Systems Thinking & Causal Loop Diagramming

1. Systems Thinking & Causal Loop Diagramming Simulation and Modeling Week 3 – Causal Loop Diagrams

2. Concepts of Systems Thinking • System Definitions : • A collection of interacting elements that function together for some purpose. • a group of interacting parts that share a common location in space, time and/or function • The systems approach is the study of systems that emphasises the connections among various parts that constitute a whole. • Systems thinking is concerned with ‘connectedness’ as well as ‘wholeness’ in problem analysis and solving. [Source: Senge, 1993] Simulation & Modeling Week 3 – Causal Loop Diagrams 2

3. A new way of thinking Emerging new way of thinking about business process that • Provides deeper understanding of inter relationships within an organisation and how all main aspects contribute to achieve organisational whole. • Appreciates both role of systems thinking and use of system dynamics notation • Uses systemic approach in corporate strategic planning and control Simulation & Modeling Week 3 – Causal Loop Diagrams 3

4. What is System Thinking • Systems thinking is the art and science of making reliable influences about behaviour by developing an increasingly deeper understanding of underlying structure. Simulation & Modeling Week 3 – Causal Loop Diagrams 4

5. Thinking in Circles • Abdel-Hamid’s article “Thinking in Cycles” states that “...(with) the rapid evolution of software engineering tools, techniques, and technology, managers must be prepared to boldly go where no one has gone before while virtually guaranteeing that their missions will meet with success”. • Similarly redesigning or re-engineering Business processes or investing in new technology is going to places where organisations have not been before! [Source: Abdel-Hamid, 1991] Simulation & Modeling Week 3 – Causal Loop Diagrams 5

6. System Thinking and System Dynamics System dynamics is a powerful, yet simple, methodology for developing deep insights into the working of various systems and providing microworlds for policy design. Over the years, system dynamics has emerged as one of the most powerful methodologies of social systems analysis and design. • Supports modelling Dynamic Behaviour: • Instances, Causes and Problems • Feed back loops and delays • Influence Diagrams Construction and Use • Systems Modelling using: • Influence Diagrams: • Stock and Flow diagrams Simulation & Modeling Week 3 – Causal Loop Diagrams 6

7. 7 Where does cause arise? Aristotelian causality • 4 types of cause contribute explain a phenomenon • 1. Material cause: the substance that made it so • 2. Efficient cause: the direct efforts that made it so • 3. Formal cause: the plan or agent that made it so • 4. Final cause: the ultimate purpose for being so ? ? Week 3 – Causal Loop Diagrams

8. 8 Where does cause arise? Aristotelean causality • e.g. Why does a house exist? • 1. Material cause: wood, bricks, mortar • 2. Efficient cause: the construction workers • 3. Formal cause: the blue prints • 4. Final cause: need for a house ? ? Week 3 – Causal Loop Diagrams

9. 9 Where does cause arise? • e.g. Community living next to an old paint factory is discovered to suffer from prevalence of lead poisoning • 1. Material cause: • 2. Efficient cause: • 3. Formal cause: • 4. Final cause: Week 3 – Causal Loop Diagrams

10. Week 3 – Causal Loop Diagrams

11. System Thinking Diagrams (STDs)(Causal loop Diagrams (CLDs) • Systems Thinking Diagrams are composed of only two components, elements and influences. • An influence also has a direction, indicated by an arrow, and an indicator as to whether the influenced element is changed in the same (S) or opposite (O) direction as the influencing element. Simulation & Modeling Week 3 – Causal Loop Diagrams 11

12. Use of Influence Diagrams • Influence diagrams are also known as causal-loop diagrams. A link from A to B is positive if a change in A produces a change in the same direction. • A link from A to B is negative if a change in A produces a change in B in the opposite direction. The direction of an arrow shows the direction of causation/Causality. • It SHOULD incorporate the principal performance influences of the system under study. Simulation & Modeling Week 3 – Causal Loop Diagrams 12

13. What are Causal Loop Diagrams (CLD) ? • Casual Loop Diagrams are cause and effect representations of structures and processes that have loops or feedback. • Causal loop diagrams show causality • There is an arrow going from population to death population deaths Week 3 – Causal Loop Diagrams

14. + A B D C Causal Links A influences B. If A increases, that will tend to increase B. If A goes down in value, that will tend to reduce B. C influences D. If C increases, that will tend to decrease D. If C goes down in value, that will tend to increase D. Week 3 – Causal Loop Diagrams

15. Polarity • Polarity : We can associate a direction of influence or polarity • + or s (same) indicates that an increase in the cause will lead to an increase in the effect • - or o (opposite) indicates that positive value of the cause will lead to a decrease in the effect + + population deaths population deaths - - Week 3 – Causal Loop Diagrams

16. Loops • A loop : occurs when arrows connect a variable to itself through a series of other variables • This example shows a loop from population through births and back to population. • There exists both negative (balancing) and positive (Reinforcing) feedback loops in SD problems population births Week 3 – Causal Loop Diagrams

17. Anatomy of a Causal Loop Diagram The ‘S’ means that the two variables move in the same direction, all other things being equal Causal relationship between two variables S Amount Eaten Hunger B O The ‘O’ means that the two variables move in opposite directions, all other things being equal Nature of loop. Indicates whether the loop is balancing or reinforcing Week 3 – Causal Loop Diagrams

18. System Thinking Structures (Archetypes) • The basic idea of structure(s) is to point out the influence one thing has on another. That is, how do things influence other things to change. • If I have two things, thing 1 and thing 2, there are only two ways one can influence the other. • As indicated in the diagram above, thing 1 can add to thing 2, as indicated by a "+" sign, thus increasing thing 2. • The alternative is that thing 1 can subtract from thing 2, as indicated by the "-" sign in the above figure, thus decreasing thing 2. Simulation & Modeling Week 3 – Causal Loop Diagrams 18

19. System Thinking Structures (Archetypes) • Let us examine the most common example (production -inventory) Sales adds to revenue. Even if sales decrease it will still add to revenue, just not quite as much as before. • On the other hand, if sales increases it will add even more to revenue. • The figure above indicates that product sales subtracts from finished goods inventory. If product sales increase it will subtract even more from finished goods inventory. On the other hand, if product sales decrease it will still subtract from finished goods inventory, just not quite so much. Simulation & Modeling Week 3 – Causal Loop Diagrams 19

20. f(parts + feedback) = 20 Feedback is critical in systems view • Feedback: The returning of part of the output of a system to be reintroduced as input (Webster’s) • (+) feedback reinforces change • (-) feedback counteracts change Week 3 – Causal Loop Diagrams

21. Reinforcing /Positive Feedback loops A reinforcing loop is one in which the interactions are such that each action adds to the other. Any situation where action produces a result which promotes more of the same action is representative of a reinforcing loop. • Examples : snow balls rolling down hill, population growth. • Change leads to further change in same direction • Growth enhancing • Potentially destablizing • Finite in extent Vicious cycles, bandwagons, self-fulfilling prophecy Population size ( + ) ( + ) Population growth ( + ) Simulation & Modeling Week 3 – Causal Loop Diagrams 21

22. Reinforcing /Positive Feedback loops • Diagram shows what happens in a typical savings account. • The principal in the savings account interacts with the interest rate and adds to the interest. • Interest rate is considered to be a constant in this example. Interest then adds to the principal. • This reinforcing action happens every so many months depending on the period over which the institution computes the interest. The SNOWBALL rolling down hill is your signal that the loop is a reinforcing loop. The SMALL GRAPH to the right of principle indicates that the growth of principal is exponential. Week 3 – Causal Loop Diagrams

23. Reinforcing / Positive Feedback Loops • It is denoted byR or + sign or with snow ball symbol. • Positive tends to run away leading to situations that are out of control. • Overall polarity of feedback loop is determined by counting the number of links that are opposite. • An even number of opposite(-) links implies positive feedback and an odd numberof opposite links(-) implies negative feedback. Causal relationship between two variables Beer consumption The ‘S’ means that the two variables move in the same direction, all other things being equal ( + ) ( + ) S Interest Balance BeerNut consumption R ( + ) S Week 3 – Causal Loop Diagrams

24. Reinforcing / Positive Feedback Loops • Phrases that characterize the phenomenon of feedback include : • “Snowball effect” – as it rolls down a mountain side, it picks up snow, its mass and circumference increase which causes the snow ball to grow even faster • As a political movement grows, its popularity and ability to attract support also grows • The exponential growth curve characterizes most positive feedback systems. World population, food production, industrialization, pollution all exhibit exponential growth Variable Time Week 3 – Causal Loop Diagrams

25. B A (+) (+) C (+) (+) D Examples: Positive Feedback Loops Invest- ment + + Industrial Capital ( + ) Production + • Plant A provides food that worm B uses • Worm B released nutrients that are then used by microbe C • Microbe C transfers nutrients to plant D • Plant D provides necessary shade for plant A Week 3 – Causal Loop Diagrams

26. Bank balance Health conditions ( + ) ( + ) ( - ) Interest added/month Poverty and desperation Natural resources (“natural capital”) ( - ) Human population Middle class living in urban core ( + ) ( + ) ( + ) ( + ) ( + ) Quality of public services Size of tax base ( + ) 26 More Examples of positive feedback ( + ) ( + ) ( + ) (+), if even # of (-) signs Week 3 – Causal Loop Diagrams

27. Economic Positive Loops + Investment Profits + + + Advertising Industrial Capital + Sales Production + + How many loops do we have ? Week 3 – Causal Loop Diagrams

28. Body temperature ( - ) ( - ) Sweat ( + ) Balancing / Negative Feedback loops • A balancing loop is one in which action attempts to bring two things to agreement. Any situation where one attempts to solve a problem or achieve a goal or objective is representative of a balancing loop. • Example : Self regulating temperature of the human body which enables it to maintain a relatively constant internal temperature called homeostatis • Phrases that characterize the phenomenon of feedback include : • Self governing, • self regulating, • self equilibrating, • adaptive all implying the presence of a goal. Simulation & Modeling Week 3 – Causal Loop Diagrams 28

29. Negative Feedback Loops • This is a negative or balancing. It is denoted by B or - sign • Positive tends to leads to a controlled equilibrium or steady state. • Negative feedback loops exist when there are an odd number of negative links in a loop. • The people there are, the more they die thus keeping the population low. + ( - ) population deaths - Week 3 – Causal Loop Diagrams

30. Negative Feedback Loops- Four Basic Elements • Desired state (goal) serves as a reference on which the system bases action and is determined externally. • Gap – this is the discrepancy between the goal and state of the system determined the magnitude and direction of the corrective action taken. • Action (rate) • System state (level). To minimise the discrepancy (gap) , the system initiates action to decrease (increase) the level. Week 3 – Causal Loop Diagrams

31. Balancing/Negative Feedback loops - Explanation The basic form of the balancing loop. • The desired stateinteracts with the current state to produce a gap. The gapadds to the action and the actionadds to the current state. The current state then subtracts from the gap. • The small clock to the right of the arc between action and current state indicates some time delay that it takes for the action to change the current state. As the current state gets closer to the desired state the gap gets smaller and smaller so it adds less and less to the action,which is adding to the current state. • Once the action has moved the current state to a point where it equals the desired state the gap is zero and there's no more addition to the action, so there is no more action. • The balance in the centre of the loop is your indication that the loop is a balancing loop. • Typical examples of balancing loops are driving from location A to location B, developing a skill, building something, fixing a problem, etc.

32. Body temperature ( - ) Hunger ( - ) Food Consumption Sweat ( + ) Bad behavior ( + ) ( - ) Fox population ( - ) ( - ) ? ( - ) Hare population Punishment ( + ) More Examples of Negative Feedback Loops ( - ) ( - ) ( + ) Week 3 – Causal Loop Diagrams

33. Example : Social Life CLD Desired time together + How many loops do we have ? + + # of invitations hrs/week together - pressure from boss + - + Quality of work average time for new work - # of mistakes - + time spent correcting mistakes Week 3 – Causal Loop Diagrams

34. Causal Loop Diagramming exercises • A good way to start is by brainstorming a list of all variables associated with a phenomenon. • Then, begin your causal loop diagram by selecting only those system elements that are causally related to each other. • Arrows between variables are used to indicate the direction of causality. For instance, if you have two variables, “amount of coal burned” and “amount of acid rain generated” an arrow would be directed from the coal to the acid rain. • Points of arrows are labeled with (+) or (-) sign to indicate positive or negative effect. A (+) means that change in the variable at the tail of the arrow leads to change in the same direction in the variable at the point of the arrow (i.e., if the one at the tail increases, then this necessarily causes the one at the point to increase). Important: when labeling, consider each pair of variables connected by an arrow in isolation from all other variables (completely ignore the other variables). Week 3 – Causal Loop Diagrams

35. Causal Loop Diagramming exercises • Determine the overall sign of a feedback loop by counting the total number of (-) signs at the end of the arrows within the complete loop. • The loop is a positive feedback if there is an even number of (-) signs (or no - signs). The loop is a negative feedback if there is an odd number of (-) signs. • Place a large (+) or (-) sign in the center of each loop to indicate the overall direction. Both positive and negative loops are typically embedded within large dynamic systems. Week 3 – Causal Loop Diagrams

36. Taking a Shower: The Movie Week 3 – Causal Loop Diagrams

37. Managing Water T in a Shower What do you think would happen in a more complicated setting, where you have to share the supply of hot water (critical resource) with someone/something else? Week 3 – Causal Loop Diagrams

38. Managing Water T in a Shower Water Temperature S Desired Temperature B O Tap setting T Gap (A-D) S Week 3 – Causal Loop Diagrams

39. System Dynamics: The Cartoon Week 3 – Causal Loop Diagrams

40. EXERCISES : Develop causal loop diagrams from the following verbal descriptions giving clear explanations. Identify the relationships & polarity between each pair of variables as well as the polarity of each loop • Population and Economic Growth Loop: As employment opportunities increase in a city, people are attracted into the urban area. However, in-migrants do not immediately swarm to employment opportunities in the area. Since migrants react to perceived opportunity, the lag in acquiring information may cause 5 to 20 year delay in response. Population growth from the influx of migrants tends to encourage business expansion in the growing urban area. The additional economical expansion creates demand for additional labor. This demand further increases employment opportunities in the area. • Population and Land Use Loop : While tending to reinforce economic growth, population growth tends to drive housing construction at a greater pace to match population growth. Assuming only a fixed amount of land available for industrial and housing use, increasing the housing stock makes less land available for business expansion. As the unavailability of more land begins to suppress business expansion in the area, the demand for labour decreased. Consequently, local employment opportunities decline. Once potential migrants perceive the lack of opportunities, declining in-migration generates a reduction in the population growth of the area. Week 3 – Causal Loop Diagrams

41. Group Work : Rural Development Form groups of 5 Draw a causal loop diagram showing the causal relationships and polarity from the following variables (indicate delays where applicable) • Births • Population • Adult Women • Soil fertility • Social controls on children • Food/person • Intensity of Land use • Food production • Quality of life Week 3 – Causal Loop Diagrams

42. Tips : Drawing CLDs • Name your variables carefully. In particular, avoid names that already imply directionality (e.g. “amount of acid rain” is an appropriate variable, “increase in acid rain” is not appropriate). Generally your variables should be nouns rather than verbs. • Confusion will inevitably result if you think about multiple arrows simultaneously when labeling the end of an arrow. Focus only on the direction and sign of causality in each pair. Then, when you are done labeling each individual arrow, figure out the sign of the loop as a whole. • Arrows in causal loop diagrams do not necessarily represent flows of stuff (material or energy). They represent flows of causality. Week 3 – Causal Loop Diagrams

43. 43 Examples • Avoid using terms that indicate directionality • e.g. “flight from city” Middle class flight from cities ( + ) ( + ) ( + ) Loss of public services Decreasing tax base ( + ) Week 3 – Causal Loop Diagrams

44. Tips : Drawing CLDs • If it helps to clarify dynamics, it is fine to include forcing variables that are cause, but are not themselves affected by the dynamics depicted (i.e. they are not actually part of a loop within the model). • As with all models, you should strive to use minimum number of variables necessary to capture the dynamics of interest. The first draft of your causal loop diagram can generally be simplified in order to increase clarity. Typically you will want to redraw your model to make it as easy for others to interpret as possible. Week 3 – Causal Loop Diagrams

45. “Finding a cure for cancer at the cellular level will not have a net benefit for society if we are unable to deal with ‘cancer’ at the ecosystem level (e.g. population overgrowth, pollution, and so on). Perhaps, then, we are beginning to perceive diminishing returns for reductionism and a swing back to a more unified science.” (Eugene Odum, 1913-2002) Food for thought Week 3 – Causal Loop Diagrams