Metaphorical Models and Credible Worlds Insights from Small and Stylized Models OR54 Edinburgh September 2012 John Morecroft London Business School.

Metaphorical Models and Credible Worlds

Insights from Small and Stylized Models

OR54 EdinburghSeptember 2012

John MorecroftLondon Business School

John Morecroft London Business School

Outline

Stylised Models and Credible Worlds - two classic models from economics

Useful Properties of Stylised Models

World Dynamics as a Credible World for exploring global industrial growth and sustainability

Comments on Modelling, Realism and Learning

John Morecroft London Business School

Stylised Models and Credible Worlds

Akerlof’s 1970 ‘market for lemons’

Schelling’s 1978 ‘checkerboard city’

... based on Robert Sugden’s interpretation

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Useful Properties of Stylised Models

Few concepts; clear key assumptions about enduring traits of individuals and/or institutions

Skillfully embedded in a ‘context’

Plausible and sufficiently understandable to stimulate comparisons with the real world

Vivid interpretation that slips easily between the real world and the model

… these properties enable inductive reasoning

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Asset Stocks and Coordination in a Stylised Model of an Industrial Society

Capital discard

Capital investment

Industrial Capital

Pollution absorption

Pollution generation

Pollution

Output and Material Standard of Living

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Asset Stocks and Coordination in Jay Forrester’s World Dynamics Model

DeathRate

Birthrate

Population

Capital in agriculture

Food ratio

Land area

Adapted from pages 20-21 of World Dynamics by Jay Forrester, Pegasus Coomunications, Waltham MA 1973.

Natural resource usage rate

Natural resources

Capital discard

Capital investment

Industrial Capital

Pollution absorption

Pollution generation

Pollution

Material Standard of Living

1900 1940 1980 2020 2060 2100

PopulationQualityof Life

NaturalResources

PollutionCapital

John Morecroft London Business SchoolSource: World Dynamics by Jay Forrester, Pegasus Communications, Waltham MA 1973.

Base CaseArchive Simulation of World Dynamics

Basic world model behaviour showing the mode in which industrialisation and population are suppressed by falling natural resources

John Morecroft London Business SchoolSource: World Dynamics by Jay Forrester, Pegasus Communications, Waltham MA 1973.

A 75% technological improvement in the efficiency of resource usage unleashes additional growth that eventually leads to an

unintended pollution crisis.

1900 1940 1980 2020 2060 2100

Population

Capital

Pollution

Qualityof Life

Natural Resources

Better TechnologyArchive Simulation of World Dynamics

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Modelling and Realism – A Spectrum of Model Fidelity

AircraftFlight

Simulatorto train pilots and rehearse

crisis scenarios

Schelling’sCheckerboard

Cityto explore the issue

of segregation and tochallenge preconceptions

High fidelity Low fidelity

Adapted from Chapter 10 of Strategic Modelling and Business Dynamics by John Morecroft, Wiley 2007.

World Dynamicsto explore the paradox ofgrowth and sustainability

in an industrial society

Analogue Illustrative Metaphorical

Realistic detail Limited detail Minimal detail and accurate scaling yet plausible scaling yet transferable insight

John Morecroft London Business School

Thank You

Related Publications

Akerlof GA 1970. The Market for 'Lemons': Quality Uncertainty and the Market Mechanism, Quarterly Journal of Economics, 84: 488-500.

Forrester JW. 1973. World Dynamics (2nd ed.) Pegasus Communications, Waltham MA. The 1st edition of World Dynamics was published in 1971 by Wright-Allen Press, Cambridge MA.

Morecroft JDW. 2007. Strategic Modelling and Business Dynamics, Wiley, Chichester UK.

Morecroft JDW. 2012. Metaphorical Models for Limits to Growth and Industrialisation, forthcoming in Systems Research and Behavioral Science.

Schelling TC. 1978. Micromotives and Macrobehavior, Norton, New York.

Sugden R. 2000. Credible Worlds: The Status of Theoretical Models in Economics, Journal of Economic Methodology 7: 1-31.

John Morecroft London Business School