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htm

Feedback
A lthough stocks and flows are both necessary and sufficient for generating dynamic behavior, they are
not the only building blocks of dynamical systems. More precisely, the stocks and flows in real world
systems are part of feedback loops, and the feedback loops are often joined together by nonlinear
couplings that often cause counterintuitive behavior.

From a system dynamics point of view, a system can be classified as either "open" or "closed." Open
systems have outputs that respond to, but have no influence upon, their inputs. Closed systems, on the
other hand, have outputs that both respond to, and influence, their inputs. Closed systems are thus
aware of their own performance and influenced by their past behavior, while open systems are not .

Of the two types of systems that exist in the world, the most prevalent and important, by far, are closed
systems. As shown in Figure 1, the feedback path for a closed system includes, in sequence, a stock,
information about the stock, and a decision rule that controls the change in the flow . Figure 1 is a
direct extension of the simple stock and flow configuration shown previously with the exception that an
information link added to close the feedback loop. In this case, an information link "transmits"
information back to the flow variable about the state (or "level") of the stock variable. This information
is used to make decisions on how to alter the flow setting.

Figure 1: Simple System Dynamics Stock-Flow-Feedback Loop Structure.

It is important to note that the information about a system's state that is sent out by a stock is often
delayed and/or distorted before it reaches the flow (which closes the loop and affects the stock). Figure
2, for example, shows a more sophisticated stock-flow-feedback loop structure in which information
about the stock is delayed in a second stock, representing the decision maker's perception of the stock
(i.e., Perceived_Stock_Level), before being passed on. The decision maker's perception is then
modified by a bias to form his or her opinion of the stock (i.e., Opinion_Of_Stock_Level). Finally, the
decision maker's opinion is compared to his or her desired level of the stock, which, in turn, influences
the flow and alters the stock .

Given the fundamental role of feedback in the control of closed systems then, an important rule in
system dynamics modeling can be stated: Every feedback loop in a system dynamics model must
contain at least one stock. .

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Figure 2: More Sophisticated Stock-Flow-Feedback Loop Structure

Positive and Negative Loops

Closed systems are controlled by two types of feedback loops: positive loops and negative loops .
Positive loops portray self-reinforcing processes wherein an action creates a result that generates more
of the action, and hence more of the result. Anything that can be described as a vicious or virtuous
circle can be classified as a positive feedback process. Generally speaking, positive feedback processes
destabilize systems and cause them to "run away" from their current position. Thus, they are
responsible for the growth or decline of systems, although they can occasionally work to stabilize them
.

Negative feedback loops, on the other hand, describe goal-seeking processes that generate actions
aimed at moving a system toward, or keeping a system at, a desired state. Generally speaking, negative
feedback processes stabilize systems, although they can occasionally destabilize them by causing them
to oscillate.

Causal Loop Diagramming

In the field of system dynamics modeling, positive and negative feedback processes are often described
via a simple technique known as causal loop diagramming. Causal loop diagrams are maps of cause and
effect relationships between individual system variables that, when linked, form closed loops.

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Figure 3, for example, presents a generic causal loop

diagram. In the figure, the arrows that link each variable
indicate places where a cause and effect relationship exists,
while the plus or minus sign at the head of each arrow
indicates the direction of causality between the variables
when all the other variables (conceptually) remain constant.
More specifically, the variable at the tail of each arrow in
Figure 3 causes a change in the variable at the head of each
arrow, ceteris paribus, in the same direction (in the case of
a plus sign), or in the opposite direction (in the case of a
minus sign) .
Figure 3: Generic causal loop diagram

The overall polarity of a feedback loop -- that is, whether the loop itself is positive or negative -- in a
causal loop diagram, is indicated by a symbol in its center. A large plus sign indicates a positive loop; a
large minus sign indicates a negative loop. In Figure 3 the loop is positive and defines a self reinforcing
process. This can be seen by tracing through the effect of an imaginary external shock as it propagates
around the loop. For example, if a shock were to suddenly raise Variable A in Figure 3, Variable B
would fall (i.e., move in the opposite direction as Variable A), Variable C would fall (i.e., move in the
same direction as Variable B), Variable D would rise (i.e., move in the opposite direction as Variable
C), and Variable A would rise even further (i.e., move in the same direction as Variable D).

By contrast, Figure 4 presents a generic causal loop

diagram of a negative feedback loop structure. If an
external shock were to make Variable A fall, Variable B
would rise (i.e., move in the opposite direction as
Variable A), Variable C would fall (i.e., move in the
opposite direction as Variable B), Variable D would rise
(i.e., move in the opposite directionas Variable C), and
Variable A would rise (i.e., move in the same direction as
Variable D). The rise in Variable A after the shock
propagates around the loop, acts to stabilize the system --
i.e., move it back towards its state prior to the shock. The Figure 4: Generic causal loop diagram of a
shock is thus counteracted by the system's response. negative feedback loop structure

Occasionally, causal loop diagrams are drawn in a

manner slightly different from those shown in Figure 3
and Figure 4. More specifically, some system
dynamicists prefer to place the letter "S" (for Same
direction) instead of a plus sign at the head of an arrow
that defines a positive relationship between two
variables. The letter "O" (for Opposite direction) is used
instead of a minus sign at the head of an arrow to define
a negative relationship between two variables. To define
the overall polarity of a loop system dynamicists often
use the letter "R" (for "Reinforcing") or an icon of a
snowball rolling down a hill to indicate a positive loop.
To indicate a negative loop, the letter "B" (for
"Balancing"), the letter "C" (for "Counteracting"), or an Figure 5: Alternative Causal Loop

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icon of a teetertotter is used . Figure 5 illustrates these Diagramming Conventions

different causal loop diagramming conventions.

In order to make the notion of feedback a little more salient, Figure 6 to Figure 17 present a collection
of positive and negative loops. As these loops are shown in isolation (i.e., disconnected from the other
parts of the systems to which they belong), their individual behaviors are not necessarily the same as
the overall behaviors of the systems from which they are taken.

Positive Feedback Examples

Population Growth/Decline: Figure 6 shows

the feedback mechanism responsible for the
growth of an elephant herd via births. In this
simple example we consider two system
variables: Elephant Births and Elephant
Population. For a given elephant herd, we say
that if the birth rate of the herd were to increase,
the Elephant Population would increase. In this
same way, we can say that if - over time - the
Elephant Population of the herd were to
increase, the birth rate of the herd would
increase. Thus, the Elephant Birth rate drives
the Elephant Population that drives Elephant Figure 6: Positive Loop Responsible for the Growth in an
Birth rate - positive feedback. Elephant Herd via Births

National Debt: Figure 7 is a positive loop that

shows the growth in the national debt due to
the compounding of interest payments. First,
we note that that an increase in the amount of
interest paid per year on the national debt
(itself a cost within the federal budget ) will
cause the overall national debt to increase. In
this same way, an increase in the level of
national debt will increase the amount of the
interest paid each year.

Figure 7: Positive Loop Showing Growth in the National Debt

Due to Compounding Interest Payments

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Arms Race: Figure 8 shows a generic arms race

between Country A and Country B. In its
simplest form, an "arms race" can be described as
a self-sustaining competition for military
superiority. An arms race is driven by the
perception that one's adversary has equal or
greater military strength. If Country A moves to
increase its military capability, Country B
interprets this as a threat and responds in-kind
with its own increase in military capability.
Country B's action, in turn, causes Country A to
feel more threatened. Thus, Country A moves to
further increase its military capability. Figure 8: Arms Race is a Positive Feedback Process.

Bank Panic: A common scene during the Great

Depression in the 1930s was that of a panic
stricken crowd standing outside their local bank
waiting to withdraw what remained of their
savings. Figure 8 shows the feedback mechanism
responsible for the spiraling decline of the
banking system during this period.

From the diagram, we see that the frequency of

bank failures increases public concern and the
fear of losing their money. In this case, we say
that the two system variables "move" in the same
(S) or positive (+) direction. The relationship Figure 9: Bank panic is a positive feedback process.
between the "fear of not being able to withdraw
money" and the rate at which bank withdrawals
are made is also positive.
The relationship between withdrawals and bank health is negative (-) or opposite (O). This means that
if the rate of bank withdrawals increases, the health of the bank decreases as capital reserves are
drawn down. The relationship between the banking industry's health and the rate of bank failures is
also negative. This means that if the health of the banking industry increases, the number of bank
failures per year will decrease.

This vicious cycle was clearly seen during the 1930s. An overall economic downturn caused the rate
of bank failures to increase. As more banks failed, the public's fear of not being able to withdraw their
own money increased. This, in turn, prompted many to withdraw their savings from banks, which
further reduced the banking industry's capital reserves. This caused even more banks to fail.

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Figure 10 depicts three interacting

positive feedback loops that are
thought to be responsible for the
growth in students taking drugs in high
school .

Figure 10: Feedback structure responsible for growth high school drug use

Negative Feedback Examples

Population Growth/Decline:In Figure 6, we saw

how an elephant population and its corresponding
birth rate form a positive feedback loop. Now, we
consider the other half of the equation, that is, the
feedback structure between Elephant Population
and Elephant Death rate. Figure 11 shows the
negative feedback process responsible for the
decline of an elephant herd via deaths. If the
Elephant Death rate increases, the Elephant
Population will decrease. A negative sign
indicates this counteracting behavior. The causal
influence of Elephant Population to Elephant
Death rate is just the opposite. An increase in the Figure 11: Elephant population negative feedback loop.
number of elephants in the herd means that a
proportionally larger number of elephants will die
each year, i.e., an increase in the herd's death
rate. A plus sign indicates this complimentary
behavior. These two relationships combine
together to form a negative feedback loop.

Figure 12 and Figure 13 are two simple and familiar examples of negative feedback processes. Figure
12 shows the negative feedback process responsible for the dissipation of Itching due to Scratching.
Figure 13 considers the negative feedback involved in Eating to reduce Hunger. An increase in one's
Hunger causes a person to eat more food. Increasing in the rate food consumption, in turn, reduces
Hunger.

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Figure 12: Scratching an itch and negative feedback Figure 13: Dissipation of hunger

Law Enforcement:Figure 14 depicts a negative

feedback process that maintains a balance
between the number of drug dealers and the
number of police officers in a neighborhood. An
increase in the number of drug dealers in a
neighborhood will prompt local officials to
increase the number of law enforcement persons
as a counter measure. As the number of police
officers increase, more arrests are made and the
number of drug dealers is reduced.

Figure 14: Neighborhood drug intervention negative feedback

Car Pools:Figure 15 shows a negative

feedback process that maintains a balance
between car pools and gasoline
consumption. An increase in gasoline
consumption increases gasoline price
(supply reduction). A higher gasoline price
pushes many individual motorists to join
carpools, which reduces the total number of
vehicles on the road. This, in turn, reduces
gasoline consumption.

Figure 15: Gasoline consumption negative feedback

Implicit and Explicit Goals

The negative feedback loops presented in Figure 11 through Figure 15 are, in a sense, misleading
because the goals they are seeking are implicit rather than explicit. For example, the implicit goal of the
loop in Figure 11 is zero elephants. That is, if the loop were to act, in isolation, for a substantial period

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of time, eventually all of the elephants would die and the population would be zero. The same sort of
logic applies to Figure 12 and Figure 13, in which the loops implicitly seek goals of zero itching and
zero hunger respectively.The logic gets even murkier in the case of Figure 14 and Figure 15. In Figure
14, there is an implicit goal of an "acceptable" or "tolerable" level of drug dealers in the neighborhood,
which may or may not be zero. In Figure 15, there is an implicit goal of an acceptable or tolerable
gasoline price, which is certainly a lower price rather than a higher price, but is also (realistically) not
zero.

Figure 16: Generic negative feedback structure with explicit goal

An alternative and (often) more desirable way to represent negative feedback processes via causal loop
diagrams is by explicitly identifying the goal of each loop. Figure 16, for example, shows a causal loop
diagram of a generic negative feedback structure with an explicit goal. The logic of this loop says that,
any time a discrepancy develops between the state of the system and the desired state of the system
(i.e., goal), corrective action is called forth that moves the system back into line with its desired state.

A more concrete example of a negative feedback structure with an explicit goal is shown in Figure 17.
In the figure, a distinction is drawn between the actual number of elephants in a herd and the desired
number of elephants in the herd (presumably determined by a knowledge of the carrying capacity of
the environment supporting the elephants). If the actual number of elephants begins to exceed the
desired number, corrective action -- i.e., hunting -- is called forth. This action reduces the size of the
herd and brings it into line with the desired number of elephants.

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Figure 17: Example of negative feedback structure with an explicit goal

Examples of Interacting "Nests" of Positive and Negative Loops

In system dynamics modeling, causal loop diagrams are often used to display "nests" of interacting
positive and negative feedback loops. This is usually done when a system dynamicist is attempting to
present the basic ideas embodied in a model in a manner that is easily understood, without having to
discuss in detail.

As Figure 18 and Figure 19 show, when causal loop diagrams are used in this fashion, things can get
rather complicated. Figure 18 is a causal loop diagram of a system dynamics model created to examine
issues related to profitability in the paper and pulp industry. This figure has a number of features that
are important to mention. The first is that the authors have numbered each of the positive and negative
loops so that they can be easily referred to in a verbal or written discussion. The second is that the
authors have taken great care to choose variable names that have a clear sense of direction and have
real-life counterparts in the actual system . The last and most important feature is that, although the
figure provides a sweeping overview of the feedback structure that underlies profitability problems in
the paper and pulp industry, it cannot be used to determine the dynamic behavior of the model (or of
the actual system). In other words, it is impossible for someone to accurately think through, or mentally
simulate, the dynamics of the paper and pulp system from Figure 18 alone.

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Figure 18: Causal Loop Diagram of a Model Examining Profitability in the Paper and Pulp Industry

Figure 19 is a causal loop diagram of a system dynamics model created to examine forces that may be
responsible for the growth or decline of life insurance companies in the United Kingdom. As with
Figure 18, a number of this figure's features are worth mentioning. The first is that the model's negative
feedback loops are identified by "C's," which stand for "Counteracting" loops. The second is that
double slashes are used to indicate places where there is a significant delay between causes (i.e.,
variables at the tails of arrows) and effects (i.e., variables at the heads of arrows). This is a common
causal loop diagramming convention in system dynamics. Third, is that thicker lines are used to identify
the feedback loops and links that author wishes the audience to focus on. This is also a common system
dynamics diagramming convention . Last, as with Figure 18, it is clear that a decision maker would find
it impossible to think through the dynamic behavior inherent in the model, from inspection of Figure 19
alone.

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Figure 19: Causal Loop Diagram of a Model Examining the Growth or Decline of a Life Insurance
Company .

Archetypes
An area of the field of system dynamics or, more precisely, of the much broader field of "systems
thinking," that has recently received a great deal of attention is archetypes . Archetypes are generic
feedback loop structures, presented via causal loop diagrams, that seem to describe many situations that
frequently appear in public and private sector organizations. Archetypes are thought to be useful when
a decision maker notices that one of them is at work in his or her organization. Presumably, the decision
maker can then attack the root causes of the problem from an holistic and systemic perspective .
Currently, nine archetypes have been identified and cataloged by systems thinkers, including:

Balancing Process with Delay,

Limits to Growth,
Shifting the Burden,
Eroding Goals,
Escalation,
Success to the Successful,
Tragedy of the Commons,
Fixes that Fail, and
Growth and Underinvestment .

Recent efforts, however, have suggested that the number can be reduced to four:

Growth Intended-Stagnation/Decline Achieved,

Control Intended-Unwanted Growth Achieved,
Control Intended-Compromise Achieved, and
Growth Intended At Expense to Others .

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No matter what the true number archetypes is or will be, however, the central question remains
unanswered: How successful are archetypes in helping decision makers solve problems in their
organizations?

Problems with Causal Loop Diagrams

Causal loop diagrams are an important tool in the field of system dynamics modeling. Almost all system
dynamicists use them and many system dynamics software packages support their creation and display.

Although some system dynamicists use causal loop diagrams for "brainstorming" and model creation,
they are particularly helpful when used to present important ideas from a model that has already been
created . The only potential problem with causal loop diagrams and archetypes then, occurs when a
decision maker tries to use them, in lieu of simulation, to determine the dynamics of a system .

Causal loop diagrams are inherently weak because they do not distinguish between information flows
and conserved (noninformation) flows. As a result, they can blur direct causal relationships between
flows and stocks. Further, it is impossible, in principle, to determine the behavior of a system solely
from the polarity of its feedback loops, because stocks and flows create dynamic behavior, not
feedback. Finally, since causal loop diagrams do not reveal a system's parameters, net rates, "hidden
loops," or nonlinear relationships, their usefulness as a tool for predicting and understanding dynamic
behavior is further weakened. The conclusion is that simulation is essential if a decision maker is to gain
a complete understanding of the dynamics of a system .

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