Jay W. Forrester

Policies, decisions and information sources for modeling

Abstract A simulation model is based on explicit statements of policies (or rules) that govern decision making in accordance with conditions that may arise within the system being modeled. The decision-making process consists of three parts — the formulation of a set of concepts indicating the conditions that are desired, the observation of what appear to be the actual conditions, and the generation of corrective action to bring apparent conditions toward desired conditions. The model should generate ‘true’ conditions of underlying variables but, in general, these true conditions are not available to people in real systems and should likewise not be used directly for decision making in a model. Distorted and delayed information about actual conditions forms the basis for creating the values of desired and also of apparent conditions. Corrective action will in turn be delayed and distorted by the system before influencing actual and then apparent conditions. In modeling business and economic behavior, and in representing policies and decision making, all kinds of information should be used, not merely numerical data. Rich stores of information about governing policies and economic structure are available from mental data bases built up from experience and observation.

System Dynamics and the Lessons of 35 Years

The professional field known as system dynamics has been developing for the last 35 years and now has a world-wide and growing membership. System dynamics combines the theory, methods, and philosophy needed to analyze the behavior of systems in not only management, but also in environmental change, politics, economic behavior, medicine, engineering, and other fields. System dynamics provides a common foundation that can be applied wherever we want to understand and influence how things change through time.

Information Sources for Modeling the National Economy

Abstract In modeling economic behavior all kinds of information should be used, not merely numerical data. Rich stores of information about economic structure and governing policies are available from mental data bases built up from experience and observation. The daily and weekly business press contains information from which a model can bridge from microstructure to macrobehavior. The System Dynamics National Model draws on all classes of information for its structure and policies. The National Model, without exogenous time series inputs, generates 3- to 7-year business cycles, 15- to 25-year capital cycles, 45- to 60-year long waves, and the processes of inflation, unemployment, and stagflation. Such a simulation model, based on a diversity of information sources, can shed new light on economic dynamics.

Counterintuitive Behavior of Social Systems

This paper addresses several social concerns: population trends; quality of urban life; policies for urban growth; and the unexpected, ineffective, or detrimental results often generated by government programs. Society becomes frustrated as repeated attacks on deficiencies in social systems lead only to worse symptoms. Legislation is debated and passed with great hope, but many programs prove to be ineffective. Results are often far short of expectations. Because dynamic behavior of social systems is not understood, government programs often cause exactly the reverse of desired results. The field of system dynamics now can explain how such contrary results happen. Fundamental reasons cause people to misjudge behavior of social systems. Orderly processes in creating human judgment and intuition lead people to wrong decisions when faced with complex and highly interacting systems. Until we reach a much better public understanding of social systems, attempts to develop corrective programs for social troubles will continue to be disappointing. This paper cautions against continuing to depend on the same past approaches that have led to present feelings of frustration. New methods developed over the last 30 years will lead to a better understanding of social systems and thereby to more effective policies for guiding the future.

Digital Information Storage in Three Dimensions Using Magnetic Cores

Present digital storage devices use two space coordinates or time and one space coordinate for selection switching, resulting in bulky construction or long access time. Three‐dimensional arrays with efficient high speed selection appear possible after continued development of rectangular‐hysteresis magnetic materials. An operating mode is suggested which depends on ability of the magnetic material to discriminate between two values of magnetizing force which differ by a 2:1 ratio. Only one magnetic core per binary digit is required. Tests show that most existing metallic magnetic materials switch in 20 to 10,000 microseconds and are too slow. Nonmetallic magnetic materials can now approach the required magnetic behavior; they switch in less than a microsecond.

The system dynamics national model: Understanding socio-economic behavior and policy alternatives

The System Dynamics National Model is a computer simulation model of social and economic change in the United States. It is designed for public policy analysis and contains a deep policy structure ranging from governmental, fiscal, and monetary policy down to corporate accounting, pricing, and ordering of the factors of production. The model will treat the highly interrelated issues of inflation, unemployment, recession, balance of payments, energy, and environment. With regard to each of these issues, the Model should help to explain the forces that underlie major national difficulties, clarify feasible futures, and examine policies that can lead to more desirable behavior. The National Model, which has been under development for the past three years, consists of six principal sectors-production, financial, labor, demographic, household, and government. At present, preliminary versions of most of the model sectors exist, and the sectors are being tested extensively. Over the next three years, each of the sectors of the National Model will be reformulated, refined, and documented. At the same time, the individual sectors will be assembled into an overall Model. Extensive computer simulation testing, validation, and outside review with a wide range of academic and professional groups will be part of the Model development process. The Model should provide useful insights about behavior and policy at each stage of its development. Application and interpretation of the Model should build in a cumulative fashion from testing of individual sectors to combined testing of two or more sectors, and finally, to policy studies in the complete assembled National Model.

Nonlinearity in high-order models of social systems

Abstract Historically limitations of mathematical analysis forced exclusion of most nonlinearities from models of social systems. Computer simulation removed the pressure to focus on linear representations, but even so, data analysis and model validation methods have perpetuated a bias toward linearity in models. However, much of real-life behavior arises from nonlinearities. If models are to be good representations of social systems, there must be unrestricted willingness to incorporate nonlinearity. Otherwise, we exclude access to much of the available information about the structure and policies that cause observed behavior. A large fraction of our knowledge about social systems lies in what must necessarily happen as extreme conditions are gradually approached. The majority of functional relationships are nonlinear, as when two variables are multiplied, for example, sales rate times price to generate a payment stream. Taking advantage of knowledge about real-life nonlinearities and their crucial contribution to behavior, leads to models that endogeneously generate the principal modes of behavior that are observed in actual systems.

Business structure, economic cycles, and national policy

Abstract A system dynamics model of the national economy is now being assembled. Preliminary studies show that the production sectors can generate three different modes of fluctuation in the economy similar to the 3-to-7-year business cycle, the 15-to-25-year Kuznets cycle, and the 45-to-60-year Kondratieff cycle. These several modes arise from the basic physical processes of production and the managerial policies governing inventory, employment, and capital investment. The three modes of economic fluctuation are easily confused, and have tended to be interpreted as if they belonged only to the business cycle, perhaps leading to inappropriate policies. The work is still in progress, but results to date have important implications for many areas, including capital investment and its effect on the business cycle, monetary policy, fine tuning the economy, the severity of future recessions, the Phillips curve, factors affecting unemployment, and the trade-off between unemployment and inflation.

Innovation and economic change

Abstract The MIT System Dynamics National Model represents the physical and human processes involved in the long-term growth of a national economy and can provide a theoretical explanation for the generation of long waves. The phases of the long-wave cycle strongly influence the climate for innovation: towards the end of a boom minor improvement innovations in established industries tend to predominate, but managerial and political innovations in a depression can ultimately lead to an upsurge of radically new technologies. A balance between human population and environment may now be the most fundamental requirement for political and social innovation, taking precedence over the proliferation of technical innovation for its own sake.

Systems Analysis as a Tool for Urban Planning

Ways for analyzing social systems result in new policies for improving the behavior of systems in which we live. Such policies can change urban slums into areas designed for self-renewal. Already, studies into the relationships between monetary policy, interest rates, and foreign exchange have thrown new light on the processes of corporate growth, product stagnation, and loss of market share, and on the growth and decline of cities. At one time the engineers task was simply to balance financial cost against the economic performance of his technology. Now, psychological stress, ugliness, and crowding have become part of the cost. Engineers who fail to realize this broadened role will be vilified by a society that views them as insensitive to the needs of the times.