System dynamics is the name given to an approach to understanding complex systems with non-linear behaviour; essentially, it is a mathematical modelling technique and methodology that allows complex problems and issues to be framed, understood and discussed.
The system dynamics approach begins with the dynamic definition of problems and then proceeds through a variety of modelling and mapping stages to build confidence in policy implications of a particular model. It can be applied to any dynamic system with the characteristics of mutual interaction, circular causality, interdependence and information feedback.
Domen Zavrl holds a PhD in the field of System Dynamics, having worked on Exploring Stabilisation of Non-Linear Real-Life Systems. System dynamics was initially developed in the middle of the last century to help improve corporate managerial understanding of industrial processes.
Today, SD techniques are widely used for policy analysis and design throughout both the public and private sectors. An overview of policy analysis approaches can be found in the PDF attachment to this post.
Professor Jay Forrester first created system dynamics in the middle of the 1950s. Forrester, who worked at the prestigious Massachusetts Institute of Technology, accepted a professorship in 1956 at the newly created Sloan School of Management at MIT, with the objective of discovering whether a science and engineering background could be usefully brought to bear on some of the core issues that determine the success (or otherwise) of corporations.
The underlying foundations of engineering that Forrester was able to provide insights into would eventually lead to the development of system dynamics, helped by his interactions with General Electric managerial staff throughout the latter half of the decade.
GE managers were perplexed at what appeared to be a cycle of employment that lasted approximately three years. Insights provided by Forrester gleaned from his engineering background demonstrated conclusively that these three-year cycles were due to instability in the firm’s internal structure rather than the business cycle or other external forces.
At GE, Forrester used hand simulations of the plants’ stock-flow feedback, using these calculations to identify the issues within the existing structure for corporate decision-making, particularly in the areas of layoffs and new hires.
These calculations were then moved forward from hand simulations to computer modelling throughout the late 1950s and early 1960s, with a team of graduates working alongside Forrester to create a formal stage of computer modelling.
In early 1958, the first ever computer modelling language for system dynamics, called SIMPLE, was created by Richard Bennett. The acronym stands for Simulation of Industrial Management Problems with Lots of Equations. An improved version of the SIMPLE language was later developed in 1959 by Phyllis Fox and Alexander Pugh. This new language, named DYNAMO for DYNAmic MOdels, was the standard in the industry for the ensuing three decades.
In the embedded infographic, you can learn more about some of the areas in which system dynamics is used today.
The earliest applications of system dynamics were aimed at helping corporations to better understand industrial processes so they could make better decisions regarding policy.
In 1968, Forrester collaborated with former mayor of Boston John F. Collins when he came to MIT as a visiting professor of Urban Affairs. This collaboration led to the production of a book titled Urban Dynamics, which outlined the first major application of system dynamics outside of the corporate world.
In 1970, following his attendance at a Bern, Switzerland meeting of the Club of Rome, Forrester drafted a new system dynamics model that could be used to address issues within the global socioeconomic system.
More information about the Club of Rome can be seen in the short video attachment.