System dynamics

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System dynamics is an approach to understanding the behaviour of complex systems over time. It deals with internal feedback loops and time delays that affect the behaviour of the entire system.[1] What makes using system dynamics different from other approaches to studying complex systems is the use of feedback loops and stocks and flows. These elements help describe how even seemingly simple systems display baffling nonlinearity.



System dynamics is a methodology and computer simulation modeling technique for framing, understanding, and discussing complex issues and problems. Originally developed in the 1950s to help corporate managers improve their understanding of industrial processes, system dynamics is currently being used throughout the public and private sector for policy analysis and design.[2]

System dynamics is an aspect of systems theory as a method for understanding the dynamic behavior of complex systems. The basis of the method is the recognition that the structure of any system — the many circular, interlocking, sometimes time-delayed relationships among its components — is often just as important in determining its behavior as the individual components themselves. Examples are chaos theory and social dynamics. It is also claimed that because there are often properties-of-the-whole which cannot be found among the properties-of-the-elements, in some cases the behavior of the whole cannot be explained in terms of the behavior of the parts.


System dynamics was created during the mid-1950s by Professor Jay Forrester of the Massachusetts Institute of Technology. In 1956, Forrester accepted a professorship in the newly-formed MIT School of Management. His initial goal was to determine how his background in science and engineering could be brought to bear, in some useful way, on the core issues that determine the success or failure of corporations. Forrester's insights into the common foundations that underlie engineering and management, which led to the creation of system dynamics, were triggered, to a large degree, by his involvement with managers at General Electric (GE) during the mid-1950s. At that time, the managers at GE were perplexed because employment at their appliance plants in Kentucky exhibited a significant three-year cycle. The business cycle was judged to be an insufficient explanation for the employment instability. From hand simulations (or calculations) of the stock-flow-feedback structure of the GE plants, which included the existing corporate decision-making structure for hiring and layoffs, Forrester was able to show how the instability in GE employment was due to the internal structure of the firm and not to an external force such as the business cycle. These hand simulations were the beginning of the field of system dynamics.[2]

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