Bdsm-ch5_causal Loop Diagram
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11/4/2009
Business Dynamics and System Modeling
Chapter 5: Causal Loop Diagrams h l i Pard Teekasap Southern New Hampshire University
Outline 1. Positive and Negative Links 2. Positive and Negative Loops 3. Guideline for Causal Loop Diagrams
1
11/4/2009
Positive Link • If the cause increases, the effect increases above what it would otherwise have been b h t it ld th i h b • If the cause decreases, the effect decreases below what it would otherwise have been
Negative Link • If the cause increases, the effect decreases b l below what it would otherwise have been h t it ld th i h b • If the cause decreases, the effect increases above what it would otherwise have been
2
11/4/2009
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 + Birth Rate +
R
-
Population
B
Death Rate +
+
Fractional Birth Rate
-
Average Lifetime
Key Causal Link + Birth Rate Variable
Link Polarity
Population Variable
+
or
R
Loop Identifier: Positive (Reinforcing) Loop
-
or
B
Loop Identifier: Negative (Balancing) Loop
3
11/4/2009
Causation VS Correlation • Every link must represent causal relationships b t between the variables, not the correlations th i bl t th l ti • Correlations among variables reflect the past behavior of a system. Correlations don’t represent the structure of the system • Correlations among variables will emerge Correlations among variables will emerge from the behavior of the model when you simulate it
Causation VS Correlation Incorrect
Correct +
Ice Cream Sales
Murder Rate
Murder Rate +
Ice Cream Sales +
Average Temperature
4
11/4/2009
Labeling Link Polarity Incorrect
Sales from Word of Mouth
Customer Base
Customer Loss Rate
Correct + Sales from Word of Mouth +
R
Customer Base
B
Customer Loss Rate +
Create loops and label polarities Quality Price Product Attractiveness Delivery Delay Functionality
5
11/4/2009
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
Cumulative Production
Number of Competitors
Profits
Market Share
Price
Price
Pressure to Clean Up Environment Environmental Quality
Unit Costs
Cleanup Effort
Bank Cash Reserves Net Withdrawals
Perceived Solvency of Bank
6
11/4/2009
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 the Make these different pathways explicit in the diagram
7
11/4/2009
Clear polarity Incorrect
Correct ? (+ or -)
Price
Revenue
+ Price
Revenue + -
Sales
Name the loops • Numbering the loops R1, R2, B1, B2, and so on h l helps your audience di fi d find each loop as your hl discuss • Naming the loops helps your audience understand the function of each loop and p provides useful shorthand for discussion
8
11/4/2009
Name the loops
Time Remaining
Schedule Pressure B2
-
Corner Cutting
Time per Task
Midnight Oil
Delay + Fatigue
Work Remaining -
B1
+ Overtime
+
Completion Rate + +
R1 Burnout
Productivity -
-
Error Rate
-
R2 Haste Makes Waste
Delay
Indicate important delays • Delays give systems inertia, can create oscillations, and are often responsible for ill ti d ft ibl f 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 yp significant relative to the time horizon
9
11/4/2009
Delays +
Price
Gasoline Expenditures Delay
+
+ Delay
-
Discretionary Trips
Expected Short-Term Price
+ Expected Long-Term Price
Delay + Delay +
Delay +
+
Car Pooling and Use of Existing Mass Transit
Vehicle Miles per Year -
Demand for Gasoline + -
Density of Settlement Patterns, Development of New Mass Transit Routes
Efficiency of Cars on Market
Delay
+
Efficiency of Cars on Road
Delay notation Price
Supply Delay
+
Price
Supply +
10
11/4/2009
Variable names guideline • Nouns or Noun Phrases • Clear Sense of Direction • Normal Sense of Direction is Positive
Variable names Incorrect
Correct +
Costs Rise Feedback from the Boss
Price Rises + Mental Attitude
+ Costs
+ Praise from the Boss
Losses
Costs
+ Criticism
Unhappiness
Morale
-
+ Costs
Price
Profit
Criticism
Happiness
11
11/4/2009
Tips for CLD layout • Use curved lines for information feedbacks. Curved lines help to visualize the feedback loops Curved 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 diagram • You won’t know what all the variables and loops Y ’t k h t ll th i bl dl 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 Market Share
Unit Costs
you might make the intermediate concepts explicit as follows: + Production Volume Market Share
+ Cumulative Production Experience
Unit Costs
12
11/4/2009
Don’t put all the loops in one diagram • Presenting a complex causal map all at once makes it hard to see the loops, understand k it h d t th l d t d 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 g should correspond to one part of the dynamic story being told
Make the goals of negative loops explicit Correct Incorrect + Product Quality
+
B Quality Improvement Programs
-
Coffee Temperature B Cooling Rate +
Product Quality
Desired Product Quality
- + Quality Shortfall
B Quality Improvement + Programs
-
Coffee Temperature B
Cooling Rate
+
-
Room Temperature
Temperature Difference
+
13
11/4/2009
Distinguish between actual and perceived conditions Bias in Reporting System Delay Product Quality
+ + Reported Product Quality
Delay
B
+ + Management Perception of Product Quality
+ Delay
Management Bias Toward High Quality
-
Quality Improvement Programs
Quality Shortfall +
Delay
Desired Product Quality
+
14
Business Dynamics and System Modeling
Chapter 5: Causal Loop Diagrams h l i Pard Teekasap Southern New Hampshire University
Outline 1. Positive and Negative Links 2. Positive and Negative Loops 3. Guideline for Causal Loop Diagrams
1
11/4/2009
Positive Link • If the cause increases, the effect increases above what it would otherwise have been b h t it ld th i h b • If the cause decreases, the effect decreases below what it would otherwise have been
Negative Link • If the cause increases, the effect decreases b l below what it would otherwise have been h t it ld th i h b • If the cause decreases, the effect increases above what it would otherwise have been
2
11/4/2009
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 + Birth Rate +
R
-
Population
B
Death Rate +
+
Fractional Birth Rate
-
Average Lifetime
Key Causal Link + Birth Rate Variable
Link Polarity
Population Variable
+
or
R
Loop Identifier: Positive (Reinforcing) Loop
-
or
B
Loop Identifier: Negative (Balancing) Loop
3
11/4/2009
Causation VS Correlation • Every link must represent causal relationships b t between the variables, not the correlations th i bl t th l ti • Correlations among variables reflect the past behavior of a system. Correlations don’t represent the structure of the system • Correlations among variables will emerge Correlations among variables will emerge from the behavior of the model when you simulate it
Causation VS Correlation Incorrect
Correct +
Ice Cream Sales
Murder Rate
Murder Rate +
Ice Cream Sales +
Average Temperature
4
11/4/2009
Labeling Link Polarity Incorrect
Sales from Word of Mouth
Customer Base
Customer Loss Rate
Correct + Sales from Word of Mouth +
R
Customer Base
B
Customer Loss Rate +
Create loops and label polarities Quality Price Product Attractiveness Delivery Delay Functionality
5
11/4/2009
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
Cumulative Production
Number of Competitors
Profits
Market Share
Price
Price
Pressure to Clean Up Environment Environmental Quality
Unit Costs
Cleanup Effort
Bank Cash Reserves Net Withdrawals
Perceived Solvency of Bank
6
11/4/2009
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 the Make these different pathways explicit in the diagram
7
11/4/2009
Clear polarity Incorrect
Correct ? (+ or -)
Price
Revenue
+ Price
Revenue + -
Sales
Name the loops • Numbering the loops R1, R2, B1, B2, and so on h l helps your audience di fi d find each loop as your hl discuss • Naming the loops helps your audience understand the function of each loop and p provides useful shorthand for discussion
8
11/4/2009
Name the loops
Time Remaining
Schedule Pressure B2
-
Corner Cutting
Time per Task
Midnight Oil
Delay + Fatigue
Work Remaining -
B1
+ Overtime
+
Completion Rate + +
R1 Burnout
Productivity -
-
Error Rate
-
R2 Haste Makes Waste
Delay
Indicate important delays • Delays give systems inertia, can create oscillations, and are often responsible for ill ti d ft ibl f 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 yp significant relative to the time horizon
9
11/4/2009
Delays +
Price
Gasoline Expenditures Delay
+
+ Delay
-
Discretionary Trips
Expected Short-Term Price
+ Expected Long-Term Price
Delay + Delay +
Delay +
+
Car Pooling and Use of Existing Mass Transit
Vehicle Miles per Year -
Demand for Gasoline + -
Density of Settlement Patterns, Development of New Mass Transit Routes
Efficiency of Cars on Market
Delay
+
Efficiency of Cars on Road
Delay notation Price
Supply Delay
+
Price
Supply +
10
11/4/2009
Variable names guideline • Nouns or Noun Phrases • Clear Sense of Direction • Normal Sense of Direction is Positive
Variable names Incorrect
Correct +
Costs Rise Feedback from the Boss
Price Rises + Mental Attitude
+ Costs
+ Praise from the Boss
Losses
Costs
+ Criticism
Unhappiness
Morale
-
+ Costs
Price
Profit
Criticism
Happiness
11
11/4/2009
Tips for CLD layout • Use curved lines for information feedbacks. Curved lines help to visualize the feedback loops Curved 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 diagram • You won’t know what all the variables and loops Y ’t k h t ll th i bl dl 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 Market Share
Unit Costs
you might make the intermediate concepts explicit as follows: + Production Volume Market Share
+ Cumulative Production Experience
Unit Costs
12
11/4/2009
Don’t put all the loops in one diagram • Presenting a complex causal map all at once makes it hard to see the loops, understand k it h d t th l d t d 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 g should correspond to one part of the dynamic story being told
Make the goals of negative loops explicit Correct Incorrect + Product Quality
+
B Quality Improvement Programs
-
Coffee Temperature B Cooling Rate +
Product Quality
Desired Product Quality
- + Quality Shortfall
B Quality Improvement + Programs
-
Coffee Temperature B
Cooling Rate
+
-
Room Temperature
Temperature Difference
+
13
11/4/2009
Distinguish between actual and perceived conditions Bias in Reporting System Delay Product Quality
+ + Reported Product Quality
Delay
B
+ + Management Perception of Product Quality
+ Delay
Management Bias Toward High Quality
-
Quality Improvement Programs
Quality Shortfall +
Delay
Desired Product Quality
+
14
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