using System dynamics for clients in the financial services, aerospace, electronics, telecommunications, computer, chemical shipbuilding, transportation, electric power, energy, and natural resources industries. Some of the best-known, most successful businesses throughout the world have System Dynamics.

A System Dynamic Model and Policy Analysis for National Education and Economy Development
Xu Qingrui, Zhu Keqin, Li Junjei

Abstract: Most of the developing countries are faced the problem how to allocate limited resource to education to promote economy growth. In this paper, the System Dynamics methodology is employed to solve the problem. The interactions between education, economy and Science-Technology (S&T), and the inherent mechanism of education and economy are studied. Based on these studies, a system dynamics model for the national education and economy development is established. According to the actual socio-economic situation of China, several different resource allocation policies for education are tested on the model. Finally, some useful policy suggestions about resource allocation for education are given, such as the proper ratio of education expenditure to national income and the proper ratios of resources allocated to different levels of education.

Parallel Sessions

Business policy and strategy

Development and Use of System Dynamics Models as Tools for Strategic Planning of Flexible Assembly Systems
Stefan Foschiani

Abstract: In recent years the way in which problems are approached in the assembly area within the manufacturing firm has gained increasing importance for economic planning. In connection with this, the demand for long term economic flexibility of assembly systems comes to the forefront. A firm should not limit itself purely to investment decisions in the planning of assembly systems, if it is to successfully meet growing demand (on both the market and technology fronts). However, it has become essential even in this field that strategic thinking and planning are considered more important than they have been in the past.
There are considerable difficulties, however, associated with the strategic decision-making processes involved in the planning of flexible assembly systems. System Dynamics assembly models are currently being developed at the Business Management Institute at Stuttgart University ( within the framework of the “Sondereforchungsbereich 158” sponsored by the DFG).The aim of this is to understand and cope with these problems more easily, with specific reference to long-term decisions, the lacking objective assessment criteria and the high complexity of the problem.

A System Dynamics Model for Automation
Govind Gupta

Abstract: A system dynamics model is presented in this paper along with the results of some policies and their consequences automation. The automation seems to be the answer for faster growth and development throughout the world whether or not there is excessive labor or its shortage in a nation. Higher productivity, lower costs, better quality of products and services, remaining competitive and new innovations are benefits of automation and they are very important factors in industrialization and as well in sustaining the jobs in the long run. Very often, particularly in the developing countries, the politicians either exploit or in most cases misunderstand the total effects of automation and computerization. In India, for example, computerization of even very important services like airlines and trail reservations, insurance and banking have suffered due to political decisions for two decades. Only recently they have realized their mistakes and are trying to catch up. This simple system dynamics model can be easily used for systems analysis to study the effects of automation and thus can help in making strategic decisions in automation and policy guidelines formulations.

Planned Organizational Change: Theory, Model, Data and Simulation
Chanoch Jacobsen, Yitzhak Samuel

Abstract: Organizations have to adapt to their environments in order to survive (Lawrence and Lorsch, 1967; Weick, 1969; Galbraith, 1967). Hence, recurrent structural changes are strategic responses of organizations to the growing turbulence of modern society (e.g., Tichy, 1983). While most organizations can alter their strategies, structures and procedures to some extent, many changes do not achieve their stated goals because of inertial forces blocking the way (Hannan and Freeman, 1984). Many of the factors affecting organizational change processes have already been identified (cf. Zaltman and Duncan, 1977), but we still lack a comprehensive view that integrates the various interplaying forces (Nadler, 1981; Carnell 1986).

Accounting Measurement and Methodological Characteristics of Accounting Dynamics
Saburo Kameyama, Takahiro Kojima, Akira Uchino, Kinya Machida

Abstract: Accounting Dynamics is a methodology for modeling and simulation of accounting using System Dynamics. Our reasons for presenting Accounting Dynamics are as follows.

• Accounting is a primitive quantification of social processes composed of everyday transactions between economic entities.
• Therefore, accounting models, which consist of such transaction data, have their actual counterparts in the real economic world.
• On the other hand, accounting measurement (including double entry bookkeeping) is very adaptable to the System Dynamics observations.
• So that, Accounting Dynamics modeling and simulation seem to be very effective tools for depicting, analyzing, predicting and improving the actual state of resource allocation in social systems.

We believe there is no other system that measures each and every routine transaction as completely as business accounting. Furthermore, in most System Dynamics research on social systems, e.g., the System Dynamics National Model, it is emphasized that there is no macrostructure, other than the aggregation of many microstructures. If the national economy’s behavior results from its microstructure, a realistic and reliable model of that microstructure will be an indispensable premise for building a National Model. The accounting Dynamics model will provide such a macrostructural building block at the business level or the upper social level.

In our presentation, we analyze accounting measurement and identify the methodological characteristics of Accounting Dynamics. Accounting measurement has axiomatic rules (primarily presented by double entry) and institutional constraints. Traditionally, accounting measurement is periodic (discrete) and lacks the feedback concept. We introduce the feedback concept into the accounting model and present generic Accounting Dynamics models in some detail. 

Flexible Manufacturing and it’s Benefits for the Financial Situation of an Enterprise
-A System-Dynamics- Assessment on Investment Calculation-
Thomas Klaue, Michael Veitinger

Abstract: Over the past decade, as a result of world-wide stagnation – combined with the entrance of low wage competitors to the market – the situation of the manufacturing industries in the industrialized economies became more competitive. Although it is not accompanied by an increasing output, the application of flexible manufacturing as a new process technology seems to enable the enterprise to gain productivity and to push up it’s competitive strength.
Therefore, the necessity to introduce these technologies is emphasized in numerous discussions. On the other hand these technologies require capital-intensive investments. So the capacity of reducing costs seems to be a decisive measure of economic advantage.

Modelling Business Strategies for Verification of Planning
U LaRoche

Abstract: The state of the art of business strategy design today uses well developed sets of rules. If business segments and competitors are known, then the interaction of the competing firms takes place on two different levels.
In the market place one product outcompetes another within the same business segment. Within the different firms clearing of the business portfolio’s takes place across the market.
Based on extensive groundwork by A. Lyneis we prototyped a general strategy-verification model, which not only serves as a training for marketing managers as e.g. Markops but which allows to start the simulation adapted to the specific business context for which a proposed strategy has been formulated.
Some cases will be used to illustrate the approach chosen.

Marketing Analysis and Forecasting as a Strategic Business Tool
James M Lyneis, Maurice Gluckman

Abstract: Pugh-Roberts has developed a number of simulation models to forecast the demand for products in specific markets. These models contain key feedback relationships which create growth, decline, and cycles in the market. They are unique in their integrated representation of macro-economic, micro-economic, and regulatory factors. Their broad scope makes them powerful enough to specifically show the relative importance of industry factors such as manufacturer pricing policies, inventory and production policies, capacity expansion policies, and the timing of new product introduction, in creating or magnifying market cycles. These models are highly valuable because, unlike simple statistical models, they explain the root causes of cyclical behavior and can therefore more accurately predict the timing and severity of market cycles. As a result, the models provide valuable information regarding:

• timing of “booms” and “bursts”
• required production capacity and production rates
• “windows of opportunity” for new product introduction
• relative growth of market segments
• relative importance of growth versus replacement demand
• relative importance of price, availability, and technology in determining demand and market share
• effects of macro-economic, regulatory, and/or political changes on overall demand patterns.

These market models have been successfully used in aerospace, automobile, computer, container shipping, financial services, industrial coatings, insurance, health care, and mail order retailing industries, so they are generally applicable. To illustrate their value versus statistical models, two of the existing aerospace models are examined in detail. With emphasis on the “Macro/Micro” issues, the basic causal structure is described and the importance of feedback is demonstrated with sensitivity tests. General uses, and examples of other potential applications, are also discussed.

Loop-Based Strategic Decision Support Systems- Theory and Application
Peter P Merten

Abstract: During the last few years we have witnessed the development of two main lines in computeroriented strategic decision support- quantitative simulation approaches und qualitative knowledge based (expert-) systems. As we will show in this paper the process of strategy making can be improved by combining the two approaches within loop-based strategic decision support systems.
The potential of the loop-based strategic decision support approach is demonstrated with the “know-how transfer model” which explains the evolution of multinational corporations in less developed countries and which helps to improve the strategic internationalization and know-how transfer decisions.

Modelling a Biotechnology Startup Firm
John D W Morecroft, David C Lane, Paul S Viita

Abstract: The top managers of a biotechnology startup firm agreed to participate in a system dynamics modelling project to help them think about the firm’s growth strategy. The paper describes how the model was created and used in order to stimulate debate and discussion about growth management.
There were several novel features about the process used for capturing management team knowledge in the model, and for representing unique structural features of biotechnology manufacturing and marketing. The paper highlights these novel aspects of conceptualisation. A heavy emphasis was placed on mapping the operating structure of the factory and distribution channels. In addition, much time and effort was spent on choosing model concepts and vocabulary suited to the business and to thinking carefully about units of measure and dimensions. Qualitative modelling methods (structural diagrams, long variable names and friendly documented algebra) were used extensively to capture the management team’s description of the business.
The size of the model (and partial models) was kept deliberately small to ensure the involvement of the management team. Simulation scenarios were designed to stimulate debate about strategic issues such as capacity allocation, capacity expansion, customer recruitment, customer retention and market growth. The paper describes how the management team was ‘drawn-in’ to using the computer to design and debate their own strategic scenarios. The paper concludes with comments on the impact of the project.

Computerbased Decision Support of the Strategic Planning and Strategic Management with System Dynamic Models Illustrated by the Example of the German Federal Railway
Dieter Schmidt

Abstract: The competitive situation of the German Federal Railway has visibly intensified due to the following factors: the way in which important customers (the coal and steel and fertiliser industries) are susceptible to crisis; the longstanding political favouring of road construction; the introduction of new technologies (video link-up, electronic mail etc.); and also the europeanisation of the transport market and the associated price decay (Duetsche Bundesbahn, 1987). The precarious financial situation, as well as growing pressure from the public, presents the railway management with the difficult task of, on the one hand, reducing costs, and on the other hand, of improving the standard of service offered. In order to be able to cope with this problem, it is necessary to identify and formulate corresponding strategies, against the background of existing strengths and weaknesses, as well as growing chances and risks arising from environmental development. Through the strategies, and through innovation, invention and reduction in costs, the railway can be developed from a bureaucratic institution to a modern and competitive tertiary sector company. Only in this way can the railway’s ability to survive be secured in the long term (Zahn, 1988).
This paper presents a system dynamics model, which portrays an important area of the federal railway. With the help of this model, the interrelations and mutual dependencies of this complex system are to be demonstrated. The model provides a valuable article in the field of strategic planning, in which strategic decisions, which are often based on uncertain information, can now be founded on a sound basis, and therefore, the decision process can be effectively supported.

Teaching and training

Feedback Delays and Control in Complex Dynamic Systems
Berndt Brehmer

Abstract: The results from studies on more complex tasks, such as concept learning and problem solving, are confusing: some results indicate negative effects of feedback delays, other results no effects of delays and even some positive effects (see Brehmer & Allard, 1988a). Thus, the problem of the effects of feedback delays is in need of study. This paper will review some of the results from a research program designed to investigate the problem of delays in a relatively complex computer simulated micro world which subjects must learn to control.

A Successful Management Training Institution Must Interact Intensively with its Environment
Andres E. Breiter

Criteria for evaluating success of management schools in terms of contribution to society are presented.
The network of interactions that make a management school successful is described. It contains links with the dominant power groups: business community, government, unions and public institutions in general. It includes students, alumni, and staff. Business needs, research results, schools’ prestige and attractiveness to faculty are also part of it.
The nature of the interrelations and their relative importance are examined during the four phases of a management training institution: feasibility analysis, planning, launching and sustained operations.
Some causes peculiar to mature management schools’ frequent stagnation and decay are examined and preventative actions suggested.

A Study on Human Control in Stock-Adjustment Tasks
Ernst W. Diehl

Abstract: Results of an ongoing study investigating the effect of different task feedback characteristics on human performance are reported. In a computer-assisted experiment, subjects were asked to perform a dynamic stock-adjustment control. A subject’s control action enters the system in two ways: it effects the stock to be adjusted and it feeds back on the disturbance that impinges on the system. The latter effect is varied with respect to its strength and its delay. The major finding that emerges from the experiment is that increasing strength in the feedback link (in either a positive or negative direction) worsens performance. An effect of delay length on performance could not be shown.

A Metalanguage Communication, Confidence and Commitment:
A New Perspective on Influence Diagrams
Julia M. DiStefano

Abstract: The purpose of this paper is to show some of the schemes used by systems researchers and consultants to collect data about their clients’ perceptions of problem situations. These various schemes–which use both words and graphics, consisting more or less of curved lines and arrows– are useful for
1. helping clients express their perception of a problem situation
2. organizing clients’ thinking
3. helping to overcome traditional rivalry between individuals and between groups
4. helping “to create a consensus and commitment to action in a team” (Eden, 1988,2).
My paper will discuss three such schemes, proceeding from the ‘soft’ systems methodology (Checkland, 1981); then ‘cognitive mapping’ (Eden, 1988); and finally, two system dynamics studies dealing with health care systems.

 A Training Game and Behavioral Decision Making Research Tool:
An Alternative Use of System Dynamics Simulation
Roger I. Hall

Abstract: The overall design is sketched of a training game and behavioral decision making research tool based on a System Dynamics corporate simulation model of a magazine publishing company. The organization of the program to run the game and the type of output generated is described. Some of the possible uses of the game to investigate behavioral decision making and group learning in a complex decision environment is mentioned.

Organizational Learning: A New Challenge of System Dynamics
Peter M. Senge

Abstract: The subject of how organizations learn and how organizational learning can be enhanced and accelerated is becoming a major interest in the business world. In the movement to reinvigorate American manufacturing, organizational learning has emerged as a major theme. In Hays, Wheelwright and Clark’s recent book Dynamic Manufacturing: Creating the Learning Organization, (Hays, R.H., Wheelwright, S.C., Clark, K.B., 1988) the authors conclude:
“There is one common denominator in high-performance plants: an ability to learn-to achieve sustained improvement in performance over a long period of time. When assessing a manufacturing organization, learning is the bottom line.”

Methodology and theory/optimization

Generic Qualitative Behavior of Elementary System Dynamics Structures
Javier Aracil, Miguel Toro

Abstract: In this paper we will assume that the qualitative information about a given concrete system comprises no numerical information beyond the signs of the influences, the relative value of these influences and the classification of the variables in a system as levels, rates and auxiliaries. With this information we try to get as much knowledge as possible on the behavior modes of the system, in the concrete meaning given to behavior mode in the qualitative theory of nonlinear dynamical systems.
Our aim is to explore how the formal qualitative analysis techniques, based on the second of the above senses of qualitative, can be used to solve the kind of questions suggested by the first of the uses. In this way a synthesis of both senses can be reached.
The results here reported are still in a work progress stage. For instance, a computer implementation of them is being developed. However we think that they are interesting enough to deserve publication.

Tests of Model Behavior that Can Detect Structural Flaws: Demonstration with Simulation Experiments
Yaman Barlas

Abstract: In this paper, using simulation experiments, we demonstrate that the “structurally-oriented” behavior tests and other standard behavior tests are different in a fundamental sense. We also show how the structurally-oriented behavior tests can help diagnose/remove structural flaws. Thus, we suggest that such tests be identified and analyzed by System Dynamics in more detail. It is hoped that the tests will be improved, standardized and implemented as part of all major SD simulation software.

Modeling Control of DNA-Replication in Bacterial Cells
Brian Bodholdt, Bjarke B. Christensen, Jacob Engelbrecht, Erik Mosekilde, Jeppe Sturis

Abstract: We have developed a dynamic model of DNA replication control in bacterial cells and of the subsequent cell division. The main hypothesis is that a certain protein, which has a negative feedback regulation on its own production, is an essential factor in initiation of the replication. The model is stochastic in the sense that the kinetic association and dissociation processes are assumed to take place in accordance with a Poisson probability distribution with mean values that match experimentally determined constants. An important feature of our model is that it shows correlation between the magnitude of the kinetic rate constants and the size, stability and the dynamics of the cell. The model thus allows us to analyze the distribution of cell volumes at the time of initiation for different growth rate, different association and dissociation constants, and different promoter strengths.

Designing a Manufacturing Policy Using the Reference Approach and Alternative System Dynamics Support Methods
Julio Macedo

Abstract: The purpose of this paper is to compare the efficiency and robustness of policies obtained using alternative system dynamics support methods. The comparison shows the need for creating new methods which combine the efficiency of the optimization methods with the robustness of the modal methods. One of these hybrid methods is the recently developed reference approach which exhibits the best efficiency and robustness.

Fuzzy Evaluation on the Validity of System Dynamics Models
Weiman Pei

Abstract: This paper discusses the multilevel evaluation system and fuzzy synthetical evaluation method for the validity of the system dynamics model, and gives a computation example at last. The example proves that fuzzy synthetical evaluation can give satisfactory results.

Aggregate Dynamics of a Population of Commodity Cycle Models
R. Joel Rahn

Abstract: The theoretical results are mixed at best. Linear systems do not show novel behavior. Some non-linear models may show new growth modes as revealed by formulas for the eigenvalues of the linearized versions of such models. The new growth modes shown by a reduced-order version of the Commodity Cycle model (Meadows, 1970) suggest that this non-linear model may support novel behavior in some regimes of operation. This paper partially lays to rest that expectation.

System Formalitation and Models Building
Margarita Vázquez, Manuel Liz

Abstract: In this work, we examine advantages of formalization, and specially Ziegler’s system formalization, relating to the most fundamental concepts used when building models with System Dynamics (SD). This is exemplified through the University/Unemployed model. We finish talking about the relations between model, theory and system concepts.

Tomorrow, Today: System Dynamics Models or Expert Systems?
Graham W. Winch

Abstract: It was once suggested to me, half jokingly perhaps, that System Dynamics offers “2nd -Generation Expert Systems – before the 1st Generation”. This paper reconciles the theories and processes, and draws upon business consulting assignments, to examine how close to reality this notion is.

A Study of Sensitive Test
Ching T. Yang,  Ansheng Cao

Abstract: It is necessary to test a newly built model to make sure that it does simulate the actual system. The test may include many aspects, such as sensitive test, comparison test with history data, etc. This paper studies sensitive test and presents some results of the findings.
In studying the structure of a given system, the endogenous variables and exogenous variables are given explicitly. If we can not tell the difference between them correctly, it may confuse the real meaning of the sensitive test.
In the present analysis we find that the conditions for non-sensitivity of variables to a model are: 1) the change is made for one variable only and 2) the change is small. The conditions for sensitivity of the variables to the model are: 1) two or more variables change at the same time and 2) the change is great. A model may also become sensitive for a small change of the exogenous variable.
The above results have been thoroughly investigated and the methods of the sensitive test are presented.

Gaming&decision theory/computer-based learning

Learning in Dynamic Simulation Games; Using Performance as a Measure
Bent E. Bakken

Abstract: In a dynamic simulation game portraying a multiplier-accelerator problem, there are major differences between high and low performers; high performers voice specific concerns for future states of the system, while low performers are less likely to think about the future. Planning, especially incorporating the deceptive nature of feedback, is necessary in systems that exhibit diverging long and short term behaviors. A comparison of game results with written reports show that there is a positive relationship between performance and understanding of the game. These results are contrary to previous research where performance and understanding have been unrelated (Broadbent et al. 1978, 1986), but can be explained by the added complexity of non-linear feedback tasks with shifts in loop dominance. Such tasks are, in contrast to simple regression models, non-routine and therefore verbal and behavior aspects of decision makers’ mental models correspond.

Computer-based Case Studies in Management Education and Research
Alan K. Graham, Peter M. Senge, John D. Sterman

Abstract: There is growing interest in combining system dynamic models with conventional case studies in order to create learning environments for management education. Such computer-based case studies promise improvement in strategic thinking skills and better integration of modeling in the policy and strategy area. Moreover, these models-with-cases are tangible products with which to conduct research in computer-based learning. This paper surveys the opportunities for using computer-based case studies in management education and for conducting novel research on management learning.
The paper first examines how models-with-cases fit in the established areas of strategic management and business policy. Which issues, in the broad range covered by strategic management, do models-with-cases address? Next, two current examples of computer-based case studies are presented (People Express Airlines and Intecom PBXs) to show explicitly how cases and models are combined and used. Finally, the paper explores research questions that arise in conjunction with such work; 1) how to teach effective inquiry skills, 2) how to teach conceptualization skills, 3) how to enhance the ability to apply learned theories to new situations, and 4) adapting measurement methods to evaluating the educational effectiveness of computer-based cases in teaching these mental skills.

Learning Laboratories: Designing a Reflective Learning Environment
Daniel H. Kim

Abstract: The use of interactive gaming environments to teach system principles has recently been gaining in popularity. One of the most promising applications of system dynamics model-based games is “learning laboratories,” workshops that blend system dynamics principles and repeated simulation game trials with ongoing conceptualization and feedback sessions to help managers gain a deeper understanding of the system within which they operate. This paper will first describe the design of such a learning laboratory, its implementation, and its use as a vehicle for learning to think more systemically. This will be followed by a discussion on how the learning lab helps unearth deep-rooted assumptions and encourages people to challenge them in a “double-loop learning” mode. Finally, the paper concludes with a brief discussion on possible future steps toward developing systems thinking skills in an organization. 

Modelling the Process of Complex System Control
R. H. Kluwe, C. Musiak, H. Haider

Abstract: The research reported here is concerned with the determinants of complex system control. It is part of a rather comprehensive project where subjects are studied while acting in an unfamiliar, dynamic task environment. In the following the research approach as well as some of the empirical results will be reported only briefly. The focus is on the description of a computer programme and its role in the research strategy.

Eliciting Group Knowledge for Model-Building
George P. Richardson, Jac A.M. Vennix, David M. Anderson, John Rohrbaugh, W.A. Wallace

Abstract: System dynamics models are typically created using multiple streams of information including quantitative data, written records, and information contained in mental models of both individuals and groups. While qualitative sources of information are widely recognized as important in all stages of the model building process, little systematic research has been completed how best to elicit and map this knowledge. In this paper, we survey the existing literature on mapping and eliciting knowledge for system dynamics modeling and also explore this literature in the broader fields of cognitive psychology and small group processes. Special attention is paid to new software advances to support these processes.

A DYNEX-Based Learning Laboratory for Economic Development Planning
Khalid Saeed

Abstract: This paper describes a user-friendly learning medium that revisits the problem of economic development with a behavioral perspective. Formal modelling and computer simulation create a laboratory which makes it possible to experiment with ideas without incurring the costs and risks of action research. Besides sharing the insights gained by the author in his experiments, the package also invites further experimentation by the readers through use of the accompanying software.

Macro economics policy

A Critique of Roemer’s Conception of Exploitation
A.V. Ryzhenkov

Abstract: The paper deals with Roemer’s claims that the Marxian theory of surplus value is logically faulty and should be considered the special case of his own “general theory of exploitation” (the “GTE”). It is shown that Roemer’s models and theorems implicitly confirms the main point of “Das Kapital”: profit does be the the converted form of surplus value produced by working class under capitalism.

A System Dynamics Approach to the Function of the Economic Leverages in China’s Economy
Qifan Wang, Wang Ying

Abstract: After being overlooked for many years, now the financial and monetary system plays an important role of adjustment and control functions in national economy, relating to which, the four economic leverages–price, tax rate, interest rate and wage are the main tools of carrying out these functions. Based on system dynamics approach, this paper quantitatively studies the long-term development tendency of their interaction and coordination. Based on simulating results under normal economy development, policy tests and analyses have been done to discuss the problems emerging from current economic reform. The reasonable ranges of the adjustment of price, tax rate, interest rate and wage increase rate are suggested and the amount of money supply are discussed. Then some policies of coordinately applying the leverages to improve the behaviors of system are put forward. This paper has made some progress in quantitatively analysing the long-term development of the financial and monetary system, in establishing a credible and practical model for policy analysis to solve the problems emerging from the economy of China. 

A Socio-Economy Development Strategy Study of a Typical Underdeveloped Coastal Open City
Qifan Wang, Hongshan Yang, Manling Yang

Abstract: This study is related to the socio-economic development strategy of a typical underdeveloped coastal open city (named L) which was mainly done by means of system dynamics approach.
L city is located in the north to the Taiwan Straits. It is one of the most famous lands of overseas Chinese ancestors in China. And it famous with a long history and splendid ancient culture. It is the starting point of the “Silk Way On Sea” with excellent ports and rich natural resources. L city had its economic prosperity in the ancient times. Coming to modern times, however, its economy was very backward because of having been closed the region to international intercourse for a very long time. Since the implementation of the economic reform and open policy, the city has achieved a great progress in the economy while the pace of regional industrialization has been more rapid in the past decades. It is the typical example on the coastal open area of China. Therefore, it is necessary to study the problems of regions to garantee the continuous, steady and coordinated development of the regional economy in the future.

Quantitative Analysis of Inflation Issue in China
Xu Jie, Wan Xuemei, Yan Guangle

Abstract: It is no doubt that China is now facing a challenge of inflation: quick prices rising, over issued monetary, rapid growing total social demand and unsufficient production supply….
The present paper studies the inflation issue in China in terms of the macroeconomic theory of system dynamics, in order to find the fundamental causes and the self-promoting mechanism of inflation in China. In this paper, factors of total social demand, monetary issue, etc. have been qualitatively and quantitatively discussed, some policy tests have been made, and finally the new viewpoints and suggestions which help to cut down inflation are put forward. It is a new test to study inflation by system dynamics instead of by regression or curve fitting.

Government policy and planning

Elements for Periurban Dynamics
Isaac Dyner, Luz Mery Berrio, Adriana Bolivar

Abstract: Rapidly growing cities cause inadequate transformation in the use of land. Government policies tend to be obsolete shortly after implementation, supply of basic services becomes insufficient and expensive, and food prices tend to increase. All these factors are certainly the case in many developing countries where large amounts of population often migrate to settle down, sometimes in dangerous or unhealthy locations, but other times in areas suitable for agricultural purposes in the periphery of the city.
The land surrounding the metropolis enters a transitional stage. The territory becomes uneconomical for rural exploitation, but it requires to be supplied with basic services for urban housing. The System Dynamics approach is then appropriate to study and plan these unstable systems.
This paper presents a model to assess the growth of peripheral districts of the city. It is a useful aid for policy making in land use issues and a good tool for planning basic services such as health, schooling, transport and recreation.
A simulation is carried out for the Periurban District of El Corazon in Medellin, Columbia. A good approximation between historical data and model results can be appreciated. Some scenarios of future growth are explored and the consequence of land-use policies are confronted.

Energy Supply Modelling: The Case of the Cyclades
Th. Goumas, Ar. Papasavvas, D. V. Papaconstantinou

Abstract: The Cyclades, a group of over thirty dispersed islands in the middle of the Aegean Sea can become a case study for energy-driven regional development. High cost, low reliability and scarcity of energy have significantly contributed to the underdevelopment of the region. There is a lack of local conventional energy sources, but the potential of renewable energy sources, namely geothermal, wind and solar is many times greater than the region’s energy needs.
The Energy Policy Unit has constructed an Energy Plan for Cyclades up to the year 2000 concerning the development of local economic resources in connection with programmes promoting the exploitation of local energy potential. New energy investments, mainly in the renewables and energy saving options were examined in detail. For this reason, consistent alternative scenarios of energy supply, energy demand and economic growth were developed and assessed through an integrated modelling system. In this paper, the emphasis will be placed on the energy supply model.

A System-Dynamics Examination of the Effects of the Mahaweli-Project in Sri Lanka
Frank Lehmann, Thomas Lehner, Jürgen Beckmann

Abstract: The following System-Dynamics model simulates the effects of a development aid to a certain project on social and economic sectors in a development country.
The project, which has been started in 1980, treats the damming up of the Mahaweli-Ganga in Sri Lanka. The advantages of this great project can’t be assessed applying only classical measures of yield.
Using System-Dynamics it is possible to analyse the effects of the project on sectors like the labour market, agriculture and the budget of Sri Lanka and to discuss changes of the values in this fields.
An improvement of the values of the 4.5 billion US$ project would create the foundation for further investments.
Moreover, the effects from the building of hotels and possible direct investments of foreign enterprises in Sri Lanka are to consider, 

A System Dynamics Model for National Energy Policy Planning
Roger F. Naill, Sharon D. Belanger

Abstract: The U.S. Energy system has been the subject of intense national interest and policy debate over the past two decades. During that time the U.S. has experienced a steady trend toward increased oil imports, two major oil embargoes, oil price shocks, and a series of government policy initiatives designed to reduce its vulnerability to oil supply disruptions: Project Independence, the National Energy Plan, and more recently oil and gas price deregulation.
Understanding the dynamics of the U.S. Energy system has been the focus of a decade-long System Dynamics modeling effort which began in 1972 at the Massachusetts Institute of Technology, continued at Dartmouth College, and is now centered at the U.S. Department of Energy (DOE). The analytical focus of that effort is an integrated model of  U.S. energy supply and demand called FOSSIL2, which is used to prepare projections for energy policy analysis in the Department of Energy’s Office of Policy, Planning and Analysis. This paper describes the conceptual development of the FOSSIL2 model, and its use in analyzing national energy policy issues.

Schedule Delays and New Financing for the Argentine Electricity Sector Growth
J. Rego

Abstract: Apparently the electricity sector of Argentina has suffered in the past from excessive capacity planning, owing to overoptimistic forecasts of demand growth rate. But because of the long delays involved and lack of financial backing this advantage has been progressively lost. The present official planning only provides for renovation and demographic growth, not allowing for economic growth. Therefore, the actual supply-demand balance of electricity can easily be worn away by technical obsolescence and aging process of the actual installed capacity of electricity production.
The problem behaviour arises when the timing of new capacity investment is delayed, falling behind the programmed schedule of new plants, without being able to meet the electricity demand. This could happen mainly due to political prices well below costs because of the inflation and or social subsidization, which leads, in turn, to the discapitalization of the sector, that still remains nationalized. A system dynamics model is used to explore the trade-off between construction delays (which entails costs of unsatisfied demand) and construction speed up (which entails financial costs).

Corporate and Statewide Perspectives on the Liability Insurance Crisis
George P. Richardson, Peter M. Senge

Abstract: The costs associated with liability in the United States are rising dramatically and persistently. Escalating medical malpractice premiums threaten the scope and availability of health care in many states. Increasing costs for automobile insurance have led to public referenda to cap premiums, in turn driving insurers out of practice in some states. Runaway litigation costs prompting calls for major revisions in liability stautes and the whole tort liability system.
Over the past two years, two independent system dynamics studies of the rising costs of liability insurance have been conducted. One study focused on forces driving rising settlement costs within a leading property and liability insurance provider. That study has resulted in a learning laboratory to help managers throughout the firm form a more systemic perspective on how established policies and practices within the firm might contribute to rising costs. The other study, done for the New York State Insurance Department looked at the problem of medical malpractice from a statewide regulatory perspective. It was designed to provide help to the state legislature in setting the state’s policy on rates over the next three years.
This paper assembles some of the work done in these two independent studies, reports on their findings, and discusses their policy implications. Of particular interest are implications of the internal and external system dynamics perspectives on the problem- where they agree, where they disagree and where they help illuminate each other.

System Dynamics Applications in the Sector of Electricity
Maurice Roche

Abstract: As for as we know there are relatively few examples of application of System Dynamics in the electric power Industry. Some of them are nonetheless of high interest. We can mention the program of the Bonneville Power Administration that had been presented in a previous Conference of the System Dynamics Society. Our purpose at Electricité de France was to scan the areas in which System Dynamics could be helpfull to our company.

A Study of Shanghai’s Industrial Structure
Qifan Wang, Tingchun Huang, Huimin Fu, Jinqua Qui

Abstract: The main purpose of this paper is to study the dynamic behavior change of Shanghai’s industrial structure. Shanghai’s industry is facing a severe situation now. In one hand, the industry is required to make adjustments in its structure and distribution according to Shanghai economic development strategy; in the other hand, its ageing technology and structure of products, together with the shortage of energy and raw material, result in decline of profits in industrial enterprises and “landslip” of government revenue. Therefore, how to adjust the structure of Shanghai’s industry reasonably is becoming an urgent task. With the aid of industrial development history of western developed countries, this paper analyzes the reasonable development of industry from four aspects, creates a system dynamics model to simulate the dynamic change of city’s industrial structure and tests its validate. At last, the paper uses this model to analyze the trend of Shanghai industrial production and studies several problems in industrial economy, such as; selecting the leading industrial department of the city; allocating funds reasonably; using energy and raw material efficiently and affecting the technology, pollution and transportation on industry. In policy test, the paper proposes a series policies to authorities responsible for industry development for reference. 

An Application of System Dynamics to the Research on the Strategy of Rural Development in Heilongjiang Province
Zhao Wen-Huang, Wang Hong-Bin, Gu Lin-Ming

Abstract: By means of a study in the application of System Dynamics theory and approach, a quantitative analysis of the coordinative development of the main agricultural productions in Heilongliang Province is made, constructing a simulation model of system dynamics which is composed of farming, forestry, animal husbandry fishery, land resoures and population.
The relationships between the various productions mentioned above, as well as between the internal variables within each production are correctly described in the model. Simulation analyses on the relationships between various productions and between the internal variables within each production, by using the model, are made and, at the same time, many programs which have advantages for the coordinative development of various productions result from these analyses.

The Dynamic Relationship Between Transportation and Other Industries in China
Manlin Yang

Abstract: This paper analyses the dynamic relationship between transportation and other industries with system dynamics theory and method. We develop a system dynamics model to protray how the transportability influences other industries, and have made some computer simulation in which we simulated the dynamic characteristics of the system at different alternatives of investment.
In the simulation, we properly reduced the investment in heavy industry and increase the investment in transportation, while the total amount of the investment is the same. The output value of heavy industry didn’t decrease, on the contrary, it increased. At the same time, the output value of other industries and national income increased too. This indicates that the transportability directly influences the output value of other industries.
From the simulation result we also see that the investment in transportation of China is too small and this leads to the situation that the development of transportation can’t meet the demand of national economics in China.
This paper is a application example of how system dynamics is used to solve problems of social economics. This research will help people to know the importance of transportation in national economics and government to make policy. 

A S.D. Model for Rational Exploitation and Utilization of Water Resources in Arid and Semi-arid Areas
Li Zhou-wei, Zhou Yong

Abstract: This model, composed of 12 subsystems and more than 220 equations, discusses various factors concerning water resource and the feedback relations of these factors. Through emulations of the different decision plans, it puts forward the most favorable plans for rational and economical exploitation of water resources, the improvement of water utilization ratio and the best use of water under the conditions of a sound ecological balance.

Modelling technology

System Dynamics as a Tool for Historians: The Role of Software
Nicola Bianchi

Abstract: This paper intends to explore the potential of the System Dynamics approach as a new auxiliary science for the historical analysis. To this end a portable DYNAMO-like package, called STEC, has been developed.
The paper, first, describes the peculiarities of the System Dynamics method as a tool for historical research, and gives an outline of the project; second, it argues that the scanty diffusion of System Dynamics might be due, among other factors, to the lack of public domain software; third, it asserts that the “old style” data processing (command line interface and batch mode) can prove itself still usable and fruitful; and last, it shows the STEC main features.

Non-Linear Dynamic Phenomena in Electron Transfer Devices
Rasmus Feldberg, Carsten Knudsen, Morten Hindsholm, Erik Mosekilde

Abstract: We have modeled the highly non-linear dynamic phenomena which arise in Gunn diodes by interaction between the internally generated domain mode and an external microwave signal. As the frequency of the microwave signal is changed, a devil’s staircase of frequency-locked oscillations develops, interspersed with quasiperiodic solutions. Period- doubling and other forms of mode-converting bifurcations can be seen in the interval of some of the steps. At higher microwave amplitudes, deterministic chaos arises. The transitions to delayed, quenched, and limited space charge accumulation modes are followed.

Rössler Bands in Economic and Biological Systems
B.G. Hald, C.N. Laugesen, C. Nielsen, E. Mosekilde, E. R. Larsen, J. Engelbrecht

Abstract: A Rössler band is presumably the simplest of all chaotic attractors. It can develop in systems with only three state variables if two of these produce an outward spiralling trajectory, and the third folds this trajectory back towards its center when the amplitude of the expanding oscillation becomes sufficiently large. In the present paper we show how Rössler bands can develop through slight modifications of well-established economic and biological models.

Creating System Dynamics Models Hierarchically Using SADT
M.B. Hommel, C. McGowan

Abstract: SADT™ (A trademark of SofTech, Inc.,Waltham, MA), a hierarchical system description notation, was used to create System Dynamics models. This paper discusses the two SADT model types, data and activity, and their correspondence with System Dynamics patterns. Rules for transforming an SADT data model to a System Dynamics model, semi-automatically, are proposed. This information is then used in a step by step translation from a SADT data model to a System Dynamics simulation model. An example is given showing how the SADT hierarchy enhances the understanding of the simulation model. 

Knowledge-Based Modelling
Andreas M. Klieinhans

Abstract: Knowledge-based modelling consists of qualitative models which are implemented in a hybrid, rule- and frame-oriented programming language. Qualitative models achieve flexible and detailed description of both the simulation entities and relationships. This paper presents a simulation expert system which is based on a multi-level representation scheme of causal diagrams. It offers a qualitative “presimulation”, that is conclusions about the sensitivity of the elements, the restrictions and the possible behaviour of the model. It enables explanation of the various implicit structural and dynamic relationships and the user to be guided to efficient quantitative simulation.

System Dynamics Simulation of Spatial Character
F. H. Sancar, S. Allenstein

Abstract: System Dynamics modeling has been applied to regional, urban, and community problem solving where critical policies are concerned with land-use controls. Representation of change in the spatial distribution and physical appearances of various activities have traditionally been achieved by modeling these as transfers between relatively homogeneous sub-area sectors. Due to lack of capabilities for direct representation of System Dynamics modeling has received little attention in environmental and city planning practice. In this paper, we describe the main components of a methodology to make System Dynamics modeling more integral in planning and design for community development, also including spatial representation.

Chaos Study in System Dynamics
Qifan Wang, Zhiping Yao, Guangle Yan

Abstract: Based on our study of synergetics and dissipative structure theory, by means of mathematics, in terms of the viewpoint of system dynamics, this paper concentrates on the study of chaos in system dynamics: we analyze the nature of chaos phenomenon and the characteristics of system dynamics, put forward the viewpoint that chaos testing should be included in model testing of S. D.; we investigate several necessary conditions of chaos; we create a model to question a famous sufficient condition of chaos; then, we shed some light on the way toward which chaos will occur. At last, we successfully apply our theoretic study to a standard nuclear spin generator model.

Improving Insight and Understanding by Optimising System Dynamics
Eric F. Wolstenholme, Sattar A. Al-Alusi

Abstract: This paper will outline the concept of system dynamics optimisation using the DYSMOD software and present a case study of its use to analyse a defence problem. The insights into the problem, which were generated from a conventional system dynamics model and its policy design experiments, will be given. This will be followed by the presentation of results from a set of optimisation experiments, utilising a range of objective functions and structural design parameters. The paper will focus on the value added to the understanding of the problem which resulted from this process. The overall conclusion is that optimisation subsumes conventional sensitivity analysis as well as providing an holistic interpretation of the behaviour of a system dynamics model.

Technology & project management

A Study on the Coordinated Development of the R&D and Socio-Economy for a Typical Large City in China Using System Dynamics Approach
Qifan Wang, Bingyi Yang

Abstract: Taking Shanghai as an example, we have studied qualitatively and quantitatively the problems concerned with the coordinated development of the R&D and socio-economy for a typical large city in China. In this paper we first discuss some theoretical problems concerned with the coordinated development, then using the approach of system analysis to investigate the typical phenomena characterizing the imbalances of the development and the main reasons (constraints) which have caused these imbalances. And then we outline our main framework and ideas of the “System Dynamics Model for the Coordinated Development of R&D and Socio-economy”, illustrate the main strategy spectrum analyses and policy tests conducted on the model, and present the main conclusions and policy recommendations.

The Coordinative Development Between R&D and Tech-Acquisition in China
Quingri Xu, Keyie Jin

Abstract: This paper studies the coordinative development of R&D and tech-acquisition in the industrialization process of China, dealing with the mechanism of interaction between R&D and tech-acquisition. It also deals with the mechanism of limited resources allocation in capital investment to R&D and tech-acquisition areas. A system dynamics model about the coordinative development of R&D and tech-acquisition is developed.

Dynamic Modelling and Policy Analysis on Technological Progress and the Change of Industrial Structure
Qingri Xu, Hanping Li

Abstract: Based on the mechanism of interaction among R&D, technological progress, the change of industrial structure, and economic growth in both supply and demand sides, and with the help of dynamic input-output analysis, in this paper a system dynamics model is constructed, focusing on the notable impacts of technological change on structural change in the Chinese economy. Through modelling and policy analysis,some new findings and patterns of long-term development, including the preferential consequences and opportunity for industrial development, future prospects for China’s S&T and economy during the next fifty years, the evolution of industrial structure in the process of industrialization, and resource allocation to different industries and R&D expenditure allocation, are obtained.

War, peace & conflict management

The Planning and Controlling of Infantry and Artillery Joint Combat Operation
Mazen J. Alwani

Abstract: This paper demonstrates the use of System Dynamics as a device to simulate a system of infantry and artillery cooperating in joint combat operation.
The system under study does not represent a real or actual battle-field. The model represents a scenario describes hypothetical system of accepted theoretical structure of how infantry and artillery may co-operate in order to achieve a desired advance on a real battle-field.
The paper will give attention to the planning and controlling of any need to such co-operation, and will give better insights to decision makers before and during such joint operations.
We make no claim for revealing analysis of any army strategy, and seek only to show how a System Dynamics model could do if it were constructed by people who fully understood the problems and had access to information at which we can only make guesses.

System Dynamics and Defence Analysis
R. G. Coyle

Abstract: Operational Research (OR) had its origins in the need to make decisions about the use of resources in support of national defence. The specific case was the invention of radar in the late 1930’s and the military problem was to decide how this new technology could best be employed, in conjunction with the existing assets, such as fighter aircraft, for the air defence of the United Kingdom. It was, in short, necessary to conduct research into how military operations could be carried out, and hence the discipline was born. In fact, for the last 50 years, the military have been the major users of mathematical modelling. System Dynamics is, however, a relatively new tool in military analysis. This paper surveys a few published applications and suggests reasons why SD is particularly appropriate for certain classes of military problems. The paper then goes on to discuss the potential role of SD in the analysis of strategic problems. Finally, some problems of military theory are discussed.

System Dynamics Modeling of Air Warfare
Donald R. Drew, Antonio A. Trani, Lev A. Malakhoff

Abstract: The use of gaming to study contemporary warfare has evolved rapidly in recent years. Particularly important strides were taken during the 1960’s and 1970’s with advances in computer technology and the development of broader ranges of subject matter. The past two decades have seen a tremendous expansion in the role and influence of computer models as “policy assisting” devices – first in the analysis of national security issues, and now for the analysis of problems arising throughout the entire affairs of Government.

The Origins of Mass Warfare: A System Dynamics Approach
Edward T. Richards

Abstract: People of different nations often meet with the intent of destroying each other with the technology and techniques of modern warfare. This has come to be the reality of modern politics. Yet mass warfare has not been a permanent fixture throughout the history of mankind. In this paper, an attempt is made to gain a better understanding of what caused the transition from localized tribal feuding.

Government’s Ability to Manage Political Conflict over the Course of Economic Development
Khalid Saeed

Abstract: This paper reports findings of experiments with a system dynamics model of resource allocation in the political system of a developing country. Political patterns resulting from various assumptions about government attitudes are examined with respect to empirical evidence about these. The analysis helps to understand circular cause and effect relationships that shape internal trends affecting the government’s commitment to economic development agenda and its ability to resolve political conflict generated over the course of implementation of this agenda.

Additional papers

Gaming to Implement System Dynamics Models
Dennis Meadows

Abstract: Operational games based on System Dynamics models have been used in System Dynamics teaching since the first days of the field. Already in the text Problems in a Industrial Dynamics (D. Packer, MIT Press, 1962) was described the simple production distribution exercise, widely known as “the beer game.” This game is so effective that it has been used in almost every introductory System Dynamics course over the past thirty years. Nevertheless, until the early 1980s there were essentially no further efforts to develop and use System Dynamics games, except for a few management-training exercises developed by consulting companies.

Water Resources Development Planning
Ali N. Mashayekhi

Abstract: Water resource development requires development and operation of expensive facilities. Planning, design, and execution of water resource projects in Iran have been taking a period of time much longer than what is considered as a normal time. In addition, the projects are costing much more than normal. This paper presents a system dynamics model to analyze the behavior of the water resource development system. The paper shows that high cost and long construction time are results of policies that govern decisions related to budget allocation, start of new projects and price of water. The paper shows that how alternative policies could improve the behavior of the system. It is argued that appropriate planning approach for water resource development should consider the feedback mechanism in the water resource development system and concentrate on design policies that control the behavior of the system through those feedback loops.

CONFERENCE ABSTRACTS

The Design and the Testing of Plans at Government Level in Kuwait
Mazen M. Alwani, Eric F. Wolstenholme, A.A. Al-Hudaib

Abstract: This poster is concerned with the application of system dynamics as a decision support tool to assist the five-year development planning process in Kuwait.
The Kuwaiti Government, and in particular the Ministries of the Interior and Planning, have been progressively introducing more elaborate procedures for development planning. A five year plan currently exists and is being implemented. Work is now in progress on the extension of the plan into the 1990’s and a system dynamics group is to be formed to consolidate and extend existing support of the planning process. The group will use micro computer software (DYSMAP2) and plans to train Kuwaiti technicians are underway.
This poster presents an example of how system dynamics is being used in Kuwait to analyse objectives and plans for feasibility and compatibility prior to implementation. The example concerns police labour force planning and preliminary results and conclusions are presented.

System Dynamics as a Support for Cash Management Expert Systems
Jürgen Beckmann, Nicolai V. Engelhardt

Abstract: The following is meant to be an example of the combination of an Expert System (XPS) and a System Dynamics (SD) model in which the farreaching effects of cash management decisions in a complex of feedback relationships in a company are illustrated.
The great advantage in proceeding this way is to use the results of an Expert System as constants and initials in a System Dynamics model. That means, that the user is enabled to study the results of a static Expert System in a dynamic model.
The mentioned System Dynamics model is created on the background of an ancillary supplier for the car industry. Rather to simulate the real system in a very detailed way the model reduces this real system to the main areas of the company. As in this paper the point of main emphasis is to demonstrate a possible way of linkage of the two systems a short problem definition is followed by the description of the most important feedback-loops in causal-loop diagrams of the System Dynamic model. Subsequently the outcome of a model simulation with it’s graphic and tabular results is to be analysed under the aspect of influence of constants and initials originating from the Expert System concerning cash management decisions.

A System Dynamics Model of the New Zealand Economy
Robert Y. Cavana, Eric Haywood

Abstract: This paper discusses the general structure and implementation of a System Dynamics model of the New Zealand economy. The model, called SDMACRO, has been developed at the New Zealand Planning Council to provide likely trend movements, some 10-15 years into the future, in the key macro-economic aggregates including gross domestic product, capital formation, population, employment, exports, imports, and the current account balance. The base case run of the model is presented together with scenarios which show optimistic and pessimistic future outlooks for the New Zealand economy. In addition, the paper briefly describes how SDMACRO is used with a 22 sector general equilibrium model, Julianne, as part of another Planning Council study which examines national and sectoral development paths of the New Zealand economy up to 1995. Finally, some recent extensions to SDMACRO are outlined.

A Model for Exploring Scenarios Surrounding the Spread of AIDS in the U.K.
Brian C. Dangerfield, Carole A. Roberts

Abstract: Figure 1 illustrates the structure of the model.
People flow from a Susceptible Population after invasion by HIV and become members of the HIV population capable of infecting other susceptibles.
Then, infected people either move into a state of
(i)  clinical AIDS ( governed by the Symptom Emergence Ratio, SER) or into one of several other states
(ii)  die from other unrelated causes
(iii)  retire altogether from sexual activity on account of their age
(iv)  retire altogether from sexual intercourse as a reaction to knowledge of their condition
(v)  acquire a medically non-infectious state
All these states render the host non-infectious since we assume that patients with clinical AIDS will no longer be sexually active.

Participatory Simulations as Training Tools – A Study Based on the Market Growth Model
Ernst W. Diehl

Abstract: A participatory simulation based on the market growth model is developed. The performance of eight subjects is evaluated and compared against the results of simulation analysis of the model. Compared to the benchmark derived from the simulation analysis, the subjects’ performance is surprisingly low. It is argued that participatory simulations can be valuable teaching instruments but that they need to be combined with additional learning support tools.

System Dynamics Simulations for the Management of a Commercial Bank
Andre Finkenwirth, Georg Doll

Abstract: Bank institutions occupy a special position in the economy as they have to guarantee a frictionless money movement. Compared with industrial companies, banks do not produce concrete products but provide abstract services with money as their output object. These services- when they are included in balance sheet- are reflected in the accounts as sales relations. Therefore a balance sheet model is applied in order to reflect general decisions in banking and to show how these decisions affect banking business in terms of volume and profit.
The analysed bank is the London branch of a Continental bank. The branch acts on the markets as a commercial bank. These kind of representations are the most common ones in the financial center of London.
The branch offers four different kind of products: Traditional, specialized, contingent and treasury products. These products determine the statement of asset and liabilities and in addition are also the income earners of the branch.
The behaviour of the branch is determined by decision rules, market developments, the juristical position and internal restrictions. This behaviour is tested by adopting different scenarios.
The System Dynamics bank model is adaptable to individual circumstances of other banks and therefore it offers practical support for the management of financial institutions.

System Dynamics and Uncertainty: Results of Two Applications of Formalized Sensitivity Analyses with System Dynamics Models of the Electric Utility Industry
Andrew Ford

Abstract: Well structured system dynamic models are often quite useful in the analysis of the policy impacts in the face of multiple sources of uncertainty. Simulation searches for a “robust” policy that performs well under widely varying conditions are often the most rewarding portion of a system dynamics study. This paper reports the results of two studies where the analysis of uncertainty is carried a step further. Here, we are interested not only in policy impacts under widely varying conditions but whether a policy can reduce the uncertainty of the system.

The Effect of Linguistic Structure on the Analytic Paradigm of System Dynamics
Richard G. Fritz

Abstract: The purpose of this research is to describe the impact that linguistic structure has had on the method of modeling in system dynamics. In the structuralist framework, language is viewed as a system of signs which structure our patterns of thought and influence our behavior. Learned languages are incorporated into the structure of the unconscious which then contains and constrains the capacity for communication and discourse. Linguistic systems are not isomorphic. Thus, when the language used in communicating social, political, and economic ideas changes, (i.e., from verbal to static linear mathematics; or from verbal to dynamic nonlinear mathematics), this affects the theoretical structure of the discipline. The symbolic linguistic structure employed in system dynamic models offers a powerful alternative methodology for scientists to investigate social reality.

Evaluating the Impact of Financial Repression on the Economic Development Pattern of the Philippines
Richard G. Fritz

Abstract: The purpose of this research is to evaluate the relation between the development of financial markets and their institutions and the process of economic growth and development. Throughout the world less developed countries are facing various stages of an international financial crisis. Major banks in the industrialized world, as well as the IMF and World Bank have extended credit to these countries expecting the resulting economic growth to yield the necessary dividends for repayment. However the most expeditious road to growth and development has never been a certain one. One controversy deals with the timing and maturity of the financial institutions and financial markets. This overall process is called “financial deepening.” Previous published research polarizes the role of financial institutions in the process of economic development between supply-leading position and the demand-following hypothesis.

Sensitivity of Econometric Estimates of System Parameters to Changes in Sampling Intervals, Measurement Error, and Process Error
Ole Fugleberg, David F. Andersen

Abstract: Synthetic data methods are used to test the robustness of estimators of the parameters within a simple linear oscillator. Econometric methods are used to estimate the known parameters in the model.
The major result is that the deviations from the estimates to the true values of the parameters increase with the sample interval. The influence from stochastic inputs is marginal.
This is due to, that for great sample interval, the lag in the causal dependency is relatively small compared to the interval between the observations involved.

Generic Models as a Basis for Computer-Based Case Studies
Alan K. Graham

Abstract: For many years, system dynamicists have speculated that most corporate troubles could be explained by a small number (perhaps ten to twenty) of generic models, behavior modes, and syndromes (sets of symptoms) they create. Recent advances have renewed interest in creating management education materials, using such generic models to provide a consistent and known environment for active learning, using actual case studies for realism and detail, and using the computer-supported hypertext format of user-directed inquiry. A project at MIT integrated these advances in computer-based studies. This paper precedes systematic development of computer-based cases; it identifies 17 problematic syndromes and behavior modes. They are generic in the sense that they occur commonly in a variety of companies, as a result of common structures and policies. The 17 were identified from published modeling studies, interviews with executives, and unpublished consulting studies. The list of common corporate syndromes will be used in selecting the cases upon which to base the computer-based case studies. The list should also facilitate the problem-identification phase of consulting for individual corporations.

SDNET: An Integrated Communications Network and Database for the International System Dynamics Community
Jack B. Homer, Peiwei Mi

Abstract: The apparent slow growth of System Dynamics as a field may be due in part to the relative isolation of many practitioners of SD around the world. Not only is the field geographically dispersed and in the minority in most instances, it is also changing rapidly along with the rest of the computer world. In this context, it seems critical that practitioners have easy and timely access to information and people that could both assist and amplify their research and teaching endeavors and give them psychological support to continue working in the field.
SDNET is an integrated electronic network and database that is intended to provide such access to practitioners of SD around the world. SDNET has been developed and tested at USC’s System Dynamics Laboratory as an initiative of the Institute of Safety and Systems Management. It is currently available to be used by anyone who has access to an account on the academic BITNET network or any other electronic network (such as ARPANET) that links with BITNET. The database (SDBASE, housed on an Apple Macintosh) is structured to contain and fully relate information on people and institutions, publications, models, conferences interest groups, and electronic messages in the world of System Dynamics. This information may be easily added to, modified, or extracted upon request.
This poster demonstrates some of SDNET’s capabilities and discusses its current status and plans for the future.

Defense Program Lifecycle Management: A Dynamic Model for Policy Analysis
Jack B. Homer, Ivan Somers

Abstract: The System Dynamics Lab at the University of Southern California’s (USC) has worked with Hughes Aircraft Company’s Electro-Optical and Data Systems Group to develop a system dynamics model for analyzing alternative policies available to a defense contractor for managing the production program life cycle. Program lifecycle management is of prime importance to firms, like Hughes, that design, manufacture and maintain complex military equipment. These firms have come under increasing government scrutiny and control, particularly with regard to cost and schedule risks.
The USC-Hughes model addresses the notion that cost and schedule risks can be substantially reduced through improved program management, even in the face of possible hurdles thrown up by customers and suppliers. The model suggests, for example, that overruns, particularly cost overruns, may be significantly reduced–without adversely affecting product quality–by carefully limiting the number and type of discretionary mid-production design improvements.
This presentation outlines the background and basic structural elements of the USC-Hughes model, demonstrates the model’s ability to track historical data from two different cases, and highlights some of the policy findings that have emerged from the model.

Can Project Dynamics be Modelled?
Svein A. Jessen

Abstract: This paper discusses the author’s version of some of the pros et cons in modern project modelling. His main view is that projects have many features that make them well fitted for using the Systems Approach in the analysis and improvement of their performance, but many of the traditional “rules” for “correct” project execution and monitoring should be questioned. He particularly advocates revision of (1) the traditional firm definition of project boundaries as time, cost and quality which because of the uniqueness and unpredictability of project work, almost always have to be changed or adjusted, but where advice on which one to “adjust” when under pressure seldom exists (2) the necessity of basing the project performance on a strict “sequencing” of the project work when real life project work often experiences substantial “overlapping” between project phases , and (3) using common rigid organizational structures in a project environment where the real requirement is structures that favour the mastering of fast changes and organizational flexibility.
The author then elaborates on how the three arguments above could be part of a more “complete” project model, including a much stronger emphasis on the human factor as a major component in dealing with the suggested more complex nature of project work.
This leads to the authors own version of a more comprehensive Project Dynamic Model. The model is described in the paper by its main features and some of its initial findings, but a fully computer-implemented model using the STELLA compiler will be demonstrated at the conference based on the research undertaken by the author.

The World Oil Market: A System Dynamics Approach
Michael Karsky

Abstract: N/A

Multi-Criteria Optimization in System Dynamics
Raimo J.J. Keloharju

Abstract: This paper begins by summarising some milestones in the expansion of the system dynamics methodology to give a background to multi- criteria optimization in system dynamics. The case of ‘Inventory Control Policies’ from Jarmain’s (Editor) “Problems in Industrial Dynamics” is then used as an example to show how Wierzbicki’s method in multi-criteria optimization can be adapted to system dynamics. The solution procedure transforms the model into a discrete trajectory in time.

Financial and Production Planning in a Manufacturing Firm: Dynamic and Multi-Attribute Strategic Analysis
Hannu Kivijärvi, Markku Touminen

Abstract: In this research we study the dynamic behavior of an industrial firm. Special emphasis is placed on the financing of manufacturing fixed capacity and working capital. Firstly, we construct a corporate model of a sample firm. Then the experimental firm is operated using following strategy groups: cash flow management strategies, depreciation strategies and retained earning strategies.
Next, the emphasis is moved to the evaluation of outcomes. At this stage, an analytical hierarchy process is used. We insist that the decision analyst should decompose the problem into a hierarchy of interrelated decision elements. At the top of the hierarchy lies the most general objective of the decision problem, i.e., the well-being of the firm. The lower levels of the hierarchy consist of various decision criteria. The lowest levels of the hierarchy consist of decision alternatives, i.e., strategy groups. Finally, the best strategy is reached.

Capital Investment Planning for New Technologies- A System Dynamics Assessment on Economic Efficiency
Thomas Klaue

Abstract: Technological investment planning is of crucial importance for industrial enterprises. Successful investment decisions and the right process technology increase the companies competitive strength. If the wrong technology is applied this leads to high fixed costs diminishing the return on investment. Methodical long-range planning is required.
The necessity to introduce new technologies is emphasized in numerous publications. For evaluation of such strategic investments the classical methods of project calculations are not sufficient due to non-consideration of specific economic parameters changed by modern process technologies.
A holistic view will be developed, considering all effects of new technologies on the enterprise. The proposed System Dynamics approach simulates the changes of cost relations due to the introduction of a Flexible Manufacturing System (FMS) in an industrial enterprise.
The handy SD model can be easily adapted to individual circumstances. Therefore, it offers practical support to demonstrate the economic efficiency of capital investment already in the planning stage of preinvestment analysis.

Corporate Simulation Modelling for Strategic Planning: A Modular Approach Based on System Dynamics Method
Rakesh Kumar

Abstract: The strategic planning process involves anticipatory decision making for the business as a whole. The integrated functioning of a business and its interaction with the environment are complex enough to comprehend by intuition alone. Choice of modelling strategy as well as method of its application therefore attain significance. Modular approach during corporate model design is recommended for dealing with complexity. System Dynamics method is found most suitable to do so. Corporate model can be constructed from the modules of marketing, production, and finance. Production system has been analysed to illustrate the modular approach using system dynamics method for the purpose of corporate modelling. A generic set of eight basic feedback modules has been designed to model any capacity centre. A few such sets integrated result in model of a production system. This approach has been applied for modelling a steel plant. The production model has been historically validated. It has been extended to incorporate financial consequences. The steel pant model so designed has been used for simulation experiments.

A Model of System Dynamics on Factory Management
Mingkai Lei, Xiaoyong Zhang

Abstract: This paper constructs a system dynamics model which simulates the behavior of the structure of a large radio appliance factory administered by government department in China. Because the factory present focus is orders unfilled and profits reduced, we carry out several policy experiments on the model. The experimental results show that if the factory manager will add sales expense properly and adjust product price in time, orders and profit will been increased to higher level. In addition, the model exposes that there are lack of management systems and policies in state enterprises of China, these problems limit their development.
Input data of the model come from the database of the management information system of the factory. Data are transmitted quickly and accurately. The model is provided with good dynamic state and applied conveniently.

Modeling the Dynamics of a Family in Crisis
Ralph L. Levine, Jane L. Pearson, Nicholas Ialongo

Abstract: A model of the dynamics of a family problem was developed as a prototype of future work in family therapy. In this situation, a family was in crisis over the problem of managing the son’s illness. The father refused to recognize the severity of the disease, while the mother begrudgedly took responsibility for the care of the child.
The model describes the dynamics underlying the mutual anger between the parents, the guilt of the father, and the effects of therapeutic interventions on this family system. The output of the model was oscillatory in nature. The timing of these oscillations of the parents anger and the father’s guilt matched the sequence of emotions actually observed by the clinical team when dealing with this family.
The modeler, who was not in possession of all the facts, predicted a relapse of the father’s behavior and a recycling of bouts of anger between parents after about six months following the termination of therapy. The therapists substantiated this prediction, giving confidence in the model.

Subjective Knowledge Bases in Corporate Policy Making
Peter M. Milling

Abstract: Intelligent behavior involves subjective variables, it is guided by fuzzy goals and constraints, and it applies multi-valued rules of inference to reach its conclusion. Decision or strategy support systems- in order to serve as reliable tools for testing the consequences of alternative courses of action- must reflect these essential aspects of the problem under investigation.

The paper presents a corporate model designed for the investigation of a firm’s resource allocation strategy. It discusses the applicability of fuzzy set theory to computer simulation in general and to System Dynamics in particular. After qualitative variables and fuzzy goals have been explicitly included, the model exhibits improved performance with respect to behavior and acceptance by management.

Strategic Microworlds and System Dynamics Modelling
John D.W. Morecroft

Abstract: In the past ten years, system dynamics has become more accessible to managers and more applicable to strategic issues. The paper reviews developments in software, theory, gaming and methods of simulation analysis that have brought about this change. Together these developments allow modellers to create computer-based learning environments (or microworlds) for managers to “play-with” their knowledge of business and social systems and to debate strategic change.

The Dynamics of Escalation Phenomenon
Michael J. Radzicki, Michael G. Bowen, Robert G. Kuller, Hector H. Guerrero

Abstract: The “escalation phenomenon” (Staw 1976; Staw and Ross 1978) refers to the tendency for decision makers to “throw good money after bad,” that is, to invest beyond the point where benefits equal costs. The commonly accepted view is that such ‘escalation” occurs as a result of decision makers becoming overcommitted to a previously chosen course of action through a series of decision errors. This paper presents a generic system dynamics model of resource recommitment behavior that is able to produce “escalation” without the presence of decision error. Implications of this model to the theory and practice of project management are discussed.

System Dynamics Modelling for the Design of Change
Khalid Saeed

Abstract: While the informal modelling procedure of system dynamics qualifies as scientific according to the definitions of the epistemological literature, the application of this procedure may create models of phenomena that provide few clues to the design of change. Policy design exercises based on such models may often end with a moral statement about what should be done by the organization as a whole instead of providing motivational instruments through which its various members realize evolutionary change. Unfortunately, a change prescribed by a moral statement can only be realized by a powerful intervention by an outside agent which is, if at all possible to implement, often dysfunctional. This paper attempts to define heuristics for the construction of models that may lead to viable designs of evolutionary change. A model is viewed as instrument for understanding a problem not as a source of design. Guidelines for partitioning complex problems into multiple models are discussed. Models containing conservative systems capable of generating a large number of time variant patterns, which are in reality separated by time and location, appear to be sound instruments for facilitating the design of change.

System Behaviors on Educational Problems
Hisao Shiizuka, Fumie Kouchi, Tomoko Toishi, Etsuko Toyoda

Abstract: This paper is attempting at modeling and simulation of an educational problem at junior and senior high schools. Our model consists of seven level-variables, ten rate- variables and twenty auxiliary -variables. Also we discuss marks of students in the model that are figured from 0 to 100. Results of the computer simulation are given to illustrate the our model.

Modeling Managerial Behavior: Misperceptions of Feedback in a Dynamic Decisionmaking Experiment
John D. Sterman

Abstract: Studies in the psychology of individual choice have identified numerous cognitive, informational,temporal, and other limitations which bound human rationality, often producing systematic errors and biases in judgments and choice. Yet for the most part models of aggregate phenomena in management  science and economics have not adopted postulates of human behavior consistent with such micro-empirical knowledge of  individual decisionmaking. One reason has been the difficulty of extending the experimental methods used to study individual decisions to aggregate, dynamic settings. This paper reports an experiment on the generation of macro-dynamics from microstructure in a common and important managerial context. Subjects play the role of managers in a simulated inventory management system, the “Beer Distribution Game”. The simulated environment contains multiple actors, feedbacks, nonlinearities, and time delays. The interaction of individual decisions with the structure of the simulated firm produces aggregate dynamics which systematically diverge from optimal behavior. Subjects generate large amplitude oscillations with stable phase and gain relationships among the variables. An anchoring and adjustment heuristic for stock management is proposed as a model of the subject’s decision process. The parameters of the rule are estimated and the rule is shown to explain the subjects’ behavior well. Analysis shows the subjects fall victim to several ‘misperceptions of feedback’ identified in prior experimental studies of dynamic decisionmaking. Specifically, they fail to account for control actions which have been initiated but have not yet had their effect. More subtle, subjects are insensitive to the presence of feedback from their decisions to the environment and attribute the dynamics to exogenous variables, leading their normative efforts away from the source of difficulty. The experimental results are related to prior tests of the proposed heuristic and the generality of the results is considered. Finally the implications for behavioral theories of aggregate social and economic dynamics are explored.

Bifurcation Sequence in a Simple Model of Migratory Dynamics
Jeppe Sturis, Eric Mosekilde

Abstract: A bifurcation sequence in the Waycross model is studied by means of Poincaré section techniques. The bifurcation parameter B is gradually reduced from 2.00 to 1.50. This parameter measures the inclination of one type of minority families (Lomanians) to move into the districts with many families of another type of minority population (Itrachians). Because of symmetry the attractors in this 4-dimensional migratory model occur in pairs with opposite directions of cyclic population movements. A pair of simple limit cycle attractors are found to remain stable under formation of a pair of period-2 attractors. In a certain parameter range, the model thus contains four entangled attractors. We follow how the period-2 attractor become chaotic through formation and subsequent destabilization of 2-dimensional tori. On the way, regular period-14, period-18 and period-4 attractors are produced through frequency-locking.

We thereafter observe a case of type-III intermittency when the two period-1 orbits become unstable, and finally the two chaotic attractors merge with each other.

Behavioural Sensitivity of the Lotka-Volterra Model
Johan Swart

Abstract: The continuous model for a deterministic continuous growth, one-predator-one-prey system is that of Lotka and Volterra. It is well known that this model predicts neutral stability in which the constant amplitudes of the oscillations are determined by the initial conditions. Without changing the underlying model assumptions and by altering only the predator functional response to prey density, it is shown that damped  oscillations towards stable equilibrium or explosive oscillations or a stable limit cycle can be generated as model input.

Oscillations and Chaos in Ecological Populations
M. Toro, F. Gaona, Javier Aracil

Abstract: In this poster we analyse the chaotic motion of a model which describes the behavior of a prey-predator-food system.
This system can be modeled by mixing two well known models: the predator-prey model (Henize, 1971) and the Kaibab plateau model, which copes with the prey-food part of the model (Godman, 1974).
This model has previously been introduced in (Toro and Aracil, 1988).

Expert System Dynamics Modeling with GURU
John J. Uhran, Jr., Nassir Ghiaseddin, Ramzi K. Bualuan

Abstract: The purpose of this paper is to present a possible way in which a marriage between Artificial Intelligence and Modeling can take place. More specifically it is the purpose of the paper to explore some basic concepts related to Artificial Intelligence and by using an expert system shell called GURU to aid in the development of system dynamics models. The concept is one of going from data base to knowledge base to models and to examine the line of reasoning that is used in formulating the problem. Simple examples will explore the potential of this approach.

A Structured Approach to Knowledge Acquisition In Model Development
Jac A. M. Vennix, Jan W. Gubbels,  Doeke Post, Henk J. Poppen

Abstract: Model development for policy purposes often involves consulting one or more experts to acquire knowledge about the system that cannot be found in the literature. This poses a knowledge acquisition problem: how to derive the necessary knowledge from the expert(s). This is particularly acute if the number of potential experts to be consulted is large, as might be the case in public policy making. In this paper we will discuss a structured approach to consult a great number of potential experts. The approach was developed for the construction of a simulation model of a regional health care system. The adopted approach, however, is sufficiently general to be employed in other model development processes as well.

A Decision Support Model for University Management
P.J. Vermeulen, W.J. Rossouw, M.J. Joubert

Abstract: N/A

An Integrative Approach to Water Resource Management: An Application in Madison, Wisconsin
Stuart D. Wallace, Fahriye H. Sancar

Abstract: This study describes policy making and its implementation in water resources to facilitate proactive policy making. A system Dynamics model is constructed, evaluated, and revised with extensive inputs of the actual actors/interested parties in the policy arena.

The Relationship Between Health Care Interventions and Morbidity: Some Counter-Intuitive Implications of a Socio-Ecological Model
Norman F. White

Abstract: The most fundamental health studies issue is the discrepancy between expected and actual performances of the Health Care System: the deployment of curative biomedicine is expected to decrease morbidity and costs, but we see everywhere a rise in both. Technological lag, environmental damage, administrative slippage, professional pressures, and new wealth consumption are conventional but, at best, partial explanations. It appears that the rationale is flawed by the use of an inappropriate image of the system out of which morbidity phenomena emerge. The Socio-Ecological Model proposed here links HCS operations with a more appropriate morbidity construct. The individual’s subsystems interact with the social-physical environment to create two distinguishable types of morbidity: anatomico-physiological conditions constituting the ‘lesions’ of the disease process, and interacting experiential, behavioural, and role changes of the illness state. The HCS becomes a significant part of the sick person’s environment, and affects the four resulting sub-populations differentially. Care and prevention goals are to move sick individuals/populations toward illness-free and disease-free quadrants and to prevent/slow movement away from them. The counter-intuitive HSC production of morbidity (through, e.g., coronary care, increased life expectancy, pursuit of fitness, early diagnosis, and psychosocial counselling) is no longer surprising. The model suggests a revision of health planning goals, with major shifts in resource allocation.

The Effectiveness of Management Information Systems
Eric F. Wolstenholme

Abstract: There are a large number of references in the literature to the problem of evaluating Information Systems in terms of both efficiency (the technical aspects) and effectiveness (the user’s view, and the effect the system has on the organisation). Whereas the efficiency can be defined clearly in mathematical terms, measurement of effectiveness tends to be subjective and is usually measured retrospectively (i.e. some time after installation) using a questionnaire approach, or by expensive simulators, prior to installation.
This presentation deals with the initial thinking behind the development of a quick and less costly system dynamics approach to measuring effectiveness, by using a simple model to examine the effect the proposed system will have on the organisation into which it is to be installed.

Description of Microeconomics by System Dynamics
Yun Guan Xia, Wan Kang Chen

Abstract: Some principle conceptions in microeconomics are simulated by System Dynamic (in brief S.D) in this article. The simulating of two fundamental theories in microeconomics concerned with balanced prices and margin analysis leads to some significant conclusions. Most of these conclusions are now in heated argument in microeconomic field. Our achievement is provided as a test of the proceeding ideas.

Using System Dynamics Method to Analyse an Enterprise
Ching T. Yang, Ansheng Cao

Abstract: This paper establishes a system dynamics model to analyse a dynamic productive procedure of an enterprise in Shanghai. The model consists of five sectors, order and supply sector, production sector, material sector, advertising sector and financial sector.
There are many products which the enterprise expects to produce, and in the model these products are transformed into two standard products according to the kind of products. The paper analyses the impacts of some soft factors, such as worker’s quality, bonus, advertising, etc., on the profit, and also the policy of purchasing materials. The model presents the strategy of how to work out plans between two standard products when the input surpasses the productive capacity of the enterprise.
The model is run by using real initial input values in 1985 and 1986. The results are very close to real situations of the enterprise. The sensitivity tests shows that the model is insensitive. So it is adquate
to consider that the model is reliable and can be used as basis for dicision making by managers.

Inventory Control and Forecasting
Shi Shen Yang

Abstract: This paper provided a two-stage invertory system. It Descrips its problem behavior and structure implement. Analyse the policy design: use inventory and backlog to absorb differences between production and demand, change production to match change in demand, change demand to match production abilities, finally, forecasting reslove permanat and temorory change and lag in production’s responce to change.

A System Dynamics Approach to the Car Ownership Trend in Taiwan Urban Areas
Showing H. Young, Iwan B. Santoso

Abstract: The economy in Taiwan grew rapidly in the last decade. This steep increase strongly affects its transportation system: the number of cars in the urban areas increased dramatically. Some studies forecasted that the number of car in Taiwan urban areas in 2000 will be three times of that in 1984. However, those studies did not consider the feedbacks from the traffic and parking conditions to the car ownership. In addition, some of the possible changes in the system environment are also not being considered, such as the increasing life expectancy of the car, the shortening car renewal period and more and more attractive car purchasing loans policies. This study is an attempt to apply system dynamics methodology to analyze the trend with inclusion of feedback and the above mentioned system environment changes. The results show that due to feedbacks from the limited capacity of roadway and parking and the influence from the system environment, the number of cars in urban areas will only be doubled in the year of 2000. Although the data for this research were very limited, by using the system dynamics methodology we are able to have a better picture of the future trend of car ownership in Taiwan.

The Application of System Dynamics in Solving a Dynamic Input-Output Model with Delays
Xing Zhang

Abstract: Since the dynamic input-output method was put forward by W. Leontief, some results have been obtained to a greater or less degree in various fields of quantitative economy, which have played an important role in the application of the method. Yet, insolving the delay-having dynamic input-output models, whether the matrix converse exists or not has not had sufficient mathematical proofs. Having taken these problems into consideration, our paper attempted to solve the problem of multiyear delay-having dynamic input-output model with the application of the properties of system dynamics in structure and time sequence, the properties of BOXLIN and SUM functions, and has combined these two models, the combination of which is possible in the sense of the economy. The DIOSD (Dynamic Input-Output and System Dynamic Model) not only has the advantage of man-and-machine conversation as well as screen display, but also we can put the DIOSD completely into the SD model with the consideration of the overall system structure. Therefore, we can make full use of the advantages of the dynamic input-output model in economy planning and forcasting, and also provide an efficient tool for its future application.

CONFERENCE PROCEEDINGS

Depression, Perception and Cognition
Karen J. Adler

Abstract: Depression is one of the leading psychiatric disorders today. A new approach known as cognitive therapy has made significant gains in treating depression by helping people change their understanding of their actions and environment. The approach is based on the assumption that it is primarily a person’s thought process concerning circumstances, rather than the circumstances per se, that are central to depression. In this paper, we develop a system dynamics model that can be used to explain more fully the dynamics of the processes that lead to depression, as well as the dynamics of getting better. The model is used as a vehicle to integrate the many facets of cognitive therapy to a coherent classification of the technique. A variety of case studies are used as a basis of model development and evaluation. The model is simple enough to be understood by people who do not have formal training in system dynamics. As such, it serves as both a valuable tool for therapists practicing cognitive therapy as well as a means of communication to the general public of the nature of cognitive therapy.

A System Dynamics Approach to Group Formation and Productivity
Bent E. Bakken

Abstract: Based on previous work on Group formation, in particular on the classic “The Human Group” by Homans (Homans 1950), we develop a System Dynamics model to portray the growth of two social subgroups within a larger work group. The work-group is the people working in the bank wiring room of the Western Electric facilities in Hawthorne, Illinois as described in Homans work (op.cit). Working with concepts taken from Cognitive Dissonance (Festinger 1957) we describe the dynamic interaction pattern of a synthetic group consisting of five individuals. Depending on hypothetical time constraints describing the participants willingness to change, we get a distinct subgroup formation process before the development of a common set of beliefs for the entire group or just development of a “group culture” without the prior formation of the subgroups. Further research is suggested, notably the inclusion of antagonism in the model. It is also suggested that such SD models can be used to integrate knowledge of personalities to simulate the impact of a person on the performance and behavior of a work-group.

Simulation Games – Do People Really Learn?
Bent E. Bakken

Abstract: The use of computers to improve general and task-specific mastery is the core of most computerized learning games. But they are also employed to communicate complex structures. Substantive theories explaining concept formation and learning has been developed by Piaget (1936) and used by Papert (1980) in a computer-specific sense. A recurring assumption in theories of learning is that people who learn from computer games learn in an abstract way, i.e., they learn more than to repeat efficient manipulations of the symbols on the screen.
This study develops a theory of the learning process involved when simulation games are used to reveal the structure of a complex system. Within the framework of a sample of student exposure to a compute simulation game, we find evidence for a theory that games do transmit knowledge of a complex system. In particular, the study indicates that participants Initial Experience, as well as its Relevance to the situation plays a major role in the mastery of the game. Another factor determining understanding of the structure is the use of gradually increased complexity. A System Dynamics simulation model of the learning process is developed, giving new insights into how simulation models should be built to overcome dilemmas of game transparency and real world complexity. A sample of 8 students show a close fit to the model predictions. A framework for further behavioral research and the state of the art implications for System Dynamics modelling practice is outlined.

A Quantitative Performance Measure and Its Application to System Dynamics
Raj Kumar Bapna, Sushil K. Sharma

Abstract: This paper presents a general quantitative performance measure to analyze the performance of System Dynamics models for the desired model behavior. The advantages of using a quantitative performance analysis facility are discussed. Some possible applications including optimization and sensitivity analysis are discussed. Also discussed are the implementation aspects. 

Beyond DYNAMO: Future System Dynamics Simulation Programming
Raj Kumar Bapna, Sujoy Ghose, Sushil K. Sharma

Abstract: Advances in computer technology, since DYNAMO first appeared, promise significant developments for System Dynamics modeling and simulation. This paper discusses the future System Dynamics simulation languages as part of a human-engineered, integrated simulation programming environment. Many features of such languages and environments, that may become available in the next five years, are identified and discussed. The relevant advances in Simulation and Computer Science are presented with appropriate modifications in the context of System Dynamics methodology. Some aspects of implementation of such languages and environments are also discussed.

Must Government Owned Enterprises Be Less Efficient Than Private Ones?
Andres E. Breiter

Abstract: This paper is based on direct observation of privately and government owned enterprises in Argentina, Italy, Poland, U.S.A. and Yugoslavia.
A causal model is presented which is found in all enterprises operating successfully and efficiently over time. The frequently observed inefficiencies in government owned companies are explored with its help. The same method suggests why certain privately owned enterprises exhibit inefficient behaviour while on occasions government owned enterprises are an example of dynamic, foresighted and efficient management.
The external pressure groups and their methods for exercising influence through government bureaucracy and other channels on company management are found to be of great importance and so is the legal structure and competitive environment in which management operates. The availability of adequately trained managers is another key element.
Several general recommendations are formulated for policies that will ensure efficiency in both government and privately owned corporations.

Parks and Natural Resources Management: A Systems Study
Thomas D. Clark

Abstract: A study of the management structures for state parks and natural resource protection areas is presented in this paper. This analysis vehicle is a system dynamics model of a typical park encompassing flora and fauna natural resources, cultural heritage resources, and recreational areas. Such systems are complex feedback structures where management goals must be drawn to achieve desired ends within fiscal and personnel constraints. The model is used to suggest methods of measuring the tradeoffs between goal accomplishment and resource constraints. The model was developed through an extensive study of the Parks System of Florida.

A Petroleum Life Style Cycle Model for the United States with Endogenous Technology, Exploration, Recovery, and Demand
Pål I. Davidson, John D. Sterman, George Richardson

Abstract: This paper describes a model of the life cycle of the petroleum resource in United States. Expanding on prior system dynamic models of petroleum resources, the model endogenously generates the complete life cycle of the resource. The model treats endogenously the petroleum demand, the development of technology for and investment in exploration and recovery, the discovery and production of petroleum and the development of petroleum substitutes. With only two exogenous variables (GNP and the international petroleum price), the model is able to portray the evolution the petroleum resource, and the associated industry, starting in 1870. The correspondence between simulated and actual data is examined through a variety of statistical measures. The model is used to show how the interplay of technological progress, depletion, and the development of substitutes create the lifecycle by altering the dominance of the feedback processes in the system. A full documentation may be found in (Davidsen, 1987).
The model constitutes the basis for more comprehensive studies in the following areas of concern, all related to the management of depletable resources: 1. Adaptation of the model to different kinds of depletable resources, and generalizations to obtain a model portraying the generic structure of the life cycle of a depletable resource. 2. Analysis and evaluation of current practices in the management of depletable resources. 3. Design and evaluation of alternative strategies for the management of such resources.
The model seems furthermore to be a promising tool for teaching resource management.

Application of Modal Analysis to Large System Dynamics Models
Amadou Diallo, R. Joel Rahn

Abstract: In this paper we present methods developed to aid the application of modal analysis to large system dynamics models. The approach is based on a method of direct linearization which can be achieved using DYNAMO equations derived from the model being studied. The linearization is followed by identification of the sub-systems of the model and a modal analysis of the sub-systems. The sensitivities of the modes to structural and parameter changes are used along with a causal loop diagrams to propose changes in the model that will have a desired dynamic effect.
Application is made to Lyneis’ model of a firm. As suggested by the analysis, modifications both in the polarity of some relationships and in their strength are introduced to stabilize each sub-system and the results are shown to be positive using the criterion of over-all profitability of the model firm. The paper concludes with a discussion of further developments of the process and to account more completely for the non-linearity of the system.

Sales-Oriented Product-Innovation-Rates
A New System Dynamics Approach to Research & Development Budgeting
Georg Doll

Abstract: Research and Development (r&d) are the source for planned invention and innovation and therefore play a crucial role for the success of a company. New products and processes become indispensable because of technical progress and competition. Early long-range r&d planning is required.
Despite the strategic importance of r&d budgeting, the usual approach resembles more a rule of thumb than a scientific method. The process most widely used takes a fixed percentage of sales for r&d. This sales orientation approach seems perhaps too simple, as there is no causal link between today’s sales and tomorrow’s products. Another method considers the product-innovation-rate; this is the fraction of total sales which comes from products that are younger than e.g. five years. The actual product-innovation-rate then is compared with an intended value (e.g. forty per cent) and the r&d budget is accordingly adjusted.
Contrary to previous studies, a System Dynamics simulation shows that the rather sophisticated product-innovation approach does not lead to better results in terms of cumulated profit. In its place, a modified approach, which avoids the disadvantages and combines the benefits of both the sales and the product-innovation-rate orientation methods, has been developed and implemented. This sales-oriented product-innovation rate approach shows superior results in some of the scenarios tested, including expansion and shrinkage portfolio situations.
The handy but accurate System Dynamics model (less than hundred equations) is easily adaptable to individual circumstances of specific industrial enterprises and therefore offers practical support for strategic long-range planning.

System Dynamics Model of Infrastructure Induced Development of Taiwan
Donald R. Drew, Lee D. Han

Abstract: This paper describes a pilot model, the harbinger of a comprehensive package of interactive national, regional and sectoral models of Taiwan, to be used for long range planning. The model, called DMT (Development Model of Taiwan ) is distilled from many mental and verbal models of Taiwan, each of which involved various segments of the system with considerations given to certain variables and to various policy interventions involving still other variables.

Model Restructuring
Robert L. Eberlein, James H. Hines

Abstract: Models are continually changed and altered, and it is clear that more effective techniques for accomplishing this can make modeling easier and faster. One common way that models are changed is to remove selected pieces of structure from the model. This type of model alteration can be done for debugging a model, for tuning a model, and for performing policy analysis. In this paper we present techniques that automate the processes involved in removing components of model structure. By taking out some of the drudgery of changing a model, and guaranteeing consistency in the resulting altered model, the techniques greatly enhance modeling fluency and speed. These techniques are implemented in a software package that is part of Professional DYNAMO.

A Dynamic Modelling System with Chinese Character DYNAMO as the Kernel —Software Tool for System Dynamics
Meiqi Fang

Abstract: This paper gives a brief account of the technical details of Chinese Character DYNAMO compiler, which follows the current DYNAMO grammar. The compiler is in the form of modules, which lays good foundation for further expansion. Taking DYNAMO as a kernel, reinforcing its internal function and statistical analysis of results, joining other programming languages, methods and modules, adding verification of model and using advanced ideas of other branches of system science, we can build a Modelling System with Chinese Character DYNAMO as the kernel. This paper gives the logic design of the Modelling System.

Development and Utilization of Global/World Models in International Affairs
Harold Guetzkow

Abstract: The development and utilization of global/world models in the context of political implications of world economic trends is overviewed in terms of three streams of research, that of multidisciplinary social scientists, of the econometricians, and of the system engineers. Socio-political processes impinge on world economic trends, just as trends in turn impact on politics, both national and international. The use of simulations rich in system dynamics for the study of international affairs is found to have much potential, as documented in findings obtained by researchers throughout the world.

Design and Analysis of the Development Model in Chiba Prefecture
Toshiyuki Horiuchi, Wang Mohang, Akira Shimizu, Toshiro Simada

Abstract: In this study, we have selected chiba prefecture as an subject. Chiba Prefecture is located in the Metropolitan region which is made up of Tokyo Metropolis and three prefectures. Though its local power is not so high compared with others, Chiba Prefecture has been remarkably vitalized in recent years. In order to study how the life environment of our local society will change in the near future, we have designed a local development model based on the System-Dynamics and analyzed it until 2000. The whole model is made up of 6 sectors; population, industry, land and dwelling, finance, education and medical facility. In the population sector, we have studied the change in the age structure. In the industry sector, we have analyzed the change in the structure by studying agriculture as the representative of the secondary industry and tourist industry and retail as the representative of the tertiary industry. Based on such kind of analysis, we have concluded the followings in 2000. the population of Chiba Prefecture will reach the level of 6.27 millions. The secondary industry will grow move rapidly than the tertiary industry, it’s will become post Industry Society. The local society might become advanced-age society, we way say that our Chiba Prefecture will be relatively comfortable to live, compared to the other areas of the Metropolitan Region.

System Dynamics Model for Studying the Impact of Tech-Progress on Economics
Yukui Hu, Suling Jia

Abstract: The consumption of resources and the environmental pollution caused by the discharge of waste materials and waste heat occur as useful products are being turned out in the social-economic activist activities. Based on the concept of entropy, the paper deals with the impact of tech-progress on every link of this process. This is the major mechanism for the impact of tech-progress on economics.

Thought Criteria for Use of System Dynamics
Yongning Jiang

Abstract: The purpose of this paper is to explore the thought criteria of modelling in system Dynamics.
Thought criteria of system dynamics has appeared as a dynamic theory in the field of economics. This field has three characteristics: nonlinear fluctuation, time delay and qualitative transformation. These characteristics constitute the basis of model building in system dynamics.
The concept of thought criteria is based on the process of cognition: Study of subject– Modelling—Understanding of object. It is closely associated in series with interactive elements of the system. The modelling has been inspected in practice as a transitional link between subject and object so that modelling has turned into a cognitive and analytical method  and will be used, first, to carry out simulated tests of the prototype and thus deepen our comprehension of it; secondly, to compare the specific properties of theoretical and experimental systems with those of the real system, and by means of the result from these comparisons, to improve a causal relation loop; and thirdly, to show a tendency to pass from qualitative analysis to quantitative analysis, thus leading to the combined assessment of the system. The rules of the combined of the application of the system model are identification, interchangeability, controllability, and availability.

Research of Decision and Planning on the Development of Tianjin Can Industry-Application of System Dynamics
Hui Jin, Bao Lui, Jisong Kou

Abstract: The paper analyses the system of Tianjin Can Industry using System Dynamics method. It puts forward suggestions to the development decision and planning of the seventh five year and the year 2000 of the Can Industry. The model simulates and analyses emphatically the returns on various investment and the efficiency of various developing products, which should be a reference for the decision-maker.
A new idea of using Optimal Technology to optimize the System when the model simulation is carrying on is brought forth in the paper, and good results are obtained.

Dynamic Modeling of Adoption, Rejection and Life Cycles of Innovations
Sakari T. Jutila

Abstract: The well established theory and methodology of the assurance sciences, especially the probabilistic reliability and availability theory, is applied to the modeling of the dynamics of innovation adoption processes. In particular, this approach allows one to model the dynamics of the diffusion of innovations through complex organizational decision networks. The approach taken here is an analytic one. However, it provides a logical framework for dynamic computer aided approaches. As the management and control of the dynamics of the innovation adoption are becoming increasingly important, obvious extensions of this approach are in the direction of optimal control systems concepts and applications. A number of empirical examples from the American automobile and steel industries are discussed.

Simplification by Planning: The Third Way
Raimo Keloharju

Abstract: This paper puts forward the idea that essential parts can be removed from a SD model without harm if the model is revised successively during the simulation. The revision requires an optimization package, called DYSMOD (Dynamic Simulation Model Optimizer and Developer). A multi-stage production model, developed by J. M. Lyneis, is used for demonstrating that the idea works in practice.

A Prototype Expert System for System Dynamics Modelling
Mitsuo Kishi, Keitaro Noda, Yuji Yamashita, Katashi Taguchi

Abstract: In this study, a prototype expert system to support system dynamics modelling is designed by organizing the knowledge structures of generic patternized expectations and the rules on how to construct system dynamics models. The system is a production-rule-oriented consultation system written in PROLOG. The proposed system covers the system conceptualization in part, system modelling, and generation of simulation program. Brief executing processes of the proposed system are: 1) Extracting concepts (nodes) within a system by perceiving action/decision making and by inferring the causal relations (links). 2) Preparing a causal-loop diagram of the system automatically by interconnecting the causal relations and by eliminating inappropriate links. 3) Transforming the causal-loop diagram into a flow-diagram automatically, and generating a simulation program. The proposed system has a knowledge base of facts acquired in the systems modelling, to facilitate the modelling of a system related to the ones dealt with in the past. Some application examples are provided to verify the applicability of the proposed system.

A Systemic View of the Population of China, Today and Tomorrow
André Lambert, Louis Lohle-Tart

Abstract: The authors present models, written in Dynamo language, used for reconstituting the demographic evolution of China between 1953 and 1978, and for dynamic simulations of the Chinese population. These models incorporate standard features of demographic projections but also a highly disaggregated sub-system of the female fertility, by age of women and number of children ever born. The spontaneous evolution of population is easily analyzed; any number of changes in fertility and/or mortality can be simulated, together with their consequences on population figures.
The paper presents simulations of modifications in the trends of mortality and fertility. The effects of such modifications are discussed.
The authors show the importance of existing stocks of people (by sex, age and number of children) for understanding and predicting the evolution, “natural” or consecutive to governmental actions, in population parameters; the evolution can be accelerated or delayed due to structural constraints.
The short- and long-term effects of the possible evolutions in demographic parameters on the several stocks (population structures) are discussed, in the perspective of their usefulness for decision-makers. The disaggregation of the model allows to make sectorial projections for each simulated hypothesis.
The feasability of a stabilized population in China by the year 2000 is also discussed.

SD Model of Urban Water Using of Tianjin
Puhua Li, Chunpeng Tang

Abstract: The paper presents a preliminary attempt for application of system dynamics in the study of urban water using and its management.
The SD model of urban water using describes the complicated system behavior. It will help us to understand and trace time interval behavior of urban water using system, to observe and handle dynamic trend of system behavior, to obtain the features of urban water using in different time. Therfrom we may have a quantified rational knowledge about water demand and have to find an effective may to strengthen scientific management of urban water using, to promote rationalization of urban water using, to save water resources and to resolve unbalance between supply and demand. Meanwhile, necessary informations and quantized references should be provided for administration and departments concerned to determine the speed of economic development, study layout and structure of industrial development, adjust key points and methods for urban water using.

CISD- – A Normative Method for Technology Assessment
Ruiji Lin

Abstract: The formal KSIM (Kane’s SIMulation) model is equivalent to a particular system dynamics (SD) model. On the basis of this equivalency, we use the KSIM and cross-impact concepts to simplify the SD modeling steps, and a new procedure –CISD from the abbreviation for Cross Impact System Dynamics which is technically simpler and more normative, has been introduced. CISD is well applied in the field of Technology Assessment (TA). An example for TA of agricultural chemicals with CISD is presented. A general computer program for CISD which is called CISD-FORTRAN makes CISD procedure more widely used with facilities even for nonspecialists.

Process/Production Control: A System Dynamics Study
Roger Neil Millen

Abstract: Using data from a large primary steel products company, two Industrial Dynamics simulation models were constructed to study the effects of process control computer-generated information on management control systems. The first model represented the existing system, the other proposed process control/business control interfaced system.
The research provides an initial step in the solution of the problem of integrating process control and management control systems by investigating the relationship between process information and control decisions at the operating level of management.
The proposed system model indicated much less fluctuation in inventory levels following changes in demand, lower backlog ratios, higher inventory ratios, lower delivery delay ratios, and higher levels of consumer satisfaction. The proposed system was also fairly insensitive to changes in the time between transmissions from the process control systems to the management control systems once the interface was effected.

Manufacturing’s Role in Innovation Diffusion and Technological Substitution
Peter M. Milling

Abstract: Successful innovation management depends upon both, the intrinsic attributes of the new product to be marketed and the firm’s internal performance like cost management, timely delivery and quality assurance. The impact of these latter aspects is frequently neglected in the design of models for supporting decision making in innovative firms.
A model is outlined to study the market response of different manufacturing policies for innovative goods. It allows e.g. the evaluation of an aggressive strategy with large production capacities from the outset, or a more tentative behavior to avoid the pressures stemming from high fixed cost and the risks of eventually idle capacity.

A System Dynamics Model of Transportation Energy Demand
H. Paul

Abstract: This paper presents a system dynamics model of the transportation energy demand in Singapore. The transportation sector in Singapore is heavily dependent on oil and is one of the major consumers of energy. Thus, it is essential to model the transportation energy demand to be able to see the implications of changes in economic situation and oil prices.
The transportation sector is divided into passenger transport and freight transport. Five modes of passenger transport are considered. The Mass Rapid Transit is included in this model as it will be the major mode of public transport in 1990’s. The ratio of per capita energy consumption to per capita income is used to indicate the change in energy consumption as income changes. With this as a basis policy changes such as price of fuel and regulation of ownership of private motor vehicles are made.
The model can be used to test various scenarios, e.g., changes in economic conditions and in fuel prices. The simulation results can then be used to examine the various policies that could be implemented to alter the transportation energy demand situation. The model has been calibrated using available information and some policy analyses have been performed with the model.

An Application of System Dynamics to Beijing Urban Ecosystem Research
Datang Qin, Tongrun Zhao, Zhishan Wu

Abstract: The study on urban ecology has its world-wide significance due to the phenomenon of growing “urbanization” nowadays. With System Dynamics, the author has studied the simulation model of ecosystem in Beijing. While determining the variable set and doing the sensitivity analysis , the author has posed a new method. A retrospective verification is done with historical data and then several strategies are analyzed by using this model. The research shows that the simulation model is an important method in urban ecosystem study and of great value to practical use. 

Aggregation of Oscillating Subsystems
R. Joel Rahn

Abstract: In previous work, the analysis of the effects of aggregating simple dynamic systems has been studied by applying methods developed for thermodynamic systems in order to take account of stochastic effects. This approach is based on the Master Equation for the probability density of the contents of a vector of system levels. The goal of these studies is to determine the dynamic characteristics of systems composed of a population of sub-systems with the same dynamic structure while accounting for novel behavior that is introduced by the process of aggregating the sub-systems into the larger system.
In this paper, the Master Equation analysis is applied to four versions of a Commodity Cycle model to determine the nature of modes of behavior that arise from the process of aggregating a population of entities whose dynamic structure is derived from the oscillatory structure of the commodity cycle model. The approach used here is novel in two respects. It contracts with the more recently developed analysis of chaotic systems in which non-linear, aggregate or lumped-parameter models generate behavior that is unpredictable while not being stochastic. In those models, no attempt is made to explain the large-scale or aggregate chaotic behavior in terms of the sub-systems. Compared to previous work in the same vein, this paper addresses itself to a slightly larger model as part of a natural progression in the analysis of ever-more complex systems by Master Equation methods.

Probabilistic Generation of Scenarios for Argentina, Using a Elemental Harrod-Domar Model of Growth
Juan Rego, Juan A. Vega

Abstract: The growing amount of the foreign debt of the developing countries shapes a gloomy future for most of them. The chances for maintained growth fueled by internal saving is nil if the service of the debt is satisfied, as it has to be to avoid international isolation. This is particularly true in the case of Argentina, with a debt equivalent to two thirds of its GDP, and its debt service representing more than 5 per cent of the GDP. After showing the historical facts about the Argentine economy, this paper presents a very simple version of a growth model type Harrod-Domar, adapted to the parameters of the local economy. Then the model is used for answering to “what-if” type of questions, wich arise from different plausible scenarios. Finally, it is analyzed the probabilistic generation of scenarios and related technical problems using DYNAMO.

Implementation and Evaluation of a Modeling Approach to Community Development Planning Meeting the Challenge of Paradigm Breakdown
Fahriye Hazer Sancar

Abstract: This paper outlines the characteristics of a search process for a planning paradigm to supplant the rational approach. After a brief discussion of the ongoing debate about the shortcomings of the prevailing paradigm, the central issues and assumptions in planning method are identified. These are then used to develop a set of criteria for procedural development and evaluation to guide the search for new approaches to planning. In the first part of the paper such criteria are operationalized to develop a series of procedures and models for community development planning and measures for evaluating these are given. The second part of the paper reports on the actual implementation and evaluation of the approach as an appropriate search strategy. The context, the models, and the evaluation results obtained in two applications, Door County Wisconsin and Janesville Wisconsin, are presented. Based on these applications the potential of the overall approach as a search strategy is discussed.

Decomposing the Long Wave Through a Non-Parametric Stochastic Measurement Model
Ronald Schoenberg, Albert J. Bergersen

Abstract: Earlier work demonstrated the presence of two long waves of colonial administration of different lengths (1490-1825 and 1826-1969). Whether these were separate episodes or examples of deeper underlying cyclical dynamics has implications for the existence of a common system dynamic over the long wave. To further inquire into the existence of a common cyclical rhythm these larger waves were decomposed through the use of a non-parametric stochastic measurement model.
To do this a 490 year time series of colonial administrations is divided into ten episodes. A conditional Normal-Poisson model is proposed based on the assumptions of a stochastic process. The mean number of colonial administrations established and terminated over each episode are estimated, controlling for a quadratic time trend which would be induced if the system was not constant throughout an episode as assumed. Two sub-cycles are observed withing each of the two long waves of colonial administrations previously reported (Bergesen and Schoenberg, 1980).
The presence of these matching sub-cycles provides a strong evidence supporting a common system dynamic in not only economic but political aspects in international life.

A Simulation Model for Dental Diseases
Toshiro Shimada, Kenji Fukushima, Hirokazu Mizushima, Kinya Machida, Akira Uchino

Abstract: Dental diseases dealt with in this study are cavities (fillings, extractions and crowns), pyorrhea and baby teeth.
The total number of teeth with dental diseases in Japan changes year by year depending on oral conditions ans are affected by the number of dentists, economic conditions and technical progress.
This model contains 4 sectors: demography, cavities, pyorrhea, and baby teeth. The demographic sector covers populations of 5 three-year age groups under 14 years of age and 13 five-year age groups above 15 years of age. The cavities sector and pyorrhea sector are composed of populations of five-year age groups, on the other hand, the baby teeth sector uses populations of three-year age groups.
From the total number of defective teeth, dental busyness and total dental care costs in Japan are calculated yearly from 1963 to 2010. The simulation results are used to modify the dental policies of Japanese administrators.
This study is a research project of the Japan Dental Association.

Money- A Systems View
Alan McK Shorb

Abstract: This is a paper about possibilities. It is the beginning of an investigation into the influence of perceptions of money on the dynamics of major economic policies. No concrete results are reported.
We begin with anecdotal evidence that many economic policies are based on a local and static perception of money. Local in that it only considers the part of the economic environment which directly impacts on, or is impacted by, the policies being made. Static in that it considers this environment to be essentially unaffected by those policies.
This usual perception of money is illustrated by exploring a number of common thoughts about money. This exploration reveals the confusion surrounding this perception. In order to penetrate this confusion, a step-by-step examination is conducted of the role that money plays in an economy. This examination leads to another perception of money: Money has no value itself; it is merely a proxy for economic product that already exists. This perception is more global and dynamic than the usual point of view. Global because the focus on economic product forces one to consider the full economic context of a transaction. Dynamic because that emphasis leads one to consider the impact of decisions on the whole economy.
A number of everyday economic transactions are illuminated by the new perception of money in such a way that consideration of those transactions naturally relates them to a wider economic system. Armed with this appreciation of economic transactions, the anecdotes presented early in the paper are revisited. In this visit, the new perception of money automatically suggests different approaches that the decision maker could take.

R-SD: The Comprehensive Development and Utilization of Water Resources of Rivers
Dongchuan Sun

Abstract: R-SD is a dynamic system model used to study the comprehensive development and utilization of water resources of rivers. This problem covers a wide range of aspects, such as hydraulic power generation, water transportation, flood cotrol, water consumption of industry and households, irrigation in agriculture, reservoir fishery, around-reservoir tourism and recreation facilities. R-SD also relates to the thermal power generation and land transportation. It is a system with multivariables, nonlinear and complex feedback structure. Usually, it is called as economic system of river-valley.
This paper emphasises on the structure of R-SD model. First, it gives the interrelationship figures between the subsystems, then the main cause-and-effect chains and flowchart of the system. Finally, a part of the results of a case study is given. It turns out that during the comprehensive development and utilization of water resources of rivers, the emphasises should be placed on the development of hydraulic power generaion in association with water transportation and other aspects. Meanwhile, thermal power generation and land transportation should be jointly developed to promote the economic prosperity in the river-valley. In R-SD, we have also posed three degrees of satisfaction, which are guided to decide the development velocities and investment proportions of power generation, transportation, and water supply.

The Mechanism and Program of Demand and Supply of Talent in ESE (Education-Society-Economy) System
Jianhua Tao, Ming Tang, Xing Zhang, Jinfang Chen

Abstract: The regional demand-supply and training mechanism of talent is regarded as a feedback-cnotrol structure under the synergetic actions of education, society and economy. By building ESE simulation system, we have studied its stability in operation and its sensibility to main parameters. We have attempted the combination of SD with LP (Linear Programming), and some initial conclusions are reached which can further be discussed.
Using the principles of the Education-Economics and SD methods to forecast and program the demand-supply of talent is becoming very popular in the educational theory circle of our country recently. There are many scholars whose studies have really shown the originality of SD method, but there are two problems that little attentions have been paid in their studies. One is that forecasting is not the strong point of SD, and it is also not competent for programming by SD methods only, the other is that we often pay more attention to the supply but neglect the demand between Education and Economy, which easily results in the lack of enough impetus to the system operation. Our paper tries to do some studies on overcoming the above two inadequate aspects.

Philosophical Views and Basic Theories of System Dynamics
Qifan Wang

Abstract: System Dynamics, founded by professor Forrester at Massachusetts Iustitute of Technology in 1956, is a discipline which analyzes and studies the system of information feedback. Basic views of theories of system dynamics distinctively show its dialectical characteristics. More attention should be paid to the features of complicated nonlinear systems. The model simulation of system dynamics is a kind of structure-function simulation. One of the remarkable advantages of system dynamics is that it can handle problems of high order, nonlinear, and multiple-feedback system.

The Comparative Study of System Dynamics and Synergetics
Qifan Wang, Bingyi Wang

Abstract: Being two different branches of the system science, System Dynamics and Synergetics share many common concepts and mathematical manipulation techniques. The comparative study of the two subjects will help accelerate the developments of both subjects as well as the whole system science. In this paper, the authors first introduce the basic ideas and mathematical handling techniques of synergetics, then that of system dynamics. Finally, the two subjects are compared from the angles of both the concept and the mathematical manipulation technique.
The following are the major points of this paper:
1) Synergetics deals with systems that are self-organized. It studies how such systems evolve in a self-organized fashion, how new patterns are brought about, or in a philosophical sense, how the animate and the inanimate world evolve. In contrast, the systems, with which system dynamics deals, are partially self-organized, partially man-made. It studies the relationship between system structure and system function.
2) The general equations of both synergetics and system dynamics are nonlinear, stochastical partial differential equations of high order.
3) Synergetics focuses its attentions on nonequilibrium phase transition, i.e. pattern formulation, while system dynamics endeavors, with most its efforts, to study the dynamic behavior of a system with some kinds of structure.
4) There are many concepts as well as mathematical handling techniques that are counterpart and can be used as a reference to each other, such as order parameter vs. sensitive parameter or minor structure; order parameter equations vs. dominant loop equations; slaving principle vs. the principle that dominant loops mainly determine the dynamic behavior of a system; adiabetic elimination vs. the insensitivity of system behavior to most parameters; linear stability analysis vs. Lyapunov method I & II, gain and phase shift analysis, etc.

A Look into the Future of Microelectronics in China
Qifan Wang, Jianglin Dong

Abstract: The rapid development and wide application of microelectronics has been making the production activity and life style changing, with great reformation in world economies. Weather or not can a country make achievement in developing hi-teches such as microelectronics is a serious challenge to both developed countries and developing countries including China. What can be done by China under the chelange and how about the future of microelectronics in China are of most concerns amonog decision makers in China.
A brief study is presented in the paper on the interrelation between microelectronics and socio-economic environment and all the effects from the relevant environmental factors. The paper also shows the research work on the development of scienice and technology in Chinia which is considered the most concerning problem to the development of microelectronics. Some viewpoints on the future of microelectronics in China derived from the research are given at the end of the paper.

The Parameter Quasi-Optimization for System Dynamic Models
Qifan Wang, Guangle Yan

Abstract: With the sustained development in science and technology method of system optimization has more and more widely been applied to the area of science, technique, engineering, economy, etc. The optimization theory is strongly supported by the birth and the development of computers. System dynamics models are good at understanding complex systems with the characteristics of high-order, multi-loops and nonlinear (say socio-economic systems). The purpose of this paper is to combine the modeling process of a system dynamics model with the optimization method so as to make the system synthesis more perfect. Because of the specific properties of large scale systems, there are some serious difficulties in completely optimizing systems. In many cases, it is impossible to find an overall optimization for complex systems. However, the quasi-optimization for dynamic systems is still available. This paper develops some ideas of the parameter quasi-optimization for system dynamic models and presents a practical method. Its advantages include that the goal of the parameter quasi-optimization is clear, the precision is controllable, the quasi-optimal indices are conveniently regulated, the whole process can be automatically completed by a computer, repeating computations and simulations are not needed. Besides system synthesis, this method can also be applied to system analysis such as the parameter quasi-optimization after decoupling a system, selecting the dominant loops, separating the interest substructures, etc. The final goal of this paper is to make a solid fundation for a common used modeling software package.

The Comparative Study on System Dynamics and Grey System Theory
Qifan Wang, Haizhou Huang

Abstract: System dynamics created by professor Jay W. Forrester at MIT, is a field which bases on system theory, absorbs the quintessence of control theory, and draws support from computer simulation technique. Established by professor Deng Julong at Central China Institute of Science and Technology in 1982, grey system theory derives its idea and methodology mainly from control theory and operations research. Although system dynamics and grey system theory both have their own features in methodology and processing technique, there are still a lot of common points between them. From the comparative study on these two fields, the paper arrives at that it is not only necessary but also possible to infiltrate and draw on the experiences of each other to develop themselves.

The System Dynamics Analysis of the National Financial and Monetary System of China
Qifan Wang, Haizhou Huang

Abstract: Based on the system dynamics approach, this paper tries to examine the structural causes of the long term performance of the economy after the reform, make the comparative researches on the financial and monetary system before and after the reform, and evaluate whether the system dynamics approach is a powerful tool to analyze the economy in a developing country such as China. After the description of the structure of the national financial and monetary model of China, the modeling approach is summarized in the paper. The formulation of the principal subsystems and the interactions among them are briefly introduced. The behavior of the model, and the four economic leverages — price, tax rate, interest rate, and loan leverage, are mainly concerned and discussed. The policies designed for economic reform are examined with the DYNAMO simulation, the different results related to the different policies are compared. At last the programs and the possible futures related to them for the economic reform are given in suggestion.

Some of the Limits to the Growth of Big City in China
Qifan Wang, Ma Shan

Abstract: In contrast with those fast growing of small- or mid-size cities’ economy, big cities in China are suffering a lot of difficulties: the deterioration of the external condition of production, the decay of the industry structure, the shortage of municipal infrastructure, the fund scarcity, etc.. People have been discussing the limit factors of big cities for times, but we still need more quantitative and dynamic analysis of the whole system. In this paper we use the system dynamics model to simulate the behavior of a big city, conclude that within this century the main limits to the economic growth of a big city is the production condition, including energy, material, and transportation supply, while after the early years of the next century, the market demand, which is determined by the cost and the quality of product as well as the economic development of other areas, will be the real limit to a big city. Policy testing shows that the effective adjustments to big cities are the improvement of material supply as well as the speeding up of the capital discarding.

Economic Structure Changes and Their Impacts on Chinese Economy
Qifan Wang, Bing Wu, Jianglin Dong

Abstract: In the past thirty years of initial industilization of its economy, China has established a primary industry system. But the unbalanced development in economy resulting from the industry policy of laying under stress on the industry aggregates to form a obstacle which hinders the further development. A great change in economy has occurred since 1984. The paper presents a historical review about the causes of the unbalanced structure, analyzing the present situation and discussing the possible impacts of the structure changes by means of a system dynamics model. The analyses and the simulation results of the model show that pertaining to past industry policy would put limits on the further development, new policy must be carried out. But on the other hand, a long period of time would be required for the completion of the changes. The expectation of rapidly change would prove to be unrealistic.

The Coordinative Development of Boomtown in Industry, Society in China
Qifan Wang, Xinnong Yang

Abstract: The paper researches into a typical example of a developed region with a boomtown of China, studies the coordinate development of economy, and population migration of that region, analyzes the mechanism and theory of industrialization of the rural area. A systems dynamics model created to study of urbanization is exhibited and explained. The paper makes comments on current policy. And by the simulation, various policies are examined, the paper finds out the more reasonable coordinative growth rate and scale among industry, agriculture and town construction. The interaction between a special region and outside in the process of industrialization and urbanization is also a subject of discussion. The general conclusions and suggestions on industrialization and urbanization of rural area of China are put forward.

The Behavior of Industrial and Investment Structures in the Change of Demand and Supply
Xiaoting Wang, Qifan Wang

Abstract: This paper presents a system dynamics model of China’s industrial and investment structures. The dynamic behavior of the two structures has been analyzed in the change of demand and supply structure. The model has given special concern to China’s limited resources and their allocation to different industries. A resource allocation mechanism is developed and the external robustness of the model is examined to test the control of the resources allocation system.

The System Dynamics Model for Policy Analysis of the Forest Industry System
Hongbin Wang, Demin Yao

Abstract: By means of the system dynamics theory and approach, A system dynamics model of the forest industry system for certain area is set up, and the future developing tendency of the forest industry system, under the conditions of various developing strategies and policies, is discussed quantitatively using the computer simulation based on the model. This model can provide scientific basis for making a long-term programme for the developing of the forest industry system.

Rural Dynamics: A Study on the Exploitation and Protection of the Rural Resources in a Southern Province of China
Jianzhong Wu, Gang Wu

Abstract: In this paper we use system dynamics approach to build a policy lab focusing on the exploitation and protection of the rural resources in a southern province of China at first. Then we proceed, after validating the model thoroughly, model-based policy analyses.

General System Dynamics Simulation Software System – ZU-DYNAMO
Wenhua Wu, Chingrui Xu, Shaozhong Jiang

Abstract: System dynamics modeling has been applied in a wide variety of areas. However, as a means of simulating models in computers, there is no any general DYNAMO compiler system that can be used in various types of computer. The purpose of this paper is to deal with a general compiler software system ZU-DYNAMO, which is used to simulate models in various types of computer with outputs in English or Chinese. Being different from traditional method, a new idea suggested in this paper is the selection of C language instead of assemble language as objective code. The aim of such selection is to make ZU-DYNAMO independent on a particular computer. The overall structure and design principle of the system are presented. The algorithms and techniques used in the system, and the structure of objective code are designed and analysed. The description of extensions of Arrays, FOR card, etc. and the ways to implement them are also given.

The Study of Planned Economy and Market Economy of Oil and Engine Demand in the Equilibrium System through S.D.
Yunguan Xia, Wangkang Chen

Abstract: The systems of oil and engine production of our complete planned economy before 1979 and market economy guided by planned economy after1980 are simulated and some conclusions are given in these models.
The complete planned economy can’t meet the national requiment for oil and engines and the market economy guided by planned economy can develop equilibrumly under the instruction of mixed policies applied to the production of oil and engines.
The main items of microeconomics are simulated and some useful plots and conclusions are given. Further study of many fields of macroeconomics and microeconomics is expected.

Dynamic Modeling and Policy Analysis for National R&D Resource Allocation Decisions
Chingrui Xu, Shaozhong Jiang, Yiqun Xing, Jiasheng Wang

Abstract: The confliction between the need of R&D expenditure and the limitation of R&D resources in certain time period is a serious issue facing both developing and developed countries. This paper deals with not only the mechanism of interaction between R&D, economy and education systems, also the mechanism and relation among basic research, applied research and development. Two system dynamics models were developed focusing on the above two problems respectively. And, through modeling and policy analysis, some new findings, such as the proper scale and growth-rate of national R&D expenditure, the relation between technology acquisition and self-developing R&D, the proper ratio of R&D expenditure, etc., were accomplished.  

A Tentative SD Model Applicable to the Study of Local Education Development Strategy and Policy Analysis in the Urban Area of Shanghai
Ching T. Yang, Zi-yuan Xu

Abstract: This paper discusses the application of System Dynamics approach to the study of local education development planning which fosters a tentative SD model applicabl to local education development strategy and policy analysis in the urban area of Shanghai. It can help decision making of the local government education authorities in this area. Based on education economic theory and the socio-economic development situation in Shanghai, this model, using DYNAMOIII language, contains four socio-economic sectors – education, economic, social structure and social life, from which 730 variables were attained with 90 level equations 179 rate equations.
The present study shows that the simulation model is not only feasible and practical for the study on local education system in Shanghai, but also applicable and useful to other urban areas as well.

Control and Administration of the Investment Hanger and Consuming Expansion
Jue Zhang

Abstract: Since the Third Plenary Session of the Eleventh Central Committee of the CCP, there have been great achievements in the development of economy in our country and the living standard of the people has been raised year by year. However, at this moment of the great boom, there appeared two protound contradictions in the macroeconomy: One is the investment hanger and the other is the consuming expansion. This is a universal persistent ailment in developing cotries.

A System Dynamics Model and Policy Analysis for Rural Socio-Economic Development of a Provincial Lake Area
Nai-guang Zhang, Cheng-hong Hu

Abstract: This paper is based on the historical and current situation of rural socio-economic development of a provincial lake area. At present, economic development of the lake area is considerably lag behind. Meanwhile, there exist rich natural resources and hidden unemployment of rural population. By describing the several facets of difficulty facing the lake area, the author addresses the issue of adjusting industry structure of the entire lake area, upon which the System Dynamics approach is employed in modeling and policy analysis.
The System Dynamics Model of the lake area rural socio-economic development consists of 8 sub-models, which are farming, fishery, animal husbandry, rural industry, forestry and side- occupation, energy, water conservancy and population. By simulating and analysing, policy recommendations are set force.

Application of System Dynamics to Cardiovascular System Biofeedback Regulation of BP for Hypertensives
Mingjie Zhu, Chenghong Hu

Abstract: The modern researches on physiology verify that there are close relationships between central nervous system (CNS) and autonomic nervous system (ANS) and some autonomic functions can be regulated by CNS to some extent. In this paper, the mechanisms of cardiovascular system, especially of BP regulation, under CNS control are researched. A blood circulatory system dynamic model is established and applied practically to treatment of hypertensives trained with biofeedback technique, in which pulse transit time (PTT) is employed as an indirect index of BP change. The result shows that the curative effect of this method is efficient for BP control.

Bringing the Results of the Bonneville Project to the Classroom
Andrew Ford, Peter Gardiner

Abstract: The Institute of Safety and Systems Management of the University of Southern California (USC) operates a Masters of Science Program in Systems Management (MSSM) at the main campus in Los Angeles and at 70 study centers located throughout the United States, Europe and the Pacific Far East. An introductory course in system dynamics is offered as an elective in the program. The students are interested in how managers use system dynamics and in the lessons from previous applications of system dynamics in large organizations.
One such application is the on-going project for the Bonneville Power Administration (Bonneville). System dynamics models are used at Bonneville to assist in the formulation of conservation policies. This paper provides a brief summary of the Bonneville project before turning to the main question of interest: What lessons from the Bonneville project are generally applicable to large organizations and worthy of attention in the MSSM program?

Accounting Dynamics – Its Concepts and Model
Saburo Kameyama, Takahiro Kojima, Akira Uchino, Kinnya Machida

Abstract: Accounting Dynamics (AD) is a methodology for the modelling and simulation od accounting using System Dynamics. Accounting identifies and measures economic transactions of an entity, and communicates these data to both internal and external decision makers. Thus it may be said that accounting controls resource allocations in social systems. In this context a simulation model described in terms of accounting will be very effective in order to analyze and project the behavior of social systems. In our model we emphasize the structure-dependent nature of System Dynamics. The AD model depicts the structure of accounts in an economic entity. The structure of accounts reflects charge-and-discharge relationships of accountabilities. Therefore the AD model seems to have a close relationship to the real world. The definition of accounting by R. Mattesich, i.e., the method of quantitative description and projection of income circulation and of wealth aggregates in macro and micro economy (Mattessich 1964), will be best met by AD. And accounting principles will be tested for their validation by the AD model simulation. The AD model will be able to be built at various levels, e.g., industrial, urban, national, in social systems. In our first approach, we have focused on the industrial level, and we have made a prototype of AD corporate model in a business entity. We will suggest critical issues in the application of the AD model for higher levels of social systems.

Applying System Dynamics to the Study of Pharmacokinetics and Pharmacodynamics
Jiyang Lee, Qifan Wang

Abstract: As an effective method of understanding the dynamic behavior of complex systems, system dynamics has great potential in the study of the dynamic course of drug absorption, distribution, metabolism, excretion and effect, which is the content of the disciplines called pharmacokinetics and pharmacodynamics. Two ways of applying SD are discussed: using DYNAMO to solve the traditional pharmacokinetic models — compartment models and combining knowledge of pharmacokinetics and pharmacodynamics to set up advanced models under the paradigm of system dynamics. The application of the method, technique and modeling view of system dynamics to pharmacokinetics and pharmacodynamics can be very helpful and fruitful.

Towards an Integrated, Intelligent Knowledge Based System for Dynamic Modelling
I. Moffatt

Abstract: Innovations in automated intelligent knowledge based systems (IKBS) including expert systems (ES) could have a major impact on the development of system dynamics methodology. This paper reports on the characteristics of an integrated system for modelling and managing complex, dynamic systems currently being developed. Essentially, the system consists of five sectors namely a simulation model; a set of quantitative measures as macros; means; a real world data set; an adaptive knowledge based system including an expert system; a policy decision making system. It is suggested that such an integrated approach to system dynamics could further enhance the usefulness of the methodology to modelling and managing complex systems.

Catalyzing Systems Thinking within Organizations
Peter Senge

Abstract: This paper describes the work of an M.I.T. research project (the Systems Thinking and the New Management Style Project) to bring systems thinking to top management groups in several large, successful corporations. The principal research tool, the “strategic forum” is described and critiqued. The paper then presents a case study to illustrate the strategic forum. Concluding remarks and supporting figures are presented at the end.

Modeling Tools for Problem-Solving
Nancy Roberts, Tim Barclay, Tim Kreutzer

Abstract: During the last year, the Technical Education Research Centers (TERC) has been combining microcomputer-based data gathering instruments with model-building software using the system dynamics approach to develop curriculum materials and software for high school students. The microcomputer laboratory aids students in collecting real-time data in such areas as heat, light, sound, motion, and water movement. Model-building helps students develop and test theories to study the data. An integrated software environment is being developed that will allow the data collected to be input directly into the models. In addition, the software will include an icon driven modeling language, algebraic function grapher, and spreadsheet to provide students with several different approaches to expressing model-building and simulation.

A Fundamental Philosophy of Science Question and Validation of System Dynamic Models
Yaman Barlas, Stanley Carpenter

Abstract: System Dynamic models, being causal simulation models, are in this sense very much like scientific theories. Hence, there is a relationship between validation of such models and verification of scientific theories. In evaluating System Dynamics models, we naturally apply our implicit “norms of scientific inquiry”. Most criticisms of such models hold that System Dynamics does not employ formal “objective”, quantitative model validation procedures. We show through a historical review of Philosophy of Science, that this type of criticism presupposes the logical-empiricist philosophy of science. This philosophy assumes that knowledge is entirely “objective representation” of reality, and that theory justification can be entirely objective, formal, “atomistic” process. According to the more recent “relativist” philosophy of science, on the other hand, knowledge is not “entirely objective Truth”, but it is relative to a given culture, epoch, and worldview. Theories can not be verified (falsified) by entirely formal, reductionist, “confrontational” methods. Completely objective (theory-free) observation is impossible. The act of observing itself requires an assumed theory. Theory justification is therefore a semi-formal, holistic, social, “conversational” process.
We discover that these two opposing philosophies of science correspond to two opposing philosophies of model validation. Most critics of System Dynamics seem to assume the traditional empiricist philosophy of science, whereas System Dynamicists mostly agree with the recent relativist philosophy on the question of model validity. We show that these philosophical results do have practical implications for both the System Dynamicists and their critics. Finally, having shown that the relativist philosophy is consistent with System Dynamics practice, we emphasize that such a philosophy of model validity should not lead to a total rejection of formal quantitative tools of model validation. On the contrary, we argue that such tools, appropriately chosen, are most useful when interpreted with the relativist philosophical perspective.

CONFERENCE PROCEEDINGS

Volume 1

Plenary Session:

Lessons from System Dynamics Modeling
Jay W. Forrester

Abstract: The power and utility of system dynamics depends on going beyond a model to implications and generalizations that can be drawn from the process of modeling. System dynamics papers too often stop with the description of a model. But to be effective, models should become part of a more persuasive communications process that interacts with people’s mental models, creates new insights, and unifies knowledge. In doing so, modeling can make use of the full range of available information–the mental data base and the written data base, as well as the numerical data base. The last century has been devoted to exploring the frontier of physical science. During the next century the great frontier will be exploring the dynamic nature of social and economic systems.

Session 1: Software Development

The Development of Dysmap2
Olga Vapenikova

Abstract: This paper introduces a new implementation of the System Dynamics simulation Language DYSMAP, a current project at Salford University. A short overview of the history, syntax and features of DYSMAP will be given. The new DYSMAP2 system operates as an interpreter. The relative merits of computer interpretation vs. compilation into FORTRAN will be discussed. An outline of the operation of this new portable package (written in FORTRAN77) will include high level descriptions of the parser, run-time interpreter, the interactive environment, dimensional analyser and the optimiser. The performance of the new DYSMAP2 package will be illustrated.

Multifacetted Modelling in System Dynamics
F.J. Torrealda, J. Dolado, F. Ferreres, M. Graña

Abstract: We propose a functional design for a software system whose aim is to provide support for an structured methodology of modelling and simulation in System Dynamics. The design follows mainly the ideas of Multifacetted Modelling developed by Zeigler. Our approach has been to give a hierarchical version of DYNAMO and a collection of functions for the handling of simulation elements in an unified system.

SDSE, System Dynamics Software in Education
A. Toval, A. Requena, S. Martinez, J. Monreal

Abstract: SDSE is a microcomputer based, interactive and integrated system designed to facilitate the teaching and use of System Dynamics in Education. In this way teachers and students without extensive Computer training are able to construct and simulate system models after short period of learning.
System Dynamics has been included in Atenea, a Spanish Ministry of Education and Science project in order to introduce computers in Education. Nowadays, SDSE is being used as a supporting program to teach System Dynamics to school and high school teachers in Atenea project courses run by Comunidad Aut6noma in Murcia.
In this paper, functional characteristics of the system are described, at the same time that SDSE is applied to build and simulate the simple·and classical example of the inventory control system. Nowadays, SDSE is programmed in FBASIC (FUJITSU FM/7 ) and GWBASIC ( IBM PC and compatible)

Session 2: Statistical analysis and econometrics with dynamical systems

Full Feedback Parameter Estimation
Robert L. Eberlein

Abstract: The determination of parameters within a system dynamics model isan important part of the model development and validation process. There are, however, very few useful tools available for working on this. The primary reason for this lack of tools has been the difficulty of applying the theory that has been developed for full feedback estimation. Useful tools can be based upon heuristic application of much of the theory. Rules are outlined that allow the easy determination and application of filtering techniques that deal with the problem of unobservable variables. The attributes of these techniques are discussed in different settings. Application to an example serves to illustrate a number of the issues.

Identification of Dynamic Systems
J.H Balbi, N. Balbi, G. Girolami, P. Orenga, G. Simonnot

Abstract: In this paper, the dominant approach to the modelling of physical systems is described: it uses local laws and powerful numerical tools. For linear problems, it leads to eigenvalues and eigenvectors, in a suitable functional space, from which it is possible to construct the response to any excitation using the Green’s resolvant. This approach has led to important progress in engineering physics.
Nevertheless, a systemic approach is useful in physics and irreplaceable for living systems. This second way uses global laws of the phenomenon in addition with a dynamical identification of the system using some adequate experiments. We illustrate this method on the modelling of a solar plant, which is correctly represented by a simple ordinary differential equation.

Testing Behavioral Simulation Models by Direct Experiment
John D. Sterman

Abstract: The decision rules in simulation models purport to describe decision-making behavior as it is and not as it should optimally be. Without the criterion of optimality to judge the appropriateness of a decision rule, simulation modelers must rely on empirical confirmation of the structure of their models. In models of small organizations, traditional social science methods may be used. But these methods are infeasible in models of larger systems such as industries or the macroeconomy. This paper shows how direct experiment can be used to confirm or disconfirm the decision rules in simulation models. Direct experiment uses interactive gaming in which human subjects play a role in the system being modeled. The subjects play the game in the same physical and institutional context assumed in the model, and are given the same information set, but are free to make decisions any way they wish. The behavior of the subject can then be directly compared against the behavior produced by the assumed decision rules of the model. An example is described in detail and the correspondence of the experiment to reality is discussed. 

Study by System Dynamics of the Problem of the Equalization of the Gain Rate
Rafael Pla-López

Abstract: We study the problem of the adequation of the market prices to some “production prices” with which an intersectorial equalization of the gain rate was obtained in an ideal capitalism of free competition. We criticize the treatment of this problem by Marx, Sweezy and Salama-Valier, by its static or aprioristic character. And we propose a system of dynamic regulation utilizing the intersectorial coefficients of an input-output table and supposing full mobility of the capital. The study of this system permits to conclude that the equilibrium values of the gain middle rate and of the production prices depend exclusively of the intersectorial coefficients of the directly or indirectly productive sectors. From this, we study the evolution of the market prices. of the production prices, of the capital organic composition, of the gain sectorial rates and of the gain middle rate from a modification of these coefficients in an equilibrium situation. 

The Causal Structure of the Wharton-UAM Model of the Spanish Economy
Emilio Fontela, Antonio Pulido, Ana del Sur

Abstract: The analysis of the causal structure of economic models is a tool for understanding the functioning of existing models, particularly in their interdependent component, and also for assisting the modelors in the process of constructing or modifying large econometric models. In this paper the authors briefly describe the methods of causal analysis and apply them to the Wharton-UAM model of the Spanish Economy. The paper, in English, discusses suggested modifications of the model as a result of the structural analysis and is completed by two Appendices, in Spanish, discussing the theoretical construct of the model and the detailed results of the causal analysis; in an Annex are also reproduced the variables and the equations of the model thus introducing the reader to a fully documented version of the model.

Session 3: Qualitative analysis

Identifying and Displaying Important Feedback Paths
Robert L. Eberlein

Abstract: Fundamental to the practice of system dynamics is the identification of feedback. The theory of linear model analysis and model simplification provide tools for doing this in the setting of linear state space models. The application of these tools in the field of system dynamics has been very limited primarily because the tools are inaccessible and difficult to use. Many of the, difficulties can be overcome by linking the analysis more closely with the original nonlinear model. We do this first by using time plots of model variables to describe behavior and second by deriving a nonlinear feedback model that can be used to exhibit the important feedback structure. The theory for doing this is heuristic, but allows the techniques to be automatically applied with interaction only in the domain of the original nonlinear model and its simulation.

A Dynamic Model of Portfolio Selection: Analysis of Bifurcations
César Villazón

Abstract: In this article we want to predict the dynamic behaviour of a portfolio of assets, i.e., we want to know how quickly it will move towards anew position of equilibrium when an unstable situation has ocurred due to important changes in the risk, (and in some cases in the return) of the securities.
In order to carry out this forecast, first we should locate the points of equilibrium, then analyse their stability and lastly determine where, and under what conditions, the discontinuities appear.
Changes in the return or in the risk of the securities which make up a portfolio can be smooth and this also brings about a smooth change in the portfolio, which is shown in a readjustment in its composition. However, it sometimes happens that, while the expectation of return remains relatively stable, circumstances arise which considerably increase the risk, in which case a serious discontinuity occurrs in the feature of the portfolio.
In this way, we can apply the methodology of Thom’s Theory of Catastrophes in order to obtain valid conclusions using the morphology of the butterfly catastrophe for the portfolio’s feature (efficient, non-efficient and opportunity or pseudo-efficient), employing four control factors: return, variance, transaction costs and risk aversion.

Session 4: Ecological, biological, medical…models 

A Dynamic Model for Understanding Eating Disorders
Jack Homer, Richard John, William Cotreau

Abstract: A system dynamics model is presented which integrates current knowledge on the various aspects of normal and abnormal weight control and which provides new insights into the mechanisms underlying certain eating disorders. Anorexia nervosa, in both its purging and non-purging variants, emerges from the model as a behavior pattern tied up with the fear of weight gain which serves to strengthen the individual’s drive toward extreme slimness. Policy tests suggest that appetite-suppressing drugs may be helpful in reducing this fear and its negative physical consequences. The encouragement or discouragement of physical activity may also serve the goal of stabilizing the individual, depending on how different therapeutic objectives are weighted for the specific individual. Future research may take the form of model enhancement or of empirical studies guided by the model’s structure and behavior.

A Simulation Model of Occupational Injury and Illness Causation and Regulation
David F. Andersen, Catherine Crawford, Sue R. Faerman, Erik Mosekilde

Abstract: The United States Occupational Safety and Health Administration (OSHA) regulates the level of occupational safety and health within firms and inspects firms for violations of its regulations. Regression-based evaluations of occupational health and safety conditions in the United States generally conclude that OSHA’s regulation fails to increase either the level of safety or safety-related investment. However, case studies and other forms of qualitative research suggest that regulation does increase both. Resolving this discrepancy requires a research strategy that combines elements of qualitative research and quantitative research. Simulation modelling can be used to bridge these two methods. Generally, the research project constructs a simulation model of accident generation within firms, generates synthetic data from variations of the model, and evaluates the sensitivity of regression methods to variations in the model. This paper presents the structure and base run behavior of the model used in this research project. 

Using System Dynamics to Evaluate Policies for Managing New York’s Hard Clam Fishery: Some Unexpected Insights
Marian N. Steinberg

Abstract: A three sector system dynamics model (clams, natural predators, and baymen who harvest the clams) was developed to evaluate measures to counter the sharp decline in New York’s hard clam (Mercenaria mercenaria) fishery. Six management alternatives were evaluated: effect of shellfish hatchery production on increasing the abundance of clams; growing seed clams on racks to protect them from predators; a maximum size limit on the harvesting of clams; limiting entry of baymen into the fishery; a bounty on predators; and setting aside a portion of the bay as a natural nursery. Model results, which were largely unanticipated, are described. 

A Model of Doñana Rabbits
Silvio Martínez Vincente, Alberto Requena, Ambrosio Toval

Abstract: For the use of ecosystems with savage fauna it is essential to dispose of -instruments which can let one to simulate the effects that natural circumstances or human actions could have on them.
Because ecosystems are extremely complicated and because we are not able to experiment “in real life” -behavior are irreversible- it becomes necessary- “to experiment in the laboratory” the effects of the different events that may affect its future life.
This “laboratory tests” can be done with the construction of an ecosystem (a model is a formal representation in scale) that later will have to be implanted on a bearing, and will be the object of simulation exercices.
A good procedure of the construction of the model and the simulation is what we calle “System Dynamics” (DS).
The non existence of previous proofs in the use of ecosystem with savage fauna leads conscious of unconsciously to the disappearance of going down of the species in specific ecosystems.
The examples of Kaibab’s land, the “Urogallo cantábrico” or of the grouse -are paradigmatic. The purpose of this work is to introduce concisely the model and the conclusions obtained from its use, for the study of the evolution of the rabbit population in a plot of 10 hectares in South Spain. The rabbit (Oryctolagus cuniculus, L.) has been chosen for its enormous value as a prey for upper birds of prey (Imperial eagle, Royal kite, Black kite, Linx and Fox, etc. etc.)

Computer Model of the Renal Filter Control System
 Laura Roa, A. Cantero, A Solis Galera, A.Franco

Abstract: A mathematical model and digital computer simulation of the human renal filtration controls are herein developed. The purpose of the model is to provide a method of analysing renal filtration control hypotheses which cannot easily be tested in an animal or human.
The method used in the construction of the model was system dynamics.
We propose an original formulation for the numerous different variables, eg, Bowman capsule pressure, glomerular absorption, net filtration and other considered variables in the model.
This model can simulate the dynamic functions of variables such as colloidal osmotic pressure, glomerular capillaries, tubular filter, along with other clinical determinants.
The model simulates disparate situations, such as the effects of renal filtration variations of arterial pressure, concentration of plasma proteins…
The results presented coincide with those of other authors.

Dynamic Analysis of the Influence of Reanimation Treatment in Burned Patients
T. Gómez-Cia, Laura Roa Romero, Lazo Zbykowski

Abstract: A non-lineal mathematical model of capillary dynamic has been constructed to study the reanimation stage and the effect that different treatments have on burn patients.
This analysis allows a qualitative and quantitative knowledge of the dynamic behaviour of variables very difficult to quantify in daily practice, like plasma volume, net liquid shift in burned and non-burned areas, etc.
The value and fidelity of the model was obtained by comparison of the reckoned results with those measured in a serie of patients of the Burn Unit of a General Hospital.

Modeling the Common Crane (Grus grus) Population Wintering in Iberia
Juan C. Alonso, Javier A. Alonso, Manuel Quintanilla

Abstract: A field study carried out during the last seven years on a wintering population of Common Cranes (Grus grus) in Spain allowed us to gather accurate field data on-certain relevant demographic parameters: (a) the size of the Western Palearctic population of this species is estimated to be around 40000 birds, and (b) the age composition in autumn is estimated for 1979-85 to be around 13.5% young. These data enabled us to develop and test a population dynamics model which combines the density- and age-dependent effects on productivity and survival rates. The parameters of the productivity and survival functions were varied within biologically reasonable limits. From the series of possible combinations we selected those that fitted our field data on population size and age structure best. Each variable was then varied to study their influence on the model.

Dynamical Interaction between Languages: Castilian and Basque a System Dynamics Model
I. Gil, M.I. Aguinagalde , M. Graña, J. Dolado, F.J. Torrealdea

Abstract: A system dynamics model reflecting the structure of the interaction between the .two languages operating in the Basque Country has been built. People have been classified into three different groups depending on their knowledge of the language. These groups of population are subjected to a normal demographic evolution and to a linguistic interaction. The interaction among the populations is controlled by two major levels: the basque culture and the development factors of the language. The only exogenous input to the model are political actions to raise or to decrease the development factors level. Although the model proves to be sensitive to these actions a delay time of about sixty years is to be expected in the response of the population.

Plenary Session: Instabilities, chaotic behavior and uncertainties in system dynamics models.

Autonomeous Chaotic Behaviour in a Generic Resource Allocation Problem
Erik Mosekilde, Dan René Rasmussen, Henrik Jensen, Jeppe Sturis, JørnJespersen

Abstract: By analyzing the dynamics of resource allocation in a generic management system, this paper illustrates how chaotic behaviour can be internally generated in a typical System Dynamics model.

A company is considered to allocate resources to its production and marketing departments in accordance with shifts in inventory and/or backlog. When order backlogs are small, additional resources are provided to the marketing department in order to recruit new customers. At the same time, resources are removed from the production line to prevent a build-up of excessive inventories. In the face of larger order backlogs, on the other hand, the company redirects resources from sales to production. Delays in adjusting production and sales create the potential for oscillatory behaviour. If allocation of resources is strong enough, this behaviour is destabilized, and the system starts to perform self-sustained oscillations.
To complete the model, we have combined the above simple structure with a feedback which represents a loss of customers when delivery delays become unacceptably long. As costumer’s reaction is increased, the simple one cycle oscillation becomes unstable and, through a cascade of period-doubling bifurcations, the system develops into a chaotic state. We present a relatively detailed analysis of this bifurcation series. Poincaré sections and return maps are constructed, and we discuss how these maps can be used to understand the observed qualitative shifts in system behaviour.

Chaotic Behavior in Predator-Prey-Food System Dynamics Models.
Miguel Toro, Javier Aracil

Abstract: A great interest has been raised recently on chaotic behavior in system dynamics models. This interest is largely justified. The discovery that deterministic systems can show chaotic behavior has deep consequences for the system dynamicist. Among other things, it is well known that strange attractors show a pathological sensitivity to initial conditions. This property impedes the use of a single trayectory (obtained by simulation) as representative of the system behavior. So, the traditional working way of the system dynamicist should be deeply reconsidered if these strange attractors are exhibited by their models. This last is higly possible due to the nonlinear character of these models. Therefore, the system dynamicist should be able to study whether or not those attractors appear in his models. If they appear, then the classical study through the analysis of the trajectory should be rejected, and studies of an stochastic nature -not yet well understood- should be undertaken.

Session 5: Optimisation of System Dynamic models.

A Case Study in Army Combat Modelling
E. F. Wolstenholme, A. S. Al-Alusi

Abstract: This paper demonstrates on approach to army combat modelling using system dynamics. A model is presented of an enemy ground advance which is used to analyse how various adaptive strategies by the attacker and defender during the advance can lead to different outcomes when the combatants meet. Particular attention is paid to the development of performance measures and to the interpretation of results in terms of the underlying feedback structure of the model.

A Case Study in System Dynamics Optimisation
R. Keloharju, E. F. Wolstenholme

Abstract: This paper presents the use of optimisation as a tool for policy analysis and design in system dynamics models and presents a demonstration of its use on the ‘project model’ developed by G. P. Richardson and A. L. Pugh III in their book “Introduction to System Dynamics Modelling with DYNAMO”. The use of optimisation to design parameters, table functions and new model structure is shown to produce every significantly improved performance for this model compared to conventiona1approaches.

Molecule and Generic Structure for Synergy
Peter Büttner

Abstract: In the evolving terminology within the field of system dynamics, a “molecule” is the smallest combination of structural elements (“particles” and “atoms”) necessary to represent a basic systems concept. A generic structure is the next largest combination of particles, atoms and molecules that conveys the most (or a) general form in which that concept can be identified in and/or represented for real systems. This paper proposes both a molecule and a generic structure for synergy.

Murcia A/I, a Mixed System Dynamics and Linear Programming Model for Regional Investment Planning
A. Toval, A. Requena, S. Martínez, J. Monreal

Abstract: When distribution of economic goods, equipments, … takes place among different regions, it is expected to carry out in an optimal way, considering “optimal” the way of distribution that assigns more to the neediest regions; thus, numerous factors such as economic conditions, actual equipments, social conditions, population, etc, should be taken into account.
The presented model has a double aim: firstly to show the present behaviour of distribution system of investment in Comunidad Autonoma de Murcia, regionally, and secondly to get this distribution to optimize a linear function that represents the regional social welfare as a consequence of the social welfare in each region of the Community and dependent on linear constraints.
To reach these objectives, a mixed model that combines both System Dynamics and Linear Programming techniques is constructed; a relation between both procedures is established in order to simulate both the natural behaviour of the distribution system and those decisions that make this distribution to be optimal.
Along this report the method carried out to handle mixed models as well as the particular model MURCIA A/I are described.

Session 6: Status and future of System Dynamics in the World, in the U.S., in Europe. 

A Study of System Dynamics from the View of System Theory
Qifan Wang, Yang Xinnong

Abstract: Since L.V. Bertalanffy first brought forward the general system theory, people have been paying more attention to research work from the systems point of view, thus bringing about the development of some system scientific fields such as systems engineering, operations research and management science, etc.
Now, in addition to general system theory, there are many new subjects related to studying system ‘dynamic behaviors and self-organization such as synergetics, dissipation structure theory, etc.
In this article, we study system dynamics from a philosophic viewpoint and try to study important points and methods that can be introduced by systems theory. We search into the relationships between system dynamics and other fields. 

Is Systems Dynamics Rate of Diffusion Slow?
Andres Esteban Breiter

Abstract: This paper examines the causes and effects that interact to determine the rate the causes and effects that of Systems Dynamics diffusion.
The use of Systems Dynamics implies both a way of conceptualizing the models of existing systems and the use of such models to gain a better understanding of the systems’ behaviour.
Given the high potential of Systems Dynamics to aid in understanding a very wide variety of systems in many areas of human endeavour the Systems Dynamics practitioners worry regularly about its slow propagation and frequently express anxiety about the future of the field. They tend to forget, however, that the potential usefulness of their approach is obvious to them but is hard to appreciate by the would be users and eventual beneficiaries of the improved solutions derived from applications of their expertise.
This paper focuses on the causes and effects that in the authors’ opinion interact in the diffusion of Systems Dynamics and suggests actions that may eventually help to accelerate the process of its broad adoption. 

On Extending the Institutionalist Paradigm: The Appropriate Place for System Dynamics within the Economics Profession
Michael J. Radzicki

Abstract: After enduring years of criticism from prominent economists, many members of the system dynamics community have concluded that economists do not like system dynamics. This article argues that this conclusion is not entirely correct. The economics profession can be divided into two methodologically different camps: the mainstream or neoclassical economists and the institutional economists. Although neoclassical economists do not see system dynamics models as being scientific because they do not adhere to the tenents of logical empiricism, institutional economists construct models in a manner that is strikingly similar to the system dynamics method. Indeed, it is shown that system dynamics can be used to strengthen and extend the institutionalist paradigm in economics and thus has the potential to find a permanent home within the profession.
The computer people took seriously the evidence that people are not maximizing-rational and decided to find out by empirical study how decisions are actually made. Thus they became, in a way, heirs of the institutionalist program ….Philosopher of Science Paul Diesing

Studying the Relationship among the Whole, Parts and Environment of a System Dynamic Model
Qifan Wang, Guangle Yan

Abstract: From the viewpoint of system dynamics the whole structure and functions of a system do not simply equal the algebraic sum of the parts which the system consists of. There universally exist mutual relationships between the transmition and exchange of information, energy and material within the whole system, its parts and its environment. The aim of this paper is to study the organic ties among the three of the whole, parts and environment of a system and the transmition involved under specific conditions. In this paper, the logical relationships between the internal and external parts of the system are described. Two concepts of the transmition matrix and the relationship matrix are presented along with the definitions of the grades of the grades of variables. Their concepts and definitions, combining the theory of the model reference self-compensation, are used to form a new method by which the functions of the structures and relationship between the whole system and its parts can be identified. Some satisfied results have been obtained from testing this new method on the Boom-town Dynamic Model.

System Dynamics in a G.S.T. Framework
Rafael Rodriguez Delgado

Abstract: Systems Theory has developed without inner coordination.
The General Theory has been general in the sense of trying to reach a global viewpoint from the perspectives of science and philosophy. But it has not perceived its structure as a whole. It has grown in complexity without integrating its parts.
Systems Dynamics has expanded in relative isolation. It has developed into a closed methodology with fixed principles and structure. To a great extent it has been equated to the Forrester’s methodology applied to industrial, urban and global systems.
It would be valuable to place the Dynamic approach in a wider context. It is assumed here that in a General Systems methodological framework the same system can be considered from three different, but complementary, viewpoints: Static, Dynamic and Dialectic. It is also assumed that closeness and openess of systems are relative states and that analysis and synthesis should have analogous methodological weight.
Systems Dynamics appears as a central node in a systemic methodology that should integrate different approaches and viewpoints into a coherent whole.

Session 7: Economic applications

The Time Delay and Oscillation of Economic System
Fan Chong-Hui, Zhang Yi-Min

Abstract: The time delay θand capital life-time βof economic system must be considered in discussing the system’s dynamic behaviour. In this paper a model of economic system with time lag has been proposed to deal with time delay and life-time. The core of this model is investment decision equation, in which the transfer function  has been introduced. By selecting appropriate coefficients ai and bj  the desired dynamic behaviour can be obtained. The impulse response h( t)of the system is defined by using numerical solution of its characteristic equation. The numerical solutions for proportional and proportional-plus-integral control system with 60 different sets of θ &βhas been calculated. According to the calculating results we use multiple regression analysis to get the regression equation between the critical oscillation parameters (period, amplification coefficient and amplitude) and time delay & life-time. It is convenient to apply these regression equations for choosing parameters.

Limits to National Development:& Resources or Resource Allocation Processes?
Khalid Saeed

Abstract: This paper re-examines the economic development problem and establishes that organizational arrangements underlying resource use at the social, political, and ecological levels, not shortage of resources per se, or their inefficient employment, are responsible for creating conditions of underdevelopment and for the failure of the well-intentioned economic development efforts made in the past. Three levels of national organization are examined: the social level which is concerned with the production and distribution of income among various cross-sections of society; the political level where decisions are made to allocate resources to public welfare or to maintaining control over the public; and the ecological level where a resource mix is selected for use on the basis economic and technological considerations. The analysis is based on three separate formal system dynamics models of the resource allocation processes dealing with each of the three levels of national organization discussed above. Appropriate institutional arrangements for fostering sustained national growth are explored.

Modeling Fuel Pricing Policy and Consumption Patterns
M.T. Tabucanon, K. Saeed, Q. Suhail

Abstract: This paper examines the domestic energy consumption in Pakistan in the backdrop of the government’s pricing policies using a system dynamics model as an explanatory tool. In the context of policy analysis, the simulated behavior of the system are tested based on various pricing schemes of the competing fuels. The simulation experiments reveal, among others, that Pakistan’s energy system structure is such that any policy involving government control over the prices will eventually result in an increase in burden on family income of rural and urban poor classes mainly and urban middle class partially. It seems that the only way to redistribute the burden on family income, minimize the burden on national economy, and also achieve conservation of fuels, is by allowing the price of fuels to be determined by the supply-demand conditions of the market.

Interfuel Substitution in Oecd-European Electricity Production
Erling Moxnes

Abstract: A dynamic simulation model of interfuel substitution in Oecd-European electricity production is presented. A combination of a priori information and a calibration of the model to hictorical development produces several important results. Adjustment times are much longer than usually assumed, and price elasticities are much higher. Both the simulation model and econometric estimates indicate that the LOGIT model is a better representation of fuel choice in the sector than a constant elasticity function. The LOGIT model explains why estimates of price elasticities tend to vary over time. It also indicates that a fuel can price itself completely out of the market. Finally, the results indicate that coal is protected equivalent to a price subsidy of about 36 percent.

An Investment and Pricing Problem: A System Dynamics Approach to the Differential Games
Hannu Kivijärvi, Margareta Soismaa

Abstract: This paper deals with the analysis of the classical investment and pricing problem of a monopoly faced with competition from substitute industries or marginal firms in the same field. The monopoly owns a finite level of a resource (ie, the stock of an exhaustible. resource), whose usage is to be divided optimally over a finite planning horizon. The demand for the resource is described by a downward sloping demand curve which is affected by the measures of the competitor. The monopoly and its competitor are maximizing the present values of their net profits over the planning horizon. The problem is first formulated as a non-cooperative differential game. The necessary conditions for the Nash solution are derived.
The necessary conditions for the solutions are stated as a two-point boundary value problem which admits also an analytical solution if some simplifying assumptions are made. However, to relax these assumptions numerical solutions are computed by employing System Dynamics.
In terms of System Dynamics the two-point boundary value problems have initial states for some level variables and terminal states for some other level variables. To solve this problem with System Dynamics we have used the Newton-Raphson method. In the Newton-Raphson method two System Dynamics models are needed: one to produce a Jacobian matrix and another to produce solutions for the original problem.

Economic Growth and Development Policy in Oil Dependent Indonesia
M. Tasrif Arif , Khalid Saeed

Abstract: This study uses a system dynamics model to understand the process of economic growth in the oil dependent economy of Indonesia. Many long-run growth patterns resulting from the various intuitively appealing development policies are analysed and an attempt is made to identify the best policy set for attaining a sustainable growth pattern. The study shows that influencing factor prices in a way to facilitate adoption of capital intensive technologies increases acceleration of growth and is a key policy to sustain growth in the long run.

Feedback and Delay in Planned Economy System
Chogjie Zhao, Chingrui Xu

Abstract: Slow feedback and passive control are the major problems in pure planned economy country. In this paper we compare two kinds of economy control forms which exist now: planned control and market control, prove why our country take economy reform as the main work in the Seventh 5-Year Plan and show what function these reforms will have. The method is based on system dynamics. Simulation tell us: the difference between planned economy and market economy consists in their feedback control form, if we can combine the advantage in market control with our system, our economy system will be improved greatly. 

Planning Conservation Programs Decision Support with the Conservation Policy Analysis Model
Patrick Barton, Mike Bull

Abstract: System Dynamics has proven to be a useful paradigm for the construction of a policy analysis model in support of energy conservation decisions in the United States Pacific Northwest. This paper outlines the most important complexities faced by the Bonneville Power Administration planners, how system dynamics has provided a framework for analysis and how the integrated model currently used by staff members (the Conservation Policy Analysis Model) has been applied successfully to a wide range of problems.

System Dynamics and Circulatory Analysis: Proposals for an Alliance
Moisés Garcia Garcia, Francisco Serrano Moracho

Abstract: Our purpose is to set up a dialogue, a scientific exchange, between CIRCULATORY ANALYSIS and SYSTEMS DYNAMICS, since we belive the two -disciplines to be complementary. In fact, we would go so far as to say that S.D. represents the natural development of C.A.
We consider there are well-founded reasons to expect the cooperation between the two disciplines to be profitable in helping to subdue the system of economic circulation and to subject it to a rational control.
Circulatory Analysis can offer Systems Dynamics the conceptual riguorousness of a theory of circulatory systems developed from solid bases, and even some new concepts which may be very useful (for instance, those of Circulatory Process and Complex Circulation). On the other hand, Systems Dynamics can offer all its engineering capacity to produce working models.
In order to show more clearly what Circulatory Analysis is, we have made a small toy, a model constructed to simulate the behavior of the system of economic circulation in a commercial business. It is extremely simple (it is, after all, a toy), but the same methodology used for its design and construction can make it possible to produce machines, that is, simulator models, to any degree of complexity.

Studying Dynamic Effects of Industrial Capital Retrofit and Energy Price Adjustment on Energy Development in China
Qifan Wang, Xiaobo Zhang

Abstract: This paper tries to use System Dynamics as a tool to analyze some existing problems in China’s energy system. The paper first points out some most severe energy problems in China and the policies that people suggest toward the solving of these problems, then reveals the dynamics of these policies through simulations on an Energy Dynamic Model that we built. The analyses cover the issues of energy production and supply system, energy price, energy shortage, and industrial capital retrofit toward energy conservation, etc.. Some conclusions are derived from the analyses which are valuable for the solving of China’s energy problems. And System Dynamics is believed to be an effective approach in energy price analysis in China.

Volume 2
Session 8: Industrial and Corporate Developments

Employment Policy and Expectations
M. D. Soto Torres, R. Fernández Lechón

Abstract: The paper studies with the help of a model the employment decisions of a firm through a business cycle which maximizes its discounted income and assumes that the forecasts are perfectly corred.
The firm produces a output function of number of workers employed by the firm at time t. The firm’s labor force increases over time as a result of layoffs and quits. The firm can recalls workers at time t only if it has an inventory of previonsly laid off workers. The firm’s output is supposed superior or equal to demand (function of price and time) at any time. The solution to the maximization problem will then yield an optimal output and employment plan which the firm proceeds to implement until its expectations about demand at time t.

A Policy Analysis Model and the Development of the Finnish Forest Sector
Risto Seppälä

Abstract: The study aims to assess the potential of the forest sector to maintain its leading role in the Finnish economy. The long range future alternatives are simulated by means of a System Dynamics model called MESSU. It is shown that within the limits set by the availability of wood and the low profitability of the forest industry, the growth of total production in the forest industries cannot meet the projected increase in international demand with the present product mix.
MESSU covers the whole forest sector (forestry and the forest industry), which makes it possible to study the interaction between the different parts of the sector. The model is built up of seven submodels (modules): forest, forest ownership, roundwood market, harvesting, forest industry, end product market and capital market.
MESSU does not only consider economic features of the forest sector, even though they are a central part of the model. Biological (timber growth) and technical (e.g. efficiency of forest industry production and harvesting) features are also included. Further, sosio-economic issues, such as population, urbanization and labor supply dynamics, are considered.

Study of Demand Behavior: A Modular Approach
R.M. Narchal

Abstract: Business decisions about investments have to be guided by the careful study of market behavior. In this paper an attempt has been made to study the market behavior adopting a modular approach. The total demand of a product in a market gets influenced by a set of four major feed backs related by market saturation, capacity expansion, price fluctuations and motivational efforts. In the paper each of the feed back has been seperately discussed to arrive at a feed back structure which can be used for designing the policies related to expansion of capacity, pricing, motivational efforts etc.

Evaluation of the Benefits from Using System Dynamics on Personal Computers for Corporate Financial Management
Albert Herremans, Philippe Wilmes

Abstract: DYNAMO has been used for many years on mainframe computers. Like many other applications programs and computer languages, it has been made available on Personal Computers. Will that make System Dynamics easily available to many potential users who never tried to use it on mainframes? Does one need to be an Information System specialist to use DYNMO on a PC?
These are the questions to which this paper intents to give an answer to. Subsequently, we used DYNAMO on a PC for a very simple financial application, and compared it superficially with the (already) traditional approach of spreadsheets.

Does Stock Control Need Modelling or Simply Experience? System Dynamics of Hospital Linen
J.P.Oostveen, D.J. Sweeny, A. de Weyer, E.v.d. Leest

Abstract: The St. Radboud Hospital of the University of Nijmegen, The Netherlands is sponsoring a System Dynamics computer simulation designed to study the hospital’s textile (bed, catering, medical linen and uniforms etc.) circulation process.

Competitors’ Reactions to Introduction of a New Product, A Selling Case
 U. La Roche

Abstract: For a utility application in the capital goods sector use of new technology in production gave the possibility to have a new product at much lower cost than competition
There were about five competitors with approximately equal market shares. In order to optimize timing of marketing and production an analysis of market and competitors’ reactions was started.
The work reported covers the main steps and findings of this analysis made in preparation of execution of the optimized marketing exploit.
These steps cover conceptualizing of market-competitor relationship, modelling and simulation to define sensitive parameters, defining some robust market policies and analysing the operational information requirements in executing a set marketing concept.
Specific results obtained were above all elimination of some crude “feel of the pants” notions how to sell and confirmation of the importance of a selling policy even in a seemingly orderly and settled market environment.
Other results contributed very much to an understanding, why a new product at much lower cost is only in part able to gain market share in a setting of wary competitors.

Decision Support for Marketing New Products
Peter M. Milling

Abstract: The control of new product growth and market penetration is a key task for corporate management. The concept of Decision Support Systems is applied to this field of problem solving. A general model of innovation diffusion is presented and used to study market response and profit impact of different strategies. Its analysis suggests a marketing approach which aims at rapidly gaining sales volume. Attractive prices and fast capacity built-up take effectively into account the dynamic environment. 

Know-how Transfer by Multinational Corporations to Developing Countries – A System Dynamics Model with Spiral Loops
Peter P. Merten

Abstract: The course of know-how transfer of multinational corporations in developing countries is presently considered to be very problematic from the view of multinational corporations as well as from the view of developing countries. This paper first develops a descriptive model of this problem. The descriptive model is based on empirical and secondary statistical investigations of Japanese, US-American and German assembling industry multinationa1 corporations (automotive industry, electrical industry and mechanical engineering industry). The descriptive model shows that the know-how transfer process is a process of structural change resulting from the interaction of multinational corporations, local corporations and developing countries. Based on this descriptive model we have developed a formal mathematical model of the evolutionary process of know-how transfer by introducing “spiral loops” as a methodological extension of the system dynamics approach. The spiral loop concept which is based on new developments in evolutionary theory and in the field of artificial intelligence is used to model the qualitative changes in interaction processes which are responsible for structural change and evolution. The feedback loop concept and the concept of shifting loop dominance are used to model quantitative changes in interaction processes. The combination of the traditional feedback loop concept of system dynamics with the spiral loop heuristic allows us to model dynamic interactive processes between two or more autonomous systems in their quantitative and qualitative dimensions. Plots from simulation runs of the model show the evolutionary pattern of the existing know-how transfer process, which is considered problematic. We have analyzed different patterns of this process with model tests in order to generate policy and strategy recommendations for managers of multinational corporations and politicians in developing. countries.

A System-Behavioral Methodology for Business Policy Research
Roger I. Hall

Abstract: A process modeling approach is used to describe three major elements of policy making, namely, the workings of the corporate ,system of a firm, its representation in Managers’ Cause Maps, and the Policy Formation Procedures used by the policy making elite. System Dynamics provides an expert system to aid the construction of the Corporate System. Cause Map and Behavioral Decision Making theory, on the other hand, provides the artificial intelligence (modeling the collective decision making behavior of a senior management) that drives the Corporate System. Potential applications of the methodology are put forward.

A Multi-Sector Model of Inventory-Production Fluctuations: The Impact of Local Information on Global Performance
Ernst W. Diehl

Abstract: Inventories of finished goods are added to the static input-output model. This addition allows one to relax the assumption that production can instantaneously track incoming orders. The reformulated input-output model exhibits production-inventory cycles over a wide range of parameter constellations. The model can be used for an extensive dynamic analysis of short-term production-inventory fluctuations in different sectors of the economy. In particular, it can be utilized to understand the extent to which each sector’s fluctuations are synchronized and dependent on the fluctuations in the other sectors.
The cause for the potentially oscillatory behavior of the model is analyzed. It is shown that the main reason for the oscillations lies in the assumption that the actors in the model do not know why orders are issued. They cannot distinguish whether incoming orders are issued because the recipients want to adjust their inventories or whether they are issued because the recipients have changed their long-term production plans. This result points out that one dimension of a successful stabilization policy might be an improved information policy. It is suggested that an extension of the model could be used to explain the production-inventory fluctuations during business cycles and to achieve a more detailed understanding of the behavior of different sectors during such cycles.

The Role of the Women in Business Management
Jose María Bueno, José A. D. Machuca

Abstract: The main purpose of this work is to study the role of the women in different levels of business management. The system under study is composed of: a)business sector, in which women carry out their activities, b) educational subsystem, which provides them with the necessary skills to ascend to different managerial positions, c) cultural and socioeconomic conditions of the country, which influence : the motivation of women for this kind of work, the entrepreneurial attitude to hiring females in firms.
The characteristics of the system together with the pursued objective bring us to the choice of System Dynamics as the most adequate method for our study. Using as our starting point a causal diagram of the global system, we have divided it in sectors. These represent the different aspects above mentioned.
This is a long-term project from which we hope to obtain partial results to be presented in the 1986 System Dynamics Conference.

A Strategic Study on the Development of Electronic Industry in China
Qifan Wang, Dong Jianglin

Abstract: With the rapid development and wide application of microelectronics, the electronic industry is playing an ever more important role in modern economies. Backed by the socioeconomic circumstances, a system dynamics model (SDEIC) is constructed to investigate the development of electronic industry andto give a description on the future of microelectronics in China in some way. The analyses and simulation results show that there will be a prosperous period for the development of the electronic industry in the coming twenty years with a vigorous investing requirement and at a relative high growth rate. A notable characteristic is that the development is unbalanced with electronic consumption products dominating the market in terms of volume in the period concerned.

Prospective Study of the Footwear Sector.
Bernardino Cabrer Borras, Amparo Sancho Perez

Abstract: The principal objetive of this study is to determine the production trend until 1995, taking into account the future behaviour of the variables which are involved in the explanation of the home market demand as well as exports of footwear.
The forecasts have been made using a prospective model. By prospective is meant the effort involved to imagine the different futures which may be caused by the behaviour of the “actors” within the logial limits of the systems through which they act. In this paper a distinction is made between the variables whose dynamics are almost always constant and those which may be affected by the decision of the ‘actors’ or by unforesceable events. The prospective study seeks to understand the plans which the actos will try to carry out and will affect its future behaviours.
These options become especially clear in the construction of partial or complete scenario. Scenario, according to the definition of Fontela (1980) is the script of a theatrical work about the future in which economic and social agents would be involved. To construct a scenario for the future is a creative task in which, implicitly or explicitly, all long-term decision makers play a part.
Hence to study a scenario of the development in the next decade is to analyse one of the potential futures, being fully aware of the essentia1 unpredictabi1ity of the future and of our full freedom of choise.

A System Dynamics Perspective on JIT-Kanban
Ramon O’Callaghan

Abstract: Just-In-Time (JIT) production is the notion of producing the necessary products in the necessary quantities in the necessary time in every process of a factory and also among companies. It is not uncommon to find JIT used synonymously with “Kanban,” which is the name for a specific inventory replenishment system developed by Toyota to accomplish JIT production. The Kanban system employs cards (kanbans) to signal both the need to deliver more parts and the need to produce more parts. A unique feature that distinguishes the kanban-based JIT system is its unique “pull” nature.
The paper begins with a review of JIT production and the Kanban system. Then, using the structuring principles of System Dynamics, a simulation model of a kanban-based JIT production system is developed. The formulation effort begins with the “simple structure” of one production stage. By connecting a few of these “basic structures” and adding a market interface module, a complete multi-stage manufacturing system is developed later.
To test the internal consistency of the model, several simulation experiments are conducted. The unifying theme in these experiments is the issue of flexibility: How well does the system adapt to changes. The simulations are thus designed to show, for different management policies, the behavior of the system in response to unexpected circumstances. The following cases are considered: normal response, changing the number of kanbans, a breakdown, small and large demand increases, bottlenecks, and capacity planning. Finally, the results of these simulations are used to point out some of the managerial trade-offs involved in JIT production.
Although the major contribution is the conceptualization and formulation of the system dynamics model, the paper lays the groundwork for subsequent normative research in the field of operations management.

Session 9: Expert Systems and System Dynamics

A New Approach to Environmental Impact Assessment
Paula Antunes, António Camara

Abstract: A new approach to Environmental Impact Assessment (EIA), based on system dynamics concepts is presented in this paper. System dynamics models will however be useful in EIA only if people are able to develop”good” models. The conceptual basis for building an expert system designed to guide people in developing system dynamics models is introduced in this work. Such an expert system will have two main modules: a system dynamics component, which will include basic system dynamics concepts and heuristics; and a specific application component, which will consist of the main relations and rules governing a givenenvironmental area. The system will also include an interface with a dynamic simulation language and with a decision aiding formulation.

EASDM: An Expert Aid for System Dynamics Modelling
Jose Carlos González Cristobal, Gregorio Fernández

Abstract: In this paper an Expert Aid for System Dynamics Modelling (EASDM) is introduced, a user friendly, interactive software tool which helps users unfamiliar with System Dynamics and computers, to construct their models from the formulation to the simulation. The most important feature that distinguishes this aid from its closest predecessor (ASDM) is the incorporation of an expert system capable of carrying out the conversion from the causal diagram to the Forrester schematics in a semiautomatic way. This is possible because, within the context of the causal diagram, there is an implicit set of “rules” which allows the classification of quantities. EASDM has been programmed in PROLOG and Pascal for personal computers with the MS-DOS operating system.

LSC: A Portable Continuous Simulation Software
M.Gaci, A Babaamer

Abstract: This paper presents a Continuous Simulation Software (LSC) developped in our laboratory.
The first version of this software treats dynamical systems , that are described by a set of explicit linear or non linear algebro-differential equations .
The software has an interface (High Level Language), that permits an auto-guided dialogue with the user.
The internal architecture of the system is structured in two subsystems: a control subsystem and an operating subsystem The package contains a library of algorithms and external functions that permits simulation models from different fields (socio-economic, technological … )

A Behavior Analysis Expert System for System Dynamics Models
Andreas Kleinhans

Abstract: There are many ways to combine Expert Systems and System Dynamics. In a short overview the paper will show useful basic combinations. As an experimental project BAMBOO will be introduced. It is primarily designed to test the usefulness of descriptive knowledge processing techniques for building and using System Dynamics Models. BAMBOO holds expertise of all SD-objects and structures, their possible combinations and the behavior they cause. BAMBOO generates the necessary knowledge about the user model by a system driven dialog. On the basis of this knowledge it shows the conclusions the model implies. For instance, BAMBOO determines which variables are sensitive and how the model will propably respond during the simulation.

MAPS: an Expert Advisor for the Qualitative Analysis of Dynamical Systems
M. Andretta , M. Lugaresi, P. Mazzanti, R. Serra

Abstract: The analysis of the evolution of non linear dynamical systems is a complex task. The cases where: i) the model equations can be regarded as a careful and reliable representation of the real system and, therefore, need no revision or modification; ii) the parameter values are precisely known; iii) the initial conditions are precisely known, are rather rare.
At least one of the previous conditions is not fulfilled in most of the systems of interest for System Dynamicists. Therefore qualitative analysis of dynamical systems, i.e. the study and classification of their asymptotic behaviours, is of extreme importance, at least in long term models.
The methodologies of knowledge representation recently developed in the field of expert systems can be applied to this problem. We therefore developed MAPS, an expert advisor for the qualitative analysis of dynamical systems. MAPS takes the system equations as input, classifies them according to their features and performs the necessary calculations at each stage, sending appropriate messages to the modelist.
At present MAPS deals with autonomous second order systems of ordinary differential equations. Further developments are foreseen concerning the study of higher order sytems and the design of an “equations database” for comparison with previously analyzed equations.

Focusing on the Growth Rate of Technological Adoption
Frederick P. Wheeler

Abstract: Models of substitution and adoption of consumer durable technologies typically focus on the level of adoption or the level of cumulative sales of the product. Although these variables may be of interest, decisions on market entry and the judgement of future return on investment are linked to the rate of change in adoption level. The percentage change in the current level of adoption, the growth rate, is more relevant, more meaningful and more sensitive a measure of past and future trends than is the level itself. This is an appeal for system modellers and forecasters to focus their attention on growth in studies of technological diffusion.

Linguistic Dynamic Modelling Using Logic Programming
A. Câmara, P. Antunes, M. Pinheiro and J. Seixas

Abstract: A new dynamic modelling methodology, SLlN, allowing for the analysis of systems defined in qualitative or quantitative terms is presented. Simulation of qualitative characteristics is performed by applying a set of logical rules which include base, tactical, strategic and structural change rules. Quantitative simulation applies traditional system dynamics concepts. To make the transition from qualitative into quantitative modes, logical rules are also used. SLIN is advantageously implemented on a very high level language such as PROLOG, as shown in this paper. To illustrate its potential applications, simple water quality models are included.

Session 10: Public and Social Applications

A Simulation Model of the Tokyo Metropolitan Region
Toshiro Shimada, I.Tokunaga, A.Otaki and T.Okubo

Abstract: The population of the Tokyo Metropolitan Region increased by about 3 millions in the five years between 1965 and 1970. This increase was due mainly to the flow of populations from the outer field of the Tokyo Metropolitan Region. Until around 1955, population increases were noticeable within the special wards of the metropolis. However, while there has been a recent lull in the increase rate of in-migration, there has been a remarkable increase in the amount of out-migration from the special wards to the four adjoining districts, the Tama district, Chiba Prefecture, Saitama Prefecture, and Kanagawa Prefecture. Out-migration exceeded in-migration in 1967 for the first time since the end of the War and the gap has been increasing year by year. On the other hand there has been gradual rise due to natural increase (the difference between births and deaths) in recent years, which has come to occupy a greater part of the population increase within the area of the Tokyo Metropolitan Region.
Our model therefore was formulated to represent such relations between the ward area and the four adjoining districts, as migration, residential effect and commutation.
We have divided the whole system into 5 sectors, corresponding to the ward area, the Tama district, Chiba Prefecture, Saitama Prefecture and Kanagawa Prefecture. Each sector is subdivided into population, residence, and enterprise sub-sectors.
The simulation was run for the 150 years from 1900 to 2050 and the results contained World War II effect on the population, the number of residences and enterprises of the ward area.

CRISYS: A Model of the Criminal Justice System in the Netherlands
R. O. Beijdorff

Abstract: System Dynamics Research and Consult has been asked bythe Ministry of Justice in The Netherlands to develop a simulation model of the criminal justice system. In this system a number of feedback mechanism are present that have negative side effects on the society. The first steps in the development of the model were taken. A number of small models of parts of the system were made to gain insight in the behaviour of some variables that are hard to quantify. A larger semi-dynamic model was developed to study the behaviour of the variables that are better to quantify. All models have to be integrated in the next part of the project in order to refine the forecasts.

Modeling School Finance Policy Using Simulation to Test A Priori Assumptions
George P. Richardson, David F. Andersen, Robert E. Lamitie

Abstract: In many of the United States, attempts to reform the funding of public education to reduce disparities among school districts have been disappointing. For this study of state aid-to-education in Connecticut, a system dynamics model of local district budgeting behavior was formulated, replicated seven times to represent all the school districts in Connecticut divided into seven clusters, and linked to a state-aid sector that dispenses aid according to the state’s current guaranteed wealth formula. Simulations of a single cluster and the seven-cluster model suggest that the guaranteed wealth formula will not, by itself, narrow the gap in per-pupil expenditures in rich and poor districts, as intended.
The study described is a relatively pure case of policy modeling designed not to confirm hypotheses but rather to draw inferences from puzzling sets of assumptions about state and local behavior. Reflecting on this case, we suggest six conditions that appear to indicate that a policy problem is ripe for the sort of contingent, inference-generating analysis illuminated by the Connecticut study. Some speculative methodological connections to cognitive science are also suggested.”

Industrial Site Planning as a Tool to Control Regional Employment – A DYNAMO Model –
H.H.E.W. Eijdems, D.J. Sweeny, B.J. Brouwer, W.R. Snel, J .M. den Breeje

Abstract: Holland is a little, crowded country with (like most nations in Europe) a high degree of unemployment. On the one hand the government tries to provide an adequate amount of industrial sites in attempting not to obstruct economic growth. On the other hand this puts a high claim on the amount of scenery still extant in our country. Therefore the council of the central province in Holland asked for an investigation about the relationship between the supply of industrial sites and the influence on the increase of employment in each part of the province. As there are six employment-office area’s in this province, a partition was made in six regions. Several branches of employment have quite different effects on claims for industrial sites, so there was also a division made in three economic branches. This results in eight teen equations for many of the relationships in the same form, but with different parameters. Therefore the DYNAMO – III -language was used in model-building to take advantage of the array possibility. The final result is a computer-model comprising about fifty array-equations, which allows the calculation of the area of industrial sites in different stages of development in each region and gives the spreading of employment over the province until 1995.

A System Dynamics Model of Sexual Harassment
James M. Norris

Abstract: The majority of women report that they have been victims of sexual harassment (Safran, 1976, Tangri, Burt & Johnson, 1982). Sexual harassment has been linked, both theoretically and empirically, to psychological and physiological stress, often accompanied by somatic symptoms such as headaches, nausea, and loss of concentration, as well as decreases in job performance and increased absenteeism and turnover. In addition, estimated losses in the federal government alone were in excess of $189 million over a two year period. This paper is one of the first to unify the past research and empirically consider sexual harassment in terms of its underlying mechanisms. It is also one of the first to examine the dynamics of the harasser and the organization in which the harassment occurred. Interactions between the victim, harasser, and organization sector are explored. Results indicate that longstanding organizational traditions of sexual harassment may make it difficult to eliminate harassment in the near future without a comprehensive group of policies concerned with eradicating sexual harassment.

Prospectives for Growth: A System Dynamics Study of the Roman Catholic Priest Population of the Netherlands
J.P. Oostveen, D.J. Sweeny

Abstract: Sponsored by a Dutch Roman Catholic Foundation a System Dynamics computer simulation model has been developed to study the population dynamics of priests of the Dutch Roman Catholic Church.
Few vocations since the second half of the sixties led to a disproportional ‘going grey’ of the priest population. This is manifested not only in the unbalanced age structure but also in a relatively high number of retirements.
The model (see enclosed flow diagram) structures on the one hand the physical demographic processes and on the other embodies a theory based on observation of qualitative aspects of disaggregated priest, believer and non-believer populations. Church attendence figures for instance are used as a measure of vocation potential.
The model is used to articulate the insights on the influence of policy alternatives on priest population in the coming 50 years or so.

Development of a Policy-Supporting Simulation Model of the Records Management System of the Dutch Public Authorities
R.O. Beijdorff

Abstract: The Dutch public authorities are confronted with large backlogs in processing the archives of their services. In view of this, the Ministry of the Interior, which is responsible for coordination of these processing activities, wanted to have a planning model for simulation, in a quantitative sense, of the archives movements within the public administration. The underlying thought was that such a model would enable problems in the fields of depot space, cost structure, allocation expertise and processing speed to be approached in a more adequate manner. A first exploration of the problem area (October 1984 – April 1985) showed that the quantitative problem of the processing backlogs is to a great extent affected by qualitative processes within the records management system and between said system and the client system. It was concluded that a planning model focused on quantitative factors cannot make an effective contribution towards solving the problems as the effects of measures aimed solely at efficiency will in the long run be affected adversely by qualitative processes. When the study was continued (September 1985 – April 1986), it was therefore decided to further investigate the processes of a more qualitative nature and to analyse their coherence. The results obtained provide a first step towards development of a simulation model for the records management system which, while supporting the relevant policies in this field, forms a tool for determining the, effects of policy changes in the system both in the short and in the long run.

Additional Papers

Development of a Common Communication and Control System for System Dynamics Type of Simulation Models
H. Krallmann, B. Rieger

Abstract: Today for managers or in general for non data processing experts the use and application of simulation models is of very high expenditure.
Editing and changing model parameters, studying the simulation language or applying e.g. a graphical standard software package are very unusual activities for this special user group. Due to this situation it cannot be expected that simulation models which deliver very important results for decision support get near to these people.
In this paper a user friendly communication and control system is presented, which offers an optimal user guidance in modifying and running simulation models, in creating a user friendly graphical output and in the interpretation of the model results.

CONFERENCE ABSTRACTS

Volume I

Catastrophe Theory and Public Policy: The Dynamics of Provider Behavior in the Nursing Home Industry
William Ammentorp, Paul Gunderson

Abstract: Major changes in the demographics of aging in the United States have created demands for geriatric care which cannot be met by existing services. Most states have elected to address this policy issue by offering incentives to providers to promote investment in long term care facilities. These offerings have been only marginally successful due to the relative attractiveness of competing investment options. This paper explores provider reaction to policy incentives using a System Dynamics model derived from Catastrophe Theory. Provider behavior is seen as unstable under competing investment options; a behavioral condition which conforms to the typical “Cusp Catastrophe”. 

Modeling a Public Employment Office: Report on a Pitfall
Raul S. Andrade

Abstract: How and why an attempt to build a system dynamics model of the operation of a public employment office resulted in an econometric model.

Combined Multidimensional Simulation Language, Database Manager and Sensitivity/Confidence Analysis Package for System Dynamics Modeling
George A. Backus, Jeffrey S. Amlin

Abstract: A fast, interactive, large-scale, data-base-oriented simulation language (LAMDA) for IBM compatible microcomputers has been developed for System Dynamics’ applications. Sophisticated output features include high-resolution graphics, full report generation capabilities with textual explanation, and user defined screen menu options, An integrated sensitivity/confidence package allows parameters or structures to be evaluated as a function of time and as a function of all other parameters for their impact on model results. Confidence intervals are determined along with the time and circumstances where certain information is critical. An integrated statistical package can be used to estimate model parameters based on historical information or, in combination with the data base, used to test model hypotheses and statistical inferences. LAMDA can also interface with FORTRAN applications. Extensive dialogue capabilities allow the model builder to make the model user-friendly and fit the need/sophistication of the client.

Comparing the Observed and Model-generated Behavior Patterns to Validate System Dynamics Models
Yaman Barlas

Abstract: Model behavior evaluation is an important component of System Dynamics (SD) model validation. SD methodology has often been criticized for its lack of quantitative/formal behavior evaluation tools. System Dynamicists have responded by stating the relative, subjective, qualitative, nature of model validation. We argue that using formal quantitative behavior tools is not inconsistent with a relativist, holistic philosophy of model validation. We suggest a multi-step, quantitative behavior evaluation procedure which focuses on individual pattern components of a composite behavior pattern. The procedure is relatively easy to apply and to interpret. We then test the performance of the procedure through a series of simulation experiments. The experimental results suggest that the multi-step procedure is appropriate for SD model behavior evaluation. The experiments also give us an idea of what the expected value and the variations of suggested quantitative tools are.

A Dynamic Approach to Investigate Household Car Ownership and Usage
Mark A. Bradley

Abstract: Many features are necessary in a behavioural model of household car ownership and usage patterns. A description is given of the features of conventional equilibrium-based models, followed by a discussion of the most important dynamic issues underlying travel choice. These issues include household travel and activity budgets; state-dependent factors such as information search, cognitive processes, habits, attitudes, and inertia; and the role of the household lifecycle as a choice catalyst. Recent dynamic modelling approaches are described, followed by a description of a system dynamics modelling approach which incorporates the dynamic hypotheses discussed throughout. Finally, a direction of research is laid out, in which the model can be used to simulate household panel data as a basis for hypothesis training.

Gaining Acceptance for a Systems’ Dynamics Models
Andrew S. Breiter

Abstract: This paper discusses the reasons why Systems’ Dynamics models frequently encounter considerable difficulties in gaining acceptance and suggests several ways for overcoming this obstacle. Resistance to models within organizations is usually generated by one or several of the following causes: insufficient credibility of model’s proponents, inability to grasp model’s usefulness, cultural background, fear of losing power and negative previous experience with models. In the special case of models addressing issues of wide public interest suggestions are presented on how to plan a communications strategy designed to generate support for the model or for the conclusions derived with its help.

The Dynamics of Robots’ Introduction in the Electric Appliances Industry
Andrew S. Breiter, Mariangela Gasparotti

Abstract: This paper discusses some dynamic effects of robot’s introduction on a company in the electric appliances industry. Two key aspects are analysed. The effects on cash flow are explored first, the conclusion is reached that under certain conditions it could represent a controlling element that would slow down the rate of robots’ introduction with the respect to the ideal rate suggested on the sole basis of economic convenience. The availability of skilled personnel is considered next. This availability increases through on the job training as more robots are installed. Under most circumstances, however, the availability of skilled technicians represents a controlling element that definitely slows down the introduction of robots. The effectiveness of training technicians therefore represents a variable of strategic importance.

The Importance of Feedback in the Pacific Northwest Electric Conservation Planning Model
Mike Bull, Andrew Ford, Roger Naill

Abstract: This paper describes the importance of feedback loops included in a policy model constructed for the Office of Conservation of the Bonneville Power Administration (BPA). First there is the description of the region and the responsibilities for conservation planning at the BPA, and then a description of the purpose, structure, and use of the policy model. Several feedback loops involving customer response to higher electric rates are selected for our discussion of feedback. The system dynamics treatment of these feedback loops is contrasted with the treatment found in most electric utility planning models in the USA. The paper concludes with an assessment of whether the inclusion of feedback has been important in BPA’s application of the model.

System Dynamics Modelling Analysis Techniques– A Pragmatical Appraisal
A.S. Câmara, J.A. Fernades, M.G. Viegas, A.P. Amaro

Abstract: This paper reviews techniques that may assist the system dynamics modeller in defining variables and functional relationships, parameter estimation, validation, sensitivity and policy analysis. The evaluation was made in the context of water resources management modeling effort for the Guadiana basin in Algarve and based on scientific, economic and operational criteria. In general, it was difficult to point out the most appropriate technique but rather recommend combinations of methods for each modeling stage.

Linguistic Simulation in Planning Theory and Application
A. Câmara, M. Pinheiro, P. Antunes, J. Seixas

Abstract: This paper introduces a new linguistic dynamic simulation methodology, SLIN which deals with systems defined in either qualitative or quantitative terms. The simulation mechanisms proposed in SLIN include a set of logical rules and fuzzy set theory. An application of SLIN to Sado estuary showed its promise but also some of its present limitations. Future developments including an appropriate diagrammatic representation, a new linguistic simulation computer language, implementation in parallel computers and subsequent real-time multi-expert based simulation are also discussed.

A System Dynamics Model to Examine the Effectiveness of Research and Education in Reducing Societal Costs Due to Low Back Pain
William L. Cats-Baril, Wifred Roth, Richard H. Zeliff

Abstract: Low Back Pain (LBP) is the most common cause of work loss after the ordinary cold, and it is the single greatest source of compensation payments. In the U.S., it is estimated that one million workers sustain a low back injury every year, and that 217 million work days are lost annually at a cost of 11 billion dollars for males aged 18-55 alone. In an effort to better understand how to control the economic impact of this disorder, a System Dynamics model is being developed. It is hoped that the model, by generating scenarios on the cost effectiveness of different interventions, will provide useful insight into specific policies to fun research addressing the causes of LBP disability.

The Dynamics of Transportation Systems
J. A. Charlesworth

Abstract: The techniques currently used for the management of urban road transportation systems are briefly reviewed, and the extent to which they take account of the dynamics of the system examined. Recent work on the development of mathematical models of urban traffic systems is described and the applicability of the model to real-life traffic systems explored. In particular, the ability of these models to reflect temporal as opposed to spacial properties of the system is examined, as well as their ability to assist in the formulation of strategies for system control. The role of system dynamics might play in overcoming some of the problems encountered is then discussed.

Defense Resource Dynamics
Rolf Clark, Albert A. Pisani

Abstract: Models based on a logic relating military ownership costs to active force assets were developed. Historical budget analyses provided relationships to tailor the models to each military service. The models, validated through projection of the 1980-85 defense growth period, were then used to predict 1986 to 1995 appropriations using top line fiscal levels as inputs. The models can explore policy options such as reduced fiscal growth, altered readiness policy, and changed innovation plans.

Adjustment Dynamics in a Static Input-Output Model
Ernst W. Diehl

Abstract: Traditional economic theory emphasizes the determination and characterization of static equilibrium. In contrast, understanding of economic behavior can be enhanced through the use of models that explicitly take into consideration the underlying physical and decisionmaking structure of the system and that allow for disequilibrium. This paper presents an example of such a model. A typical static, open input-output model is translated into an equivalent disequilibrium model. It is shown that objective individual decisions can lead to unintended oscillatory modes of behavior of the overall system. An assumption of perfect information can prevent such undesired oscillations.
This paper also demonstrates a way of communicating system dynamics thinking to an economics audience. The model is developed in progressive steps, a procedure that is widely found in economic literature. First, stocks are added to a model that originally considers flows alone. Each of three succeeding model changes is then motivated by the results of the previous model and presented as a logical next step towards a more consistent theory. Thus, it is not only the result of the final model as such that is of interest, but also the way the model is developed. Model development is presented as a learning and communication process.

A System View of Transportation System
Paolo V. Dolci

Abstract: The Le Moigne’s theory of General System is presented and applied to the transportation system. A model of this system, using accessibility and generalized cost as the variables to be controlled is also sketched. 

INFLOW: from Influence to Flow Diagram in System Dynamics
Paolo V. Dolci, Maria A. Puddu

Abstract: In this paper we review the algorithm to identify the type of variables (levels, rates, auxiliaries) which appear in the influence diagram. This algorithm has been implemented on a personal computer at the Cagliari University.

Linear Analysis and Model Simplification
Robert L. Eberlein

Abstract: There has been a great deal of work done in the simplification of linear dynamic models. Given that most models that are in use are nonlinear this has restricted the applicability of the available techniques. By concentrating on a particular nonlinear phenomenon, in this case shifting loop dominance, it is possible to use the techniques of linear analysis for the simplification of nonlinear models. The theory for this is developed and it is shown how this can be applied to the model. For purposes of exposition the market growth model is used and the results are encouraging. Though there is still a good deal of work to be done it seems feasible to develop simplification techniques for nonlinear models that address directly the nature of the nonlinearities.

Statistical Estimation and System Dynamics
Robert L Eberlein, Qifan Wang

Abstract: Much of the work done in system dynamics has been criticized for making insufficient use of statistical estimation techniques. There have been various responses to this criticism concentrating on the other sources of information available to the model builder. One of the major hurdles to the use of statistical estimation techniques is an understanding of when they are likely to be useful in system dynamics modeling. In this paper we consider different estimation techniques and how useful they can be in system dynamics modeling. The work is meant to be a practical guide that will allow the modeler interested in statistical estimation to gain some understanding of the different approaches available. We concentrate or attention to the special problems that the system dynamics modeler is likely to encounter in estimation.

Period Doubling and Approach to Chaos in a Simple Context
John C. Eidson, Charles H. Braden, Dale F. Schultz

Abstract: Studies of deterministic systems which apparently exhibit chaotic behavior are attracting much interest in disciplines ranging from physics to economics. A particularly interesting case of a simple electrical network has been studied recently in the physics literature with the objective of isolating minimal characteristics essential to chaotic behavior. A system dynamics formulation has been given to the numerical simulation of this system. Instructional laboratory exercises comprising both observations on the electrical circuit and computer simulation of the circuit are being implemented for the upper level undergraduate and graduate students.

A Report on the Utilization of the MOSES Computer as a Tool in Development and Dessimination of System Dynamics Models
Hans Esmann Eriksen, Erland Hejn Nielsen

Abstract: The Jutland Technological Institute (JTI), Aarhus, Denmark, has embarked a project to promote the utilization of System Dynamics models in Danish Industries. The vehicle of this projekct is a new type of hybrid computer, the MOSES (Modular Symbolic Electronic Simulator) system, developed at the Technical University of Denmark. In ongoing projects the MOSES system has demonstrated itself as an invaluable “discussion” partner. We have performed a series of seminars with managers from medium and large sized Danish companies. At these seminars some of the generic structures of growth companies have been discussed and related to Danish conditions. This report contains a brief description of the MOSES system and a description of the ongoing project.

The Banking System: A System Dynamic Profile
Douglas Franco

Abstract: This is a report of several applications of System Dynamic Methodology to banks, with particular emphasis given to their structure and their Decision Making in terms of System Dynamic concepts. Aplications range from policy design and long term planning to the design of Decision Support systems. The first part presents relationships between money flows and accounting information. Next, some policy design results are presented. Later on, the estimation of the parameters of the SD model is transformed into the heart of a Decision Support System.

Economic Development and Financial Deepening: A Study of Causation and Dynamics
Richard G. Fritz

Abstract: The direction of causality between financial deepening and economic development is tested. Using factor analysis, two indexes are developed to represent the two economic phenomena for the Philippines. Time series causality tests are used to evaluate the direction of causality. The results indicate the causal pattern reverses over the history of the sample. Reversal is viewed as the result of financial repression. The structural dynamics implied by the empirical time series test is evaluated using a system dynamics model. The growth promoting and growth inhibiting roles of the financial sector are simulated in the dynamic structure of a dynamic economic development model.

A Reduced Dynamic Model for Evaluating the Impact of Man on the Environment
L. Gardini, H. Sedehi, R. Serra

Abstract: A representation of socio-economic systems using reduced models allows a “qualitative” type of analysis to be carried out. It is often the case, especially in the long term process, that the main interest is directed towards the asymptotic behavior of the solutions as a function of the initial state and to evaluating the properties of stability of stationary states. In this article, after a short outline of the procedure and methodology adopted, we describe the application of these techniques in the construction and use of a dynamic model for the design of a tourist village. The model, which mainly deals with the impact of man on the environment, serves to evaluate the social and economic effects of the construction of a tourist centre in a national environment which must be conserved.

Dynamics of Power Supply and Demand
Krishan Kumar Garga, N. K. Gupta, B. Thapar

Abstract: Power demand forecasting methodologies which are currently being used by electricity authorities are end use method, trend method and Scheer’s formula. These methodologies being static in nature, do not take into account the future power supply position, while becoming an important instrument of economic change the growth of power generation activity itself is totally dependent upon the overall economic development thus forming an important feedback loop in the economic system. Present paper discusses a power economy system dynamic model for estimation of future demand and supply position of Power.

On Relations Between Feasible Observations and Decisions
H. Górecki, A. Korytowski

Abstract: The paper is an attempt at a theory of relations connecting feasible observations/ or measurements/ and feasible decisions/ or controls/ in general cybernetic systems. The theory gives a formal framework and a tool for quantitative analysis of the following facts:
1. An increase in observation possibilities, e.g. an increase of the precision of measurement, enlarging the scope of observation etc., results in an increase in decision possibilities by making more effective decisions possible. This works also in the other direction: if there are more feasible decision, new observations or measurements become available.
2. In the framework of a cybernetic model no decisions and/or observations which generate antinomies can be simultaneously feasible. This creates interesting and important constraints on measurements and decisions in systems which include man or where a human or automatic decision maker is an object of observation, and where the results of observation may be known to this decision maker.
3. The observation/measurement/ takes tome and changes its object and thus the result of observation always refers to past rather than to the present. This normally is due to physical effects through other phenomena, like psychological, may also be important depending on the nature of the object.
The facts of group 1 are in a sense opposite to those of groups 2 and 3. This leads to the existence of optimum decision-measurement possibilities. Conditions for this optimum to exist together with its significance for biological and technological system will be discussed.
The subject of this paper is of interdisciplinary interest and has been studied, partially and from particular angles, within the framework of control theory/facts of group 1/, mathematical logic/theory of antimonies, principles of mathematics-mainly facts of group 2/, physics/theory of measurement, principles of quantum machanics-mainly facts of group 3/ and philosophy/the classic problems of free will and consciousness/. The relevance of the presented theory to these fields will also be discussed.

Artificial Intelligence: A Tool for System Dynamics
Janet Marjorie Gould

Abstract: This paper presents the findings of my research in artificial intelligence applications for system dynamics. The sudden appearance of microcomputers in homes, schools, and businesses has opened an opportunity for dissemination of system dynamics to a wider audience than we could have ever hope to reach with the earlier computer technologies. This opportunity should not be lost by clinging to obsolete, or soon to be obsolete, technologies. User-friendly micro-based software should be immediately available to those individuals, schools, and corporations who are interested in systems thinking. The demand for such systems far surpasses the current supply. Artificial Intelligence software is now available for microcomputers. This new software development can significantly improve current and future systems for the novice and the experienced system dynamicist.

Generic Models as Educational Tools: Teaching About Managing Technology Conversions
Alan K. Graham, D Neal Scogin

Abstract: “Generic models,” as the term is emerging, denotes a model representing the underlying causes of commonly occuring sets of problems, whose purpose is for education, rather than for policy analysis per se. Preliminary uses of generic models have been an exciting and efficient means of transmitting insights. This paper is a status report on the modeling of a company’s conversion to a new production or product technology. Based on information sources including in-depth interviews within such companies, the authors’ previous experiences, and published surveys and cases, the planned model focuses on management goals, staffing, and acquisitions of the skills necessary to deal with the new technology or product. Although the model does not explain every (complete or partial) implementation failure, it seems relevant to a significant fraction of such failures. The authors intend to develop the model and curriculum materials for management education and portions of university courses on technology management.

Future of Aluminium Demand in India-A System Dynamics Approach
N.K. Gupta, Krishan Kumar Garga

Abstract: Although there are more than 3000 end uses of aluminium in the world and more than 300 in India, yet there are five sectors viz. power, consumer durables, transport, building consturction canning and packaging which account for more than 90% of aluminium consumption. To study the dynamics of demand of aluminium in these sectors, system dynamics model having various sectors viz. Population, economy, power, consumer durables, construction, packaging and canning, transport and aluminium consumption model has been simulated from 1970 to 2000 A.D. using dynamo.

System Dynamics National Model Interest Rate Formulation: Theory and Estimation
James H. Hines

Abstract: Within the MIT System Dynamics National Model, the risk-free interest rate is determined jointly by the normal interest rate and by liquidity. The normal rate is the rate which agents believe would obtain under normal circumstances, in the absence of transitory pressures. The normal rate continually adjusts to new interest rate conditions.

During times of deficient liquidity, agents will increase the risk-free rate above the normal rate. The converse also holds. The risk-free rate will continue to adjust until pressures in the system are relaxed. Estimation results support the national model theory of interest rate formation.

“By Prescription Only”: A Computer Simulation Game for Understanding the Emergence of New Medical Treatments
Jack B. Homer

Abstract: This paper presents a computerized system dynamics game in which the player makes “annual” decisions controlling the availability and evaluation of a new medical product with uncertain potential and possible (though initially undetected) side effects. The game has been implemented using the popular spreadsheet program Lotus 1-2-3. This program has on-screen display capabilities allowing for the construction of a user-friendly game that requires no knowledge of system dynamics. A detailed discussion of game mechanics is followed by a description of a classroom experience which led to further development of the original version of the game and some general insights about game-building.

An Application of System Dynamics to the Construction Management of a Major Building
Jean-Claude Huot, Yves Sylvestre

Abstract: In the past, the most popular computer models for the construction management of major buildings were large models based on the graph theory and their consequent discrete event simulation on the mainframe computer to have a view of the operational level. We think that in the future if we want to remain competitive on the world market the trend will be the use of small system dynamics generic models in relation to micro-computers at the strategic management level that can generate the reference modes i.e. the project control baselines.

Bringing Systems Thinking to a General Audience
Allan Jenkins

Abstract: The long term success of System Dynamics is largely dependent upon the dissemination of systems thinking to a considerable segment of the general public. A strategy for exposing a non-academic, adult audience to the basic characteristics of systems is developed, using the ADAPT Learning Cycle, System Dynamics, and the Social Fabric Matrix.

An Analysis on the Impact of the Population Control on Chinese Economic Development
Liu Jiaoliang, Yin Liuying, Liu Yongkang

Abstract: China has the greatest population in the world. The impact of the population on Chinese economic development is great. Based on Chinese National Economic Model NATN3, the relationship between the population control policy in China and Chinese economic development are obtained by simulation of the policy analysis.

System Dynamica Generalized Modeling for Forecasting Multiproduct Substitution
Zhao Chong Jie

Abstract: The System Dynamics Generalized Substitution Modeling is presented. This modeling considered the influence factors of circumstance by introducting action function. The methodelogy is based on the System Dynamics with econometrics, combining three postulates in product substitution and decomposing multi-product into several two-product substitution. Parameter estimation, which existed in all System Dynamics Modelings, is one important but still unsolved problem. Now this problem has been solved in our paper by orthogonal simulation, it is based on the orthogonal theory and generalized least squares (GLS)

Disaggregating a Simple Model of the Economic Long Wave
Christian E. Kampmann

Abstract: A multi-sector, input-output version of Sterman’s simple Long Wave Model is developed to investigate the validity of the capital self-ordering theory for a more realistic system with diverse capital types. Simulation experiments with varying capital lifetimes and input-output coefficients tend to reproduce the characteristic fluctuations in capital production, caused by self-ordering, with a period in the 30 to 70 year range. However, complex patterns of oscillation with wide variance in period can emerge, explained by varying dominance of self-ordering loops. The analysis thus confirms the destabilizing effect of self-ordering and its significance for long term fluctuations while raising issues and generating new insights about the-long wave.

System Dynamics in Urban Transportation Planning and Policy Analysis
Indra K. Khanna, N. Singh, Prem Vrat

Abstract: A simulation model of the passenger transportation system is presented. The model has been built in order to carry out a series of simulation experiments. The purpose of these experiments is to compare the effects of sore transportation policies on road congestion, modal-split, air pollution and transportation fuel consumption. System dynamics principles have been used for simulating the model. The statistics of Delhi urban area have been used to calibrate the model.

A Microcomputer Workshop Exploring the Dynamics of Arms Races
David P. Kreutzer

Abstract: This microcomputer workshop is being developed to encourage exploration, testing, and discussion of the impact of alternative arms-building policies. The model allows participants to adjust parameters that reflect a number of psychological, technical, and political factors. For example, participants can represent one country’s tendency to overestimate the strength of the other and underestimate its own strength.

Before releasing the model to the public, we are reviewing its conceptual soundness and its educational effectiveness to be sure that it reflects empirically supported technical, psychological, and political realities. The presentation of this paper and the early versions of the workshop are part of this preliminary review process.

Information Network and Risk Management
Hironori Kurono

Abstract: With a new information system, the “order-production-distribution” system can be managed as a whole in terms of corporate performance. But there is a possibility that such a system can be damaged easily from degraded information conveyed through an information network. This paper is concerned with an approach to dealing with degraded information in light of risk management with the system dynamics philosophy.

A Model of Burnout in the Work Place
Ralph L. Levine, Mary Van Sell, Beth Rubin

Abstract: Burnout is a problem associated with work in social service organizations. It is characterized by loss of energy, negative attitudes, and decreased performance. This system dynamics model encompasses the literature on burnout and belongs to a general class of stress and motivational models which describe problems of alcoholism and sexual harassment in the work place, etc. The gap between performance and professional expectations generates physical and psychological fatigue, which decreases involvement and performance. Supervisors frequently ignore the workers’ problems, but will initiate structure when quality is perceived to decrease. The gap between expectations and performance may account for burnout initially, but cannot account for maintaining burnout after expectations decrease. Learned helpless may be the mechanisms that sustains burnout.

Finding Qualitative Behavior Modes: The Use of Interval Analysis to Perform Sensitivity, Stability, and Error Analysis on Dynamic Models
Weldon A. Lodwick, Ralph Levine

Abstract: A method is described and illustrated for explicit incorporation of and computation with ranges of initial conditions, functions, and parameter values in dynamic models using interval analysis. This approach is neither a statistical nor fuzzy set analysis but instead utilizes interval arithmetic which is particularly well suited for computerization. When a dynamic model is couched in interval analytic terms, ranges of all possible solutions are generated allowing not only an analysis of ranges of behavior modes but for sensitivity and stability analysis to be performed as a natural part of the model. Moreover, uncertainties such as specification, numerical method (e.g., numerical integration), and roundoff errors can also be analyzed in conjunction with or separate from the interval dynamic model.

Leverage and the Performance of Electric Utilities: How Feedback Assumptions Affect Policy Conclusions
James M. Lyneis

Abstract: Many electric utilities have a heavily debt-laden capital structure. A number of factors have contributed to this situation, but chief among them is the theory that increased debt improves a corporation’s earnings per share. This theory is derived from a relatively simple financial model which relates earnings per share, capital structure, interest costs, and income. Using a more comprehensive model, this paper shows that reducing debt as a percentage of capital structure can improve the interest coverage, earnings per share, and market price per share of electric utilities.

Dynamic Scheduling of Flexible Manufacturing Systems
Clarence J. Maday

Abstract: Mid-volume, mid-variety operations characterize flexible manufacturing systems (FMS) or job-shops found in most factories. Profitability of FMS depends upon effective scheduling of material flow, machine use, staffing, and buffer capacities. Many systems adjust to changes in demand and equipment failure in the long term. In the short term, however, large changes may occur in inventories, staffing requirements, and machine utilization. In general, these large changes reduce production efficiency and profits. An approach is demonstrated for attenuating or eliminating changes or swings in a system when there occurs some abrupt change. Delays and delay parameters in the system model are adjusted, subject to practical constraints, to produce a smooth and rapid transition after the change. A simple econometric model is used for illustration. A symbolic and algebraic manipulation language is required to implement the approach.

National Development Policies for Developing Countries
Purnendu Mandal, Eric F. Wolstenholme

Abstract: The work described in this paper is an extension of earlier work by the same authors on analysis of national development planning. A brief description is presented here of the system dynamics model developed for this earlier work as a basis for explaining its recent application to development policy design. A taxonomy of development policies is presented and the results of analysing seven policies, within an adaptive model framework, are presented, which are aimed at improving and achieving both growth and equity. Each policy is examined under conditions of continuous proportional control and discrete control based on a sector criticality.

Volume II

A Conceptual Framework for Modelling the Dynamics of Environmental Systems
I. Moffatt

Abstract: A conceptual framework for modelling the dynamics of environmental systems is presented. It is argued that apparently stable systems can evolve via bifurcation when critical thresholds are exceeded. When a system is forced further away from equilibrium dissipative structures emerge. These dissipative structures are characterized by stochastic, non-linear feedback mechanisms which have the capacity to transform an apparently stable environmental system into a relatively more complex one which evolves. Some examples of these structures are simulated using system dynamics and the implications for further research are discussed.

Predictability and Forecasting
Foster Morrison

Abstract: Forecasting for complex nonlinear systems has proven to be elusive. Investigators have assumed the causes to be too little data and overly-simplified models. Recent studies in climatology reveal that nonlinear systems behave in ways quite different from the linear or static systems of traditional science and engineering. The behavior of nonlinear systems can be cyclical or essentially stochastic and usually is a mixture of both. New techniques, such as “attractors,” are being devised to facilitate analysis. Methodologies must be applied with due consideration to the structure of the system under investigation.

Chaotic Behaviour in a Simple Model of Urban Migration
Erik Mosekilde, Steen Rasmussen, Henrik Joergensen, Flemming JaIler, Claus Jensen

Abstract: By analysing the dynamics of a simple problem of urban migration, this paper illustrates how chaotic behaviour can be internally generated even in a relatively small (4-level) System Dynamics model.
Two different groups of minority families are considered to move around between three sectors of a city. This migration occurs in response to changes in certain social indicators which we take to be related to the number of families already living in the respective sectors. Type I families, for instance, prefer to live in areas with many households of the same kind and tend to avoid neighbourhoods with many type II families. Type II families, on the other hand, although also they like to live together, are at the same time attracted to areas with many type I families.
For normal parameter values, this system has an unstable equilibrium point. In base case it exhibits a limit cycle behaviour with the non-linear limiting factors associated with a slowing down in the rate of emigration from a certain sector as the number of remaining families approach zero. We show how the system develops through a Feigenbaum cascade of period doubling bifurcations as the inclination of type II families to move into areas with many type I families is reduced by. 15%. By calculating the largest Lyapunov exponent for the system we finally show how the chaotic behaviour is quantitatively distinguishable even from the most complicated limit cycle behaviour.

A Simulation Model for Corporate Planning in a Steel Plant
R.M. Narchal

Abstract: A Simulation Model for Corporateing Planning has been designed for a Steel Plant based on System Dynamics principles. This Model has been designed for Material flow that takes place through a group of 12 production shops arranged in six stages of production. The Model requires a time variant input of Demand of 17 categories of finished steel products and 3 categories of Raw materials. The Model generates behaviour of various objectives based on the assumptions of the environment. The Model can be used for simulating the impact of various strategic policy decisions on the corporate objectives. The Model also guides the management in designing their long term investment policies related to expansion, modernisation and debottlenecking. 

A System Dynamics Model for Corporate Planning for an Engineering Company
R.M. Narchal

Abstract: This paper describes the design and application of a System Dynamics Model in simulating the future of an Engineering Company. The stress has been given in this paper to explain the application of System Dynamics principles in designing long range policies of the company. The Model is being used by the company in testing various strategies to be adopted by the management related to new projects for expansions and modernisation by simulating the impact of these strategic decisions on the objective variable. The Model assists the management in designing their long range policies to achieve the corporate objectives.

Dynamics of Dental Care in the Netherlands: A System Dynamics Approach
G.O. Nijland, J.H.G. Klabbers, G. J. Truin, A.J. M. Plasschaert

Abstract: During the last five years a system dynamics model of the dental health care system of the Netherlands has been developed.The model consists of six submodels, capturing the major demographica1, pathological, psychological, sociological and economical processes of supply and demand of dental care. Two income-categories differentiating between two classes of insurance (“Sickfund” and “Non-Sickfund”), and six age-categories are distinguished. The model comprises ten types of dental treatments. Alternative policies with respect to restoring the lost equilibrium between supply and demand of dental care are tried out, and compared with the base-run. Dependent on the considered time-horizon, and the interests of different parties (dentists, dental students, dental hygienists), different policy-scenario’s turn out to be more attractive in redressing the balance.

A Dynamic Model of the Atlantic Salmon Fisheries Under Distant and Home Water Harvesting
Lars Olson

Abstract: This paper uses a dynamic model to study the effect of distant and home water fishing on the Atlantic salmon fisheries. Under open access, capacity in each fishery oscillates due to overfishing and adjustment lags in capital investment. It is shown that development of a feeding ground fishery imposes significant costs on home water fisheries. In a regulated environment, joint operation of the two fisheries can result in higher total catches and profits than when a moratorium is placed on feeding ground fishing.

Using STELLA and System Concepts to Teach Microeconomics
Steven Peterson

Abstract: Despite the power of our framework as a tool for learning, system dynamics has yet to penetrate into the economics discipline. A different approach to dissemination of system dynamics into the microeconomics mainstream is presented. In contrast with the traditional product-focused strategy, the new approach uses microeconomic theory as a context for the development of student modeling skills. The approach relies heavily on the STELLA software. It is embodied in a book for introductory and intermediate microeconomics students. The general specifications and design of the approach are presented. To illustrate the approach, a sample laboratory session from the book is provided. 

An Analysis of Congressional Process based on the Work of Karl W. Deutsch: A System Dynamics Model
Sonja C. Powell

Abstract: In The Nerves of Government (1963), Karl W. Deutsch postulated the crucial problems of “steering” and of the “creative intelligence function” – the ability to invent and carry out fundamentally new policies to meet new conditions, the ability to combine items of information into new patterns so as to find and recognize relevant new solutions – that increasingly confront government institutions and that constitute an essential aspect of the decision- and policy-making processes on which the political system may depend.
This paper is an initial effort to conceive a System Dynamics (S/D) model of the U.S. Congressional system from this perspective, to promote further investigation of Deutsch’s work in this area, and thus to effect appropriate change in Congressional institutional structure and function in this respect.

Packaged System Dynamics Models
Alexander L. Pugh. III, D. Ross Hunter, Craig A. Stephens

Abstract: One constraint on the growth of System Dynamics as a methodology can be removed by enabling non-professional users to make use of System Dynamics models with reduced professional involvement. Such use requires that models be disseminated in packaged form, that is, with supplementary software that gives English-language access to the model, guides the user in its intelligent use, and performs automatic analysis of simulation results. A new generation of the DYNAMO simulation language contains tools that assist the model builder in the packaging process. Experience has shown that while the benefits of packaging are considerable, it is easy to underestimate the effort involved.

Developing Nation: A System Dynamics Model
John M. Richardson Jr.

Abstract: This paper describes a model of a prototypical developing nation. The purpose of the model is to understand why violence and violent repression are so pervasive in the development process. Further it is intended to show how violence affects and is affected by other aspects of development. The model, which is programmed in micro dynamo, has three sectors, POPULATION, ECONOMY, AND GOVERNMENT. Preliminary results show that fluctuations in economic growth can lead to outbreaks of violence and deteriorating economic performance.

STELLA: Software for Bringing System Dynamics to the Other 98%
Barry Richmond

Abstract: A revolutionary new piece of software called STELLA is introduced. STELLA-which stands for Structural Thinking, Experiential Learning Laboratory with Animation — is a system dynamics “expert system,” embodying expertise in the areas of computational and structural logic, conceptualization, equation formulation and model analysis. STELLA is designed to facilitate efforts to bring the system dynamics framework to a much broader audience. The software enables even those lacking computer experience or a quantitative orientation to conceptualize, construct and analyze high-quality system dynamics models, while accelerating the development of an intuition for dynamics. Several STELLA-based products targeted at audiences in both formal education and business are described. 

Forecasting the Demand for a New Drug in a New Market: When History Does Not Repeat Itself
Mark Rose, Phil Merk

Abstract: The past offers few guidelines for forecasting the future of a drug in a new therapeutic category, but a systems dynamics model that counts patients instead of prescriptions can help predict demand for the product.

Poverty, Hunger, and Development Policy
Khalid Saeed

Abstract: This paper attempts to explain the pervasive problems of poverty and hunger of the developing countries in terms of the internal tendencies of their socicio-technical organization. The analysis is based on a generic system dynamics model of an agrarian economy which determines income distribution and food adequacy endogeneously but treats government policy as exogenous. It is suggested that the policies such as agricultural development, financial and technical assistance for the poor, and population control, that directly address the symptoms of the problems of poverty and hunger, may be defeated in the long run since socio- technical arrangements of the system favor persistence of poverty and vulnerability to food shortage. These policies will, however, be successful if concomitant efforts are also made to reduce income inequality through fiscal measures and to build up a food slack in the system through obtaining food calories uneconomically from cereal production.

Aids for Customizing Generic System Dynamics Models: A Community Development Example
Fahriye H. Sancar, Robert J. Cook

Abstract: The general considerations for the development and customization of a generic system dynamics model for rural community development are presented. A preliminary version of a generic model is presented. Alternative customization strategies based on problem complexity as perceived by the community are discussed. The customization involves generating a network representation of the problem using a modified version of interpretive structural modeling and a pattern transfer procedure to enhance the generic model. The entire procedure is based on cognitive criteria to overcome human information processing limitations; to provide a rational and systematic approach to the simplification of problem complexity, and to promote a shared understanding of the problem situation among the participants.

Cognitive Criteria for Structuring System Dynamics Models
Fahriye H. Sancar, Robert J. Cook

Abstract: This paper discusses the development of cognitive criteria for use in guiding the problem definition phase of System Dynamics modeling. The System Dynamics modeling process is presented as currently defined in the literature. The problem definition phase of the process is then isolated because of its overriding influence on model structure. Topics relating to information, information processing and group decision making are discussed and the shortcomings of human judgment and inference are identified. These shortcomings are related back to the tasks required for problem definition and criteria are identified which can serve as guidelines for the development of cognitive aids for structuring System Dynamics models. The paper closes with a brief discussion on operationalizing the concepts of cognition, creativity and social interaction as tests of the relative value of these criteria.

An Evaluation of the Management of Stocks in a Chemical Company
H.Sedehi, P.Verrecchia

Abstract: The present article describes an example of the application of the MDS approach (Modelli Dinamici per Strategie – Dynamic Models for Strategies) to the study of criteria for a supply policy and for a consequent economic evaluation of the different supply policies which may be adopted. The aim of the study is limited to an evaluation of the direct economic effects of the different hypothetical policies, excluding those associated with the market and with different production steps. The results of a series of simulations using the model are presented along with an outline of the economic benefits deriving from the adoption of a “tight-rein” stocks policy carrying a reasonable level of risk.

System Dynamics, Mental Models, and the Development of Management Intuition
Peter M. Senge

Abstract: This short paper is intended to stimulate thinking and hopefully more serious efforts toward understanding how systems thinking tools can most effectively catalyze the development of management intuition. This effort draws from an on-going research program, the program in Systems Thinking and the New Management Style, aimed at advancing systems thinking as a practical tool for developing a more wholistic, long-term, and creative (as opposed to reactive) orientation in organizational leadership. The program involves a network of organizations, many of which have been pioneers in developing more visionary nonauthoritarian work environments. The organizations serve as laboratories to explore innovations in management education. The central premise in these explorations is that the localization of management responsibility will require transforming an organization’s capacity to learn, so that local control and understanding can advance together. The research at M.I.T. is focused on developing a library of “generic structures,” relatively simple models of organizational dynamics that recur in diverse settings, which can provide a foundation for that education. This paper discusses basic assumptions about learning that underlie the program.

The Financial Dynamics of Small Business Growth and Survival
Raymond C. Shreckengost, Ray Thompson

Abstract: The failure rate for small businesses is extremely high. Inadequate financial control is a major contributory factor.

The pattern of interactions between a fluctuating sales rate and the levels of receivables, payables, inventory and cash is highly complex. A model is described which simulates the experience of a small business in managing current assets and liabilities. It demonstrates the way in which liquidity changes over the operating cycle, how cash flow, and profit are dynamically different and how the firm’s need for financing is constantly varying. System Dynamics is a useful tool for understanding and improving the financial management of small firms.

What is Economic Energy?
Georg H. Sichling, Petra Sichling

Abstract: The law of the conservation of energy has great practical importance in physics. Is a similar law applicable to economics? For an answer, System Dynamic-related methods were applied to the economic Two Sector Diagram. They show the forces of Supply and Demand operating on the economic flows of money, goods and labor. The demand can be expressed quantitatively by a utility function, which shows that economic forces and flows are informational concepts. Consequently, the two main forms of energy in any economic system are code transport and numerical code values. Only the latter are essential.

Systems Simulation for Regional Analysis. An Application of Matrix Input-Output to Istmo De Tehuantepec
Jorge Silva-Midences

Abstract: This work is the application of systems simulation to regional analysis and its constains the philosophy and approach of the report dealing with economic growth in the Susquehanna River Basin prepared by Battelle Memorial Institut-Columbus Labs but a new look: the subsystem Input-Output matrix into the framework and with the demands (usually exogenous variables) like endogenous and with no necessarily fixed technical and capital coefficients over the time and its resolved by no conventional methods The application was in the Istmo De Tehuantepec, México.

A System Dynamic Model of Blast Furnace for Project Evaluation
Gopal Sinha, Goutam Dutta

Abstract: Production of pig iron in a blast furnace is a complex phenomenon. This paper identifies the major interdependencies forming a feed back structure, leading to a system dynamic model of blast furnace. The model has been used to evaluate projects on an overall and long range basis.

A Skeptic’s Guide to Computer Models
John D. Sterman

Abstract: Increasingly, citizens and policymakers are faced with the results of computer models and must make judgments about the model’s relevance and validity. How can such decisions be made in an intelligent and informed manner? Can modeling be made accessible to the ordinary person or will it remain the special magic of a technical priesthood? This paper offers tentative answers to these questions. It first highlights the characteristics and capabilities of computer models such as are used in foresight and policy analysis. The advantages and disadvantages, uses and misuses of formal models are presented. What are the fundamental assumptions of the major modeling techniques? How appropriate are these techniques for foresight activities? What are the crucial questions a model user or model consumer should ask when evaluating the appropriateness and validity of a model? The paper is designed to help model consumers peek inside these computerized black boxes.

STRATEGEM-2: A Microcomputer Simulation Game of the Kondratiev Cycle
John D. Sterman, Dennis Meadows

Abstract: The economic crisis of the 1980s has revived interest in the economic long wave or Kondratiev cycle. This paper describes a simulation game which demonstrates how long waves can arise. The game vividly shows how the investment and production policies pursued by individual firms, though rational from the point of view of the individual actors, interact in the context of the whole system to produce “irrational” behavior–periodic over and under-expansion of the economy. The game illustrates te theory of capital self-ordering developed in the System Dynamics National Model Project. The paper describes the structure and rules of the game, including protocols for operating the game. The game can be played manually or on personal computers. The paper includes virtually all the materials needed to play the game, in either the board version or the personal computer version. The game board, record sheet, and a listing of the computer program (in BASIC and suitable for IBM PCs) are included.

An Experiment to Evaluate Methods for Estimating Fossil Fuel Resources
John D.Sterman, George P. Richardson

Abstract: Estimates of petroleum and natura1 gas resources vary substantially, both over time and across estimation methods. This paper develops a simulation model of global oil resources to evaluate different resource estimation techniques. Protocols for the Hubbert life cycle and USGS geologic analogy methods are developed and applied to synthetic data generated by the model. It is shown that the Hubbert method can generate an accurate estimate as early as twenty years before the peak of global production, but the geologic analogy approach overestimates the true resource base over the life cycle of the resource. The results show the applicability of simulation and the synthetic data approach to the problem of evaluating forecasting methods.

The Application of System Dynamics to the Analysis of GERT Networks
Feixiang Sun, Shaozhong Jiang

Abstract: The relationship between system dynamics (SD) .and other research areas is a subject of universal interest. Attention of the paper is to the possible links between SD and GERT (short for Graphical Evaluation and Review Technique).
A new simulating design for a class of GERT network is proposed and the equivalence of GERT networks to SD models established, thus a new solution to the network obtained.
According to the approach, a GERT network is converted into a SD model in which levels are used to model the random variables associated with the network, such as the expected time to realize a node and the probability that it is realized. The resulting basic model can be used for calculations of any parameter of interest in the analysis of GERT networks.
Its advantages and implications are discussed.

Sensitivity of an Ecological System Dynamics Model to Combination Parameter Changes
Johan Swart

Abstract: The question as to how sensitive a System Dynamics Model is to combination parameter changes in general is a complex one. A recent technique due to J.W. Hearne enables one to find the combination of parameter changes to which the system is most sensitive. The technique is applied here to an ecological model and a perturbation of the system along the most sensitive direction in parameter space is compared with single parameter perturbations of the same magnitude. The method may be useful in population control.

Using STELLA to Create Learning Laboratories: An Example from Physics
Peter Vescuso

Abstract: STELLA is a new software program that has been designed to bring system dynamics to broad-based audiences. A series of books is being developed to disseminate STELLA and system dynamics into one of these broad-based groups — the college educational market. The books center on a “learning laboratory” approach to learning. This approach uses STELLA as the basis for an experiential, learner-controlled learning process. One of these books, “Learning Laboratories In: Physics,” is described in this paper. The book contains three sections: mechanics, thermodynamics and electromagnetism. Within each section are five to six lab sessions. The lab sessions progress from simple structural models of fundamental concepts to more complex models that integrate the work from the previous labs. A sample session on Newton’s laws is presented to illustrate the approach.

The Analysis of the Accumulation Rate in China
Qifan Wang, Xiaoting Wang

Abstract: The purpose of this paper is to identify the main important variables and quantities which interact with the accumulation and accumulation rate, and then to analyze the intrinsic relations among them which are important in accumulation rate decisionmaking. Especially we concentrate on the relations among the accumulation rate and energy, total consumption and effectiveness of accumulation.

Studying Technological Progress and its Impact on Economic Growth in China
Qifan Wang, Yang Xin Nong

Abstract: In this article, we analyze the tendency of technological development and the possibility to catch up with the advanced level in China. The technology progress has been playing an important part in the future, in turn, the economic growth has significant influence on technology level. According to the policy test results, we give the proposal and get the conclusions about developing technology in China. 

Stimulations and Obstructions to the Economic Growth of China
Qifan Wang, Xiaobo Zhang, Xiaoting Wang, Xingnong Yang, Yuqing Xiu

Abstract: This paper tries first to put some key factors together in an integrated system (The System Dynamics· Socio-Economic Model of China), and then reveals the dynamics of stimulations and obstructions. The stimulation results of the model show that the stimulation function of different factor changes with time, and at different times, different stimuli will be the leading factors. Overpopulation, shortage in energy supply, transportation backlog, and severe pollution are all serious problems troubling China currently and in the future. The paper also studies some possible ways to remove those barriers.

MRP and JIT: Teaching the Dynamics of Information Flows and Material Flows with System Dynamics Modeling
Merrill E. Warkentin

Abstract: System Dynamics modeling is used as an instructional aid for the teaching of production and inventory management techniques. The roles of Material Requirements Planning (MRP) and just-in-time (JIT) systems in production and inventory management are presented and discussed. By modeling these manufacturing systems, the student can acquire an appreciation of the dynamic relationships between the elements of each system. Some elements of the Dynamo models of these systems are presented. The future opportunities and research needs are discussed.

The Irregular Disturbance of Control Policy in a Dynamic System
Frederick P. Wheeler

Abstract: The control policies of a dynamic system are manifest in the rates of change of state variables or levels. Irregular variation in a control will introduce random delay of the flow into the related level. Of particular interest are exogenous rapid disturbances to the rate constants of feedback loops. These disturbances lead to small random delays which build up as the system develops in time. A statistical description of this process can be obtained for a simple feedback loop as a function of the spectrum of the time series of exogenous disturbances. An understanding of this behaviour is useful for modelling stochastic systems.

Algorithmic Control Modules for System Dynamics Models
E. F. Wolstenholme

Abstract: The purpose of this paper is to describe a proposed framework for policy analysis and design in complex systems based on the transfer to such systems of control modules developed for simplier and more easily quantified systems.
The framework is demonstrated by outlining the development of a dynamic allocation algorithm within a system dynamics model of an engineering system and describing its application in a much larger scale amanagement system. A generalised form of the algorithm is presented based on this experience which serves to highlight its isomorphic qualities.
It is suggested that this framework provides an integrated approach to structural policy analysis in complex systems which can also be used to generate significant insights and perspectives into both the physical and control structure systems.

A Methodology for Qualitative System Dynamics
Eric F. Wolstenholme

Abstract: This paper is based on the premise that there is a need to formalise the procedures used in system dynamics. outside the area of computer simulation analysis, to create a stepwise procedure for systemic analysis. This need arises within the subject when applications encroach on areas where quantification is difficult or unacceptable or when a full qualified analysis is not an economic proposition or limited by time factors.
The paper suggests that qualitative system dynamics should be propogated through the medium of a general framework for system enquiry. The need for general systemic methodologies is examined and the major elements of system dynamics are used to formulate the basis of such a methodology. This formulation presents a means for qualitative problem analysis in terms of the organisational structure and process control structure of systems using generally proven results developed from quantitative system dynamics models.

Some Applications of the Macro-socioeconomic Model-SD to a Province of China
Jien-Chung Wu, Huan-Chen Wang, Mao-Kang

Abstract: Northwest will be a strategically key region for the economic: development of China in the early next century. The Macro-soeioeconomic Model-·SD for a northwestern province (abbreviated to MASEM-SD) has been built. The main purpose of the model is to research into the internal and external conditions and the proper policies which are necessary to realize the great goal in 2000 set by the People’s Government of the province. The model further exhibits prospects for the province in the next century and put forth some potential problems that should be paid attention to.

KBSIM- A Knowledge Based Tool and its Use in Model Preprocessing
David F. Young

Abstract: This article describes a tool called KBSIM and its use in model preprocessing. KBSIM consists of a knowledge acquisition system and a systems knowledge modeler which translate the responses of human tutors into structural models and facts housed in a system knowledge base. KBSIM accesses and manipulates the knowledge base through an iterrogation engine to produce information on the structure and function of a described system. KBSIM’s knowledge base is a hierarchical set of matrix mapped structural models of a system to an expert level of detail. The tool is useful in integrations and strategic management, technology selection and systems modeling and analysis.

A Simulation Model for Managing the Parking Systems of Kaohsiung: A System Dynamics Approach
Showing H. Young, Tai Ma, Chien M. Chao

Abstract: This paper tries to develop a simulation model for managing the parking systems for the city of Kaohsiung . The system dynamics methodology is employed to formulate the model. The causal structure is compartmented into five sectors: (1) the urban activity/travel sector, (2) the modal split sector, (3) the parking sector, which comprises parking supply and parking demand subsystems for both curb and off-street parkings, (4) the traffic/parking interaction sector, and (5) the financial management sector, which attempts to develop causal links between the revenue sources and expenses of the parking system. The model provides the city administrators a policy lab for parking systems management.

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.

CONFERENCE ABSTRACTS

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.