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This powerpoint is from Chapter 5 of Sterman's Business Dynamics book used in the 4th Class of Business Dynamics and System Modeling Class at Southern New Hampshire University
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11/4/2009
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Business Dynamics and System Modelingh l iChapter 5: Causal Loop Diagrams
Pard Teekasap
Southern New Hampshire University
Outline
1. Positive and Negative Links
2. Positive and Negative Loops
3. Guideline for Causal Loop Diagrams
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Positive Link
• If the cause increases, the effect increasesb h t it ld th i h babove what it would otherwise have been
• If the cause decreases, the effect decreasesbelow what it would otherwise have been
Negative Link
• If the cause increases, the effect decreasesb l h t it ld th i h bbelow what it would otherwise have been
• If the cause decreases, the effect increasesabove what it would otherwise have been
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Above (Below) what if would otherwise have been
Because
• To determine what actually happens, you need to know how all the inputs are changing
• CLDs don’t distinguish between stocks and flows
Causal Loop Diagram Notation
BR Death Rate
+ ++
-
Birth Rate Population
+
FractionalBirth Rate
AverageLifetime
-+ ++
Key
+
Causal LinkLink Polarity
Birth Rate PopulationVariable Variable
Loop Identifier: Positive (Reinforcing) Loop
Loop Identifier: Negative (Balancing) Loop
or
or
R
B
+
-
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Causation VS Correlation
• Every link must represent causal relationships b t th i bl t th l tibetween the variables, not the correlations
• Correlations among variables reflect the past behavior of a system. Correlations don’t represent the structure of the system
• Correlations among variables will emergeCorrelations among variables will emerge from the behavior of the model when you simulate it
Causation VS Correlation
MurderRate
Ice CreamSales
+ +MurderRate
Ice CreamSales
+
CorrectIncorrect
AverageTemperature
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Labeling Link PolarityIncorrect
CustomerLoss Rate
CustomerBase
Sales fromWord ofMouth
Correct
R BCustomerLoss Rate
CustomerBase
Sales fromWord ofMouth
-
++
+
Create loops and label polarities
Quality
Price
Delivery
ProductAttractiveness
DeliveryDelay
Functionality
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Determine loop polarity
• Count the number of negative links– If the number of negative links is even, the loop is positive. If the number is odd, the loop is negative
– In a complex diagram, it is all too easy to miscount the number of negative links in a loop. And it is easy to mislabel the polarity of links
• Trace the effect of a change around the loop– If the feedback effect reinforces the original change, it is a positive loop; if it opposes the original change, it is a negative loop
Identify link and loop polarity
Attractiveness of Market
CumulativeProduction
Profits Number ofCompetitors
Price Price
MarketShare
UnitCosts
Bank CashReserves
Pressure to CleanUp Environment Reserves
PerceivedSolvency of
Bank
NetWithdrawals
CleanupEffort
EnvironmentalQuality
Up Environment
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Link and Loop Polarity
Unambiguous polarities
• All links must have unambiguous polarities
• If you have trouble assigning a clear and unambiguous polarity to a link, it usually means there is more than one causal pathway connecting the two variables
• Make these different pathways explicit in theMake these different pathways explicit in the diagram
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Clear polarity
? (+ or -)RevenuePrice
CorrectIncorrect
+RevenuePrice
Sales+
-
Name the loops
• Numbering the loops R1, R2, B1, B2, and so on h l di fi d h lhelps your audience find each loop as your discuss
• Naming the loops helps your audience understand the function of each loop and provides useful shorthand for discussionp
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Name the loops
SchedulePressure
TimeRemaining
-
CornerCutting
B2
R1
MidnightOil
B1Time per
Task
Pressure
Overtime
Fatigue
CompletionRate
WorkRemaining-
++
-
+
+
+
Delay
Haste MakesWaste
R2
Burnout
Error Rate
Fatigue
Productivity
-- -
-
Delay
Indicate important delays
• Delays give systems inertia, can create ill ti d ft ibl foscillations, and are often responsible for
trade‐offs between the short‐ and long‐run effects of policies
• The diagrams should include delays that are important to the dynamic hypothesis or p y ypsignificant relative to the time horizon
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Delays
GasolinePrice +
DiscretionaryTripsExpected
Short-TermPrice
GasolineExpenditures
Demand forGasoline
+
-+
+
+
-+
Car Pooling andUse of Existing
Delay
Delay
DelayExpected
Vehicle Milesper Year
Density ofSettlement Patterns,Development of NewMass Transit Routes
Efficiency ofCars on RoadEfficiency
of Cars onMarket
-
+
+-
++
Use of ExistingMass Transit
Delay
Delay
Delay
Long-TermPrice
Delay notation
Price Supply
+DelayPrice Supply
++
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Variable names guideline
• Nouns or Noun Phrases
• Clear Sense of Direction
• Normal Sense of Direction is Positive
Variable names
++
CorrectIncorrect
Costs PriceCosts Rise Price Rises
MentalAttitude
+Feedbackfrom the
Boss
Praise fromthe Boss Morale
+
-+Costs ProfitCosts Losses
+
Criticism Unhappiness+
Criticism Happiness-
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Tips for CLD layout
• Use curved lines for information feedbacks. Curved lines help to visualize the feedback loopsCurved lines help to visualize the feedback loops
• Make important loops follow circular/oval paths• Organize your diagrams to minimize crossed lines• Don’t put circles, hexagons, or other symbols around the variables in causal diagramY ’t k h t ll th i bl d l• You won’t know what all the variables and loops will be when you start, so draw many times to find the best layout
Choose the right level of aggregation
-
If your audience was confused by
MarketShare
UnitCosts
++ Cumulative
you might make the intermediate concepts explicit as follows:
MarketShare
UnitCosts
ProductionVolume -
++ CumulativeProductionExperience
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Don’t put all the loops in one diagram
• Presenting a complex causal map all at once k it h d t th l d t dmakes it hard to see the loops, understand
which are important, or understand how they generate the dynamics
• Build up the model in stages, with a series of smaller causal loop diagrams. Each diagram p g gshould correspond to one part of the dynamic story being told
Make the goals of negative loops explicit
ProductQuality
+ +DesiredProduct
ProductQuality
CorrectIncorrect
B
QualityImprovement
Programs
Quality
-
B QualityShortfall
+
+- QualityQuality
QualityImprovement
Programs
Coffee Room
B
Cooling Rate +
CoffeeTemperature
B TemperatureDifference
+
-+
CoffeeTemperature
CoolingRate
RoomTemperature- -
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Distinguish between actual and perceived conditions
Bias inReporting
SystemSystem
ManagementBias TowardHigh Quality
ManagementPerception of
ReportedProductQualityProduct
Quality
+
++
+
+
DelayDelay
Perception ofProduct QualityB
QualityImprovement
Programs
QualityShortfall
DesiredProductQuality-
++
Delay
Delay
