The System Approach Framework Formulating the economic component The WADBOS example Denis Bailly Université de Brest,

1. The System Approach Framework Formulating the economic component The WADBOS example Denis Bailly Université de Brest, UMR AMURE Center for the Law and Economics of the Sea www.spicosa.eu

2. The SAF Based on a system approach, the System Approach Framework (SAF) is a multidisciplinary assessment framework developed : • to explore the dynamics of Social and Ecological systems and potential consequences of alternative policy scenarios, • with a balanced consideration of the Ecological, Social and Economic sectors of these Systems, • to conduct participatory co-construction and deliberation over “what if?” scenarios It has been developed and tested in support to the implementation of environmental sustainability agenda in the coastal zone (WFD, MSFD, Habitat directive, Common Fisheries Policy, Common Agriculture Policy…)

3. ..so why is it difficult to model social and ecological systems? socio-ecological systems are difficult to model S-E systems demonstrate: • Non-matching scales • Surprises (non-linearities) • Interconnection with other systems • Memory effects • Choke points

5. Implementation of system approach to : - Modify the feedback loops path that are at the core of the coastal systems dynamics by placing at the core and considering public policies as control factors over the fate of systems, by developing a knowledge more integrator of ecological, social and economic dimensions, presented under scenarios approach, and based on a deliberative approach of the interface between scientific knowledge and public policies for issues identification as well as for the evaluation of science’s products (production).

6. Approach - Link ecological, economic and social systems • take into account dynamics through feedback loops - Scenarios based analysis (control factors) Procedure: a) (Policy) Issue definition (co-construction and co-definition of the issue with stakeholders) b) System design (structure and components of the conceptual model) c) Mathematical formulation (updated conceptual model) d) Scenarios implementation e) Integration of knowledge and provision of deliberative and decision making processes

7. From Engelen, 2003 Policy Issue definition Stakeholders’ mapping and analysis of their system’s perception Designing/Building the system • Conceptual model • Mathematical model • System assessment Visualisation of scenario outputs for deliberation Back to design….

8.  ‘A System is a configuration of parts connected and joined together by a web of relationships to serve a particular purpose’; Ex. a car, a plane, the human body, an organization, … , an economy, a regional system, a coastal system.  Joining and integrating this network of relationships create Emergent properties of the whole (that is more than the sum of parts);  The parts of the system can be systems of their own, and systems can be the parts of bigger systems. They fit in a hierarchy. Ex. engine of the car < car < car in the transportation system; Ex. fisherman in the fishing community < fishing community< fishing community in the global economy; About systems

9. General Structure of Systems • System approach relies on the mathematical formulation of cause/effect relations, the objective being to assess how the system evolves over time (stability, ‘overshooting’, thresholds effects) • State variables representing successive (over time) states (stocks, levels) of systems • Integration of instantaneous variations through time • Number of inhabitants, pollutants concentration, number of enterprises, … • Rate of change representing activities and processes leading to changes in the systems’ state. • Decision rules, continuous function • Investment rate, growth rate,.. • Interactions between variables determining action rules • Positive, negative feedback loops • Limits and boundaries within those interactions take place

10. Analysis of living organism as a system (A classic case: the energy allocation in a living organism and asymptotic growth (von Bertalanffy)) Kooijman (2000)  Behavior rules (laws) • Energy fluxes (processes) • Energy accumulation (state variables) • Feedback (causal)  Boundary • Environmental conditions are represented by forcing variables • If the organism influences its environment, system’s limits will take into account some other processes and state variables  Mathematical formulation: integration of differential equations  Emerging property: asymptotic growth, reproduction effort

11. Extension to population dynamics • Life cycle and feedback loops • Mathematical formulation G: Growth Rate From Bald et al. (2006)

12. History of systems analysis and systems dynamics • Forrester 1961, Industrial Dynamics • von Bertalanffy 1968, General System Theory • Forrester 1969, Urban Dynamics • Forrester 1971, Principles of Systems • Meadows/Randers/Meadows 1972, 2004, Limits to Growth « overshoot » (overpassing the carrying capacity of dynamic system) under 3 conditions (analysis of socio-eco-systems dynamics) • Morecroft 2007, Strategic Modelling and Business Dynamics Limits of growth: analysis of socio-eco-systems dynamics, consequences of existing limits, importance of non linearities

13. System approach examplethe WadBOS case illustration The Dutch Wadden Sea is an unique natural reserve, a shallow sea, but also an area where people live, work and recreate. Conflicts of interest! Need for Policy and Management! (From Engelen 2003)

14. The WadBOS economic subsystem Major economic activities are Shell mining, Fisheries, Recreation, Shipping of goods & people, Industry, Gas-mining and Electricity. Most activities carried out at sea are an input into the local industry and cause directly or indirectly the need for transportation of goods and people

15. Time horizon 10 Years: jan. 1997 – dec. 2006 Coupled Socio-economic and Natural- biological processesat 3 temporal scales Social, Economic Natural, Biological 12 hours; month; year month; year

16. The Mussels Fishery Macro economic nature = Mussels fishery is considered as one single aggregated vessel. Other economic activities have the same formulated structure. The solely economic system is considered here. The ecological system is considered as a black box and the economic activity is considered under the private angle (decisions are based on private choices, public and social choices as well as the social dimension will be integrated and considered in the next step of the formulation through the coupling).

17. INFRASTRUCTURE: (stock) Total infrastructure has units horse power. It represents the total capacity of the fleet. Infrastructure has a lifetime and then depletes at a constant rate per month. Investments increase the infrastructure. The maximum is set at 100,000 HP. INVESTMENT: (flux) A certain fraction of the profits can be invested in infrastructure if the profits outweigh the costs due to employment, taxes and maintenance of the infrastructure. EMPLOYMENT: (stock) Employment depends on the total infrastructure (man months needed to staff units of infrastructure) CATCHES (flux) (Q) result in the fishing effort (hours per month) over Mussels population through a catchability coefficient (per hour). Monthly catches accumulate and are limited by TAC. Once TAC is reached there's no more fishing (fishing mortality = 0). TURNOVER (TO) is the valuation of Catches according to the price per ton of mussels (P). Mussel price decreases when supply increases (where  is the price elasticity). ADDED VALUE: Added value is assumed to be a fraction of the turnover. Added value is taxed by a tax rate. POLICY COST is related to the tax rate applied to added value. Assumptions • State Variables = stock • Processes = flux

18. 3 Policy Options Apply a TAC Catches Going for fishing (yield) Selling catches Limit in fleet size Apply a tax rate Added Value Increase in infrastructures Decison rule on investment « Investment » Infrastructures

19. Dynamics of the InfrastructureDepreciation Infrastructures have a limited life span and as consequence are depreciated along this expected life time. Feedback loop

21. Investment: a certain fraction of the profits can be invested in infrastructures (defined here as a shared of added value). Feedback loop

22. Adding Investment

23. + + Adding Investment

24. Adding Investment +

25. Adding Investment

26. Adding Investment

27. Change TAC Change fleet size +/- +/- Change tax rate +/- Feedback Loop and Policy options Positive feedbacks: if A increases, then B increases Negative feedbacks: if A increases, then B decreases - mussel population Ageing + catch - + infrastructure (fleet size) + + turnover investments policy cost + - + - + employment added value

28. Cause/effect Stock/flow Differential equation Conceptual Model and mathematical formulation

29. Feedback Loops

30. From Maes J.

31. Conceptual Model of the WadBOS coastal ecosystem From Maes J.

32. Updated Conceptual Model under the Extend simulation platform

33. Updated Conceptual Model under the Extend simulation platform

34. Going further in formulation: Formulate the profit and turnover formation, other policy options Investments are based on perceived future earnings rather than present earnings. That calls for expected catches and profits but also opportunity costs that will lead to decision rules (stay in or leave the business). Delays Improvement and Discussion

35. Improvement and Discussion Introduction to non monetary value by adding birds (eirds) to the system: assess new assumptions and explain how it can impact the economic system and its formulation. WadBOS case: eiders valuation • WadBOS case: people derive well-being from eiders • Bird watching: use value • Existence, bequest, altruistic value: non-use values • A hypothetical example inspired from literature1 is used here: CV survey has not actually been carried out • 1 Ahearn, M.C., K.J. Boyle and D.R. Hellerstein (2006), Brouwer, R., P. van Beukering and E. Sultanian (2008), Loomis, J.B., D. S. White (1996), MacMillan, D., N. Hanley and M. Daw (2004)

36. Adding eiders valuation

37. Adding eiders valuation

38. Spatialization of sources and impacts Build databases of model outputs (PCRASTER, etc.) Matrix of stakeholders, scenarios and indicators, with metrics defined by stakeholders Use EXTEND as a communication tool, not necessarily an operational tool The message of the WadBOS case is to start with simple models that integrate disciplines. Add detail later and only if it is necessary Integration of disciplines requires simpler, not complex, models. So contrary to common thinking, the more integration represented in the model, the simpler the model needs to be to allow for testing, detecting feedbacks, time delays and to allow for use by scientists from different disciplines or end users with different backgrounds. Improvement and Discussion

39. Conclusion 1/2 www.spicosa.eu System approach relies on the mathematical formulation of cause/effect relations, the objective being to assess how the system evolves over time (stability, ‘overshooting’, thresholds effects). • This supposes a multidisciplinary approach of interactions between eco and socio-systems • ► Definition of the policy issue with/by stakeholders • ► System co-construction and conceptual representations • ► Mathematical formulation: answer curves, meta-analysis, mechanist models • ► Construction of relevant indicators • ► Exploration of management and evolution scenarios

40. Conclusion 2/2 www.spicosa.eu  It’s rather a top-down approach, which primary objective is not to provide an operational tool to support decision making, but rather to explore the potential evolution of a system  It’s an iterative approach allowing sharing, discussing, improving the description and the understanding of a system  Output/visualisation must be set so that they contribution to increase communication with scientists and among stakeholders