Causal Loop Diagram

Causal Loop Diagram (sources for pictures taken from textbook not mentioned to reduce clutter) 1

Representing Cause and Eect 

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moving beyond informal arguments arguments a formal structure to represent te system te structure tat !e employ is called Causal Loop Diagram

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#est dynamics Microbial richness



! Crop rotation and diversity

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Pest and diseases !

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Market ! Organic Pesticide

! ! Chemical  pesticides



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Species richness in pest and diseases

! Species abundance of   birds and rodents !

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"" " " Species abundance of P& "

! Field diversity ! Species richness in birds and rodents !

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" Species richness in  predator insects "

Species abundance of  !  predatory insects " "

! Physical control methods

Causal Loop Diagram %&'(

road construction !

! road capacity

)raffic volume depends on congestion* closing several feedback loops that cause traffic to traffic volume ! increase #henever ne# ! ! roads are built

 pressure to reduce congestion " !

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desired travel time

travel time ! " attractiveness of  " +-

driving

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trips per day ! %&'( +.

 public transit ridership

+/ ! cars in region !

 public transit fare

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average trip ! length

 population and economic activity

ade$uacy of   public transit

" cars per person

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Causal Links% Reprsenting Cauase and Eect &ore cars !ill lead to more pollution &ore cars lead to less people traveling by train 'ot concerned !it te limiting case (for te time being) 

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 positive (*) polarity means tat te value of te aected variable increases as te value of te causal variables increases  negative (+) polarity means tat te value of te aected variable decreases as te value of te causal variables increases ,ut tere is a catc s population rises- bot number of cars and number of train users rise  positive (*) polarity means tat te value of te aected variable increases as te value of te causal variables increases- all other thing being constant 

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 negative (+) polarity means tat te value of te aected variable decreases as te value of te causal variables increases- all other thing being constant 

Causal Links% #ractice 

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Loss of !ildlife abitat leads to more incidents of animals attacking uman  .e iger te investments- te more te employment Lo!er te govt/ employee0s morale- lo!er te development outcomes

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Causal Links 2ubtleties 

3at are te dierences bet!een te follo!ing 

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Represent te follo!ing 

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 .e lo!er te number of people participating in politicste iger te disinterest in politics  .e iger te number of people participating in politicste lo!er te disinterest in politics  .e lo!er te number of people participating in politicste lo!er te interest in politics Rising expenditure on 'RE4 !ill increase government5s budget de6cit 7ariables ave to be measurable 8uantities/ Rising Expenditure is not a variable

Represent te follo!ing 

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 .e lo! unemployment rate is te conse8uence of government policy

government policy is not a measurable variable/ 2ome measurable possibilities are budget de6ciet-

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Causal Links •

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 .ree cutting increases te pollution level 7ariable name must be a noun or noun prase% •

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4ovt/ Electricity policy is responsible for depleting ground!ater level unambiguous names •

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government policy : electricity rates for irrigation

;eedback from public !ill increase govt/ employees morale •

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 .ree Cutting vs/ 'umber of .rees

praise from te public : feedback from te public


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Causal Links •

 .erse cars: number of cars •

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( Everyting sould be made as simple as possible- but not simpler = Einstein) terse is not al!ays better

cars:cars per person: cars per region !ater temp/:actual !ater temp/:desired !ater temp/ cose names !ose normal sense of direction is positive motivation : demotivation employment : unemployment •

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 Aggregate •

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average age of a group: list of individual ages average:total number of insects% not a separate variable for eac type of insect- unless tey ave separate dynamics

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Causal Links •

Represent te relation bet!een birt rate and population •

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does a decrease in birt rate means lo!er population 'o/ lo!er tan !at it oter!ise !ould ave been dierence bet!een stock and @o! = to be discussed later

Do you kno! te real value •

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value Desired value #erceived value (maybe dierent from real value) 1A

rac ce% e a ons p bet!een more tan t!o variables Cause and eect are generally linked by a cain •

of variables •

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Reducing !ages result in increasing employment

3at is te mecanism •

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3age costs decrease and as a result pro6ts !ill climb- !ic !ill positively aect investments !ic !ill increase employment Bf te number of seeds planted in a farm increases tis !ill reduce te plant eigts- because te same amount of nutrition as to be sared among more plants 11

Cain of Reasoning Bf minimum !age rises- pressure to pay lo!er tan minimum !age !ill rise- unless te gross income rises ;rom Editorial in .e &int on 2ept/ 1%  good monsoon !ill likely provide a boost to rural demand- toug it remains to be seen o! te positive eect on farm incomes from iger output is balanced by a negative eect from lo!er farm ! prices rural demand rainfall farm output rural income •

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" farm prices

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Causation vs/ Correlation •

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Causation is about postulating cause and eect relation Correlation is simply an observed penomenon •

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if te structure of te system canges- correlation pattern may cange

Bn te last decade bot te income ine8uality and te scool enrollment increased t times it is more subtle Does economic gro!t lead to lo!er birt rate- or is te lo!er rate attributable to literacy- education for !omen- and increasing costs of cild rearing  modeler must be careful about postulating causation- no matter o! strong te correlation (R") may be

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Causal Loops •

 cange in any variable sets up a cain reaction tat eventually results in furter canges in tat variable   

Demand

#rice

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#rice

* 2upply

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Loops can be at dierent levels of details A simple abstraction

Making mechanism explicit

price

price *

cost of  substitutes

relative value

demand

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,alancing Causal Loops   

Demand

#rice

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 Dierent Causal Loops *

Demand

#rice

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Causal Loops% Balancing vs/ Reinforcing   

Demand

#rice

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,alancing:Reinforcing loops ave odd:even no/ of negative links Do not rely on counting alone- cross ceck if te polarity of te loop makes sense = does cange in a randomly cosen variable as te claimed eect on variables (see te next example)

Causal Loop Diagram %&'(

road construction !

! road capacity

)raffic volume depends on congestion* closing several feedback loops that cause traffic to traffic volume ! increase #henever ne# ! ! roads are built

 pressure to reduce congestion " !

+,

" !

desired travel time

travel time ! " attractiveness of  " +-

driving

!

trips per day ! %&'( +.

 public transit ridership

+/ ! cars in region !

 public transit fare

"

average trip ! length

 population and economic activity

ade$uacy of   public transit

" cars per person

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Convert te given text to a Causal Loop Diagram •

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nce a 6rm falls beind in its debt payment- its credit rating goes do!n/ 3it lo!er credit ratingit as to pay more interest for its loans/ &oney spent on public goods suc as roadsscool- and po!er encourages entrepreneurs to start businesses- !ic !ould create sustainable  Fobs and raise te state0s tax revenues/ .ese taxes !ould make it possible to invest in more public goods/

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Loop Construction #ractice •

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 .7 !atcing and social life Gse of pesticides% consider sort and long term

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7irtuous vs/ 7icious Cycle •

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 .raditional notion of virtuous cycle can be captured by a self reinforcing loop  virtuous cycle can easily become a vicious cycle •

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;orest Cover

Rain

Hutc !as not al!ays a desert- it !as a green land

 .emporary canges in link polarity canges te nature of te loop •

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speculative bubbles are formed !en a demand+ price loops become self reinforcing

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Demand

#rice

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2upply

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rt is to break a vicious cycle or convert it into a virtuous cycle

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7ariable names to be cosen carefully ll links must ave polarity There must be loops in your System Diagram.  Absence of loops generally indicate incomplete reasoning. Ill loops must be marked Balancing (B/! or "einforcing("/#!

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;eedback 2ystem  .inking •

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#roblems do not stem from events and solutions do not operate in a vacuum/ #roblems and solutions coexist and are interdependent ;eedback results in causal loops/ 2eeks solutions tat are sympathetic !it agents and teir motivations

people using pesticide students disinterest in academics

4ulati in BE) Rising farm !ages ave increased te cost of production in agriculture across te board/ 'o !onder farmers0 organisations ave been demanding iger minimum support prices (&2#s) to cover teir increased costs of production/ ;armers often old te &aatma 4andi 'ational Rural Employment 4uarantee ct (&4'RE4) sceme- Jresponsible for tis strong pus in farm !ages and te overall scarcity of farm labour/ .is sceme- tey claim- is itting tem adversely as rising costs are not fully compensated by eiter &2#s or market prices/ ,ut rapidly rising farm !ages sould also bring ceer to tose !o are concerned !it reducing poverty in rural areasespecially because farm labour is generally at te bottom of te economic pyramid/ Bt sould also

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