Introduction to

System
Dynamics
Emilio Porta Pallais
eporta@worldbank.org
 How do we determine our
actions?

In order to have success we have to focus on……

Actions Outcomes
 How do we determine our
actions?

Actions Outcomes

Mental
Models
 Constructing good mental
models is a complex task

Complex reality

Broad and simple

In depth and specific

 Constructing good mental
models is a complex task

Y = (β1 X1, β2 X2, β3 X3, …..)

Production of milk = f (GDP, food prices, interest rates, …..)

See any problem?

What is missing?
Constructing good mental
models is a complex task

Factor 1
Factor 2
Factor 3 Outcomes
...
Factor n
 Constructing good mental
models is a complex task

Good team
Continuous learning

Good product Success

Leadership

Clear vision

Sufficient
financial
resources
 Constructing good mental
models is a complex task
■ 3 big challenges:
◆ Establishing the limits of the model
and selecting variables
◆ Understanding the ways the variables
interact and affect each other
◆ Understanding and representing
causality
 Four Fundamental Truths about
Models

■ Truth 1: We all construct mental

models about the realities that we
must face.

No one has reality

in their head.
 Four Fundamental Truths about
Models

■ Truth 2: Everyone mentally simulates

models for…
- making sense of daily life
(deciding why he/she is doing this or why this happened)

- making decisions
(predicting the consequences of actions and
alternatives that we are considering)

The most common term for mental simulation is: thinking!

 Four Fundamental Truths about
Models
To produce models with ithink, you will be doing things
that you have done every day of your life, but you will be
doing them with a new tool and a new set of hypotheses
about how the world works.

The new tool and a new set of hypotheses will allow you
to…

+ construct higher-quality mental models

+ simulate models with more reliability
+ communicate them more effectively
Four Fundamental Truths about
Models

■ Truth 3: “All models are wrong...

Some models are useful.”

W.E. Deming
Four Fundamental Truths about
Models

As far as the laws of mathematics refer to

reality, they are not certain, and as far as
they are certain, they do not refer to reality.

Albert Einstein
 Four Fundamental Truths about
Models

■ Truth 4: “Even though all models are wrong,

we do not have an alternative to using them.”

B.M. Richmond

Statements like, “You can’t model that,” or “That is very

coplicated to model” usually do not make sense.
 Purpose of the workshop

The real questions are…

• Construction: How well are the realities in question
captured by the model?
+ Have they selected essential, interrelated elements and omitted
the non-essential ones?

+ Are the elements and relationships that have been included

representative of reality?

• Simulation: How reliable are the simulations?

• Comunication: How easy is it to effectively share the
model and its deductions?
 Purpose of the workshop

To read and write with the ithink software, you

need to develop the following skills…
■ Using language (so you can read and write using
stocks and flows)
■ Mechanics of using the software

Example: To use Microsoft Word, you need both the mechanics of

using the software and the language to write.

The second skill is not easy…

Therefore, we will work with the language first.
 Purpose of the workshop
■ When you leave the workshop, you will be able
to…
• Read and critique a model of stocks/flow
• Example: You will be able to see if a model is
useful for analyzing a topic.

• Modifying a model/sub-model to suit your needs.

• Developing an interface to communicate your model

with other decisionmakers and policymakers.