Lecture 12: Stock and Flow Models

Question 1

Elements of Stock and Flow Diagrams

Answer 1

Stock: A component that stores a quantity of “stuff”

Source, Flow, Sink: The movement of “stuff” into or out of a stock; input and output = rates of change = differential equation

Variable, Information link: Information feedbacks and intermediate variables

Inflow: rate of additive change

Outflow: rate of detrimental change

Stock: quantitative level

Question 2

Why use Stock and Flow diagrams?

Answer 2

• Causal loops are used for determining and communicating system structure
• CLD models are unable to capture stock and flow dynamics of a system
• Stock and flow diagrams can be used to quantify system components and the flow between them
• Thereby we can simulate dynamic system behaviour over time
• This is widely used in business process forecasting and strategic planning as well as in support of strategy, policy and regulatory decision-making

Question 3

Reinforcing Feedback Loops

Answer 3

• Are self-enhancing, leading to exponential growth or to runaway collapses over time
• Found whenever a stock has the capacity to reinforce or reproduce itself
• Doubling time of reinforcing loops is approximately 70/growth rate
• E.g. for 100€ balanace and 7% interest rate, doubling time is 10 years (70/7 = 10)

Question 4

Modelling Dynamic Behavior

Answer 4

• Stocks change slowly, even if flows change suddenly
• Therefore, stocks act as buffers or shock absorbers in systems
• This causes delays
• Delays in a balancing feedback loop makes the system likely to oscillate
• Faster response time makes oscillations worse
• Any physical, exponentially growing system has at least one reinforcing loop driving growth and one balancing loop constraining growth

Question 5

Renewable resources

Answer 5

Non-renewable resources are stock-limited:
-The entire stock is available at once, and can be extracted at any rate (limited mainly by extraction capital) but since the stock is not renewed, the faster the extraction rate, the shorter the lifetime of the resource
Renewable resources are flow-limited:
-They can support extraction or harvest indefinitely, but only at a finite outflow rate equivalent to their inflow rate. If they are extracted faster than they regenerate, they may eventually be driven below a critical threshold and become, for all practical purposes, non-renewable