causal lojjkjop diagram
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Causal Loop Diagram(sources for pictures taken from textbook not mentioned to reduce clutter)
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Representing Cause and Effect moving beyond informal arguments a formal structure to represent the system the structure that we employ is called Causal
Loop Diagram
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Pest anddiseases
Chemicalpesticides
OrganicPesticide
Market
<Farm basedinputs>
Crop rotation anddiversity
Speciesrichness in pest
and diseases Species abundanceof P&D
Speciesrichness in
predator insects
Species abundance ofpredatory insects
Species richnessin birds and
rodents
Species abundance ofbirds and rodents
+
+
+
+
-
+
+
+
--
-
Field diversity
+
+ +
Microbialrichness
+
-
-
-
+ +
<Chemicalpesticides>
<OrganicPesticide>
-
--
-
<Fielddiversity>
+
<Soil fertility>
+
-
+
+
Physical controlmethods
-
+
<Plant growth>
+
Pest dynamics
Causal Loop Diagram
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travel time
traffic volume
trips per day
attractiveness ofdriving
average triplength
road capacitypressure to reduce
congestion
roadconstruction
-
+
+
+
+
-
+
+
+
+
desired traveltime
adequacy ofpublic transit
public transitfare
public transitridership
cars per personcars in regionpopulation andeconomic activity
in the region
-
+-
+
-
-
+
+
+
DELAY
DELAY
Traffic volumedepends on congestion,
closing severalfeedback loops that
cause traffic toincrease whenever new
roads are built
B1
B2
B3
B4
Causal Links: Reprsenting Cauase and Effect
More cars will lead to more pollution More cars lead to less people traveling by train
Not concerned with the limiting case (for the time being)
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• A positive (+) polarity means that the value of the affected variable increases as the value of the causal variables increases
• A negative (-) polarity means that the value of the affected variable decreases as the value of the causal variables increases
• But there is a catch• As population rises, both number of cars and number of train users rise
• A positive (+) polarity means that the value of the affected variable increases as the value of the causal variables increases, all other thing being constant
• A negative (-) polarity means that the value of the affected variable decreases as the value of the causal variables increases, all other thing being constant
Causal Links: Practice Loss of wildlife habitat leads to more incidents of
animals attacking human The higher the investments, the more the employment Lower the govt. employee’s morale, lower the
development outcomes
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Causal Links Subtleties What are the differences between the following
The lower the number of people participating in politics, the higher the disinterest in politics
The higher the number of people participating in politics, the lower the disinterest in politics
The lower the number of people participating in politics, the lower the interest in politics
Represent the following Rising expenditure on NREGA will increase government's budget deficit Variables have to be measurable quantities. Rising Expenditure is not a
variable Represent the following
The low unemployment rate is the consequence of government policy government policy is not a measurable variable. Some measurable
possibilities are budget deficiet, corporate tax rate, subsidy percentage
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Causal Links• Tree cutting increases the pollution level• Variable name must be a noun or noun phrase: • Tree Cutting vs. Number of Trees
• Govt. Electricity policy is responsible for depleting groundwater level
• unambiguous names• government policy / electricity rates for irrigation
• Feedback from public will increase govt. employees morale• praise from the public / feedback from the public
• High number of cars are responsible for increased pollution levels
• a measurable quantity – should have a clear sense of direction (increase or decrease)• number of cars / high number of cars, pollution
levels/increased pollution levels
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Causal Links• Terse• cars/ number of cars• (Everything should be made as simple as possible, but not simpler
– Einstein) terse is not always better• cars/cars per person/ cars per region• water temp./actual water temp./desired water temp.
• chose names whose normal sense of direction is positive• motivation / demotivation• employment / unemployment
• Aggregate• average age of a group/ list of individual ages• average/total number of insects: not a separate variable
for each type of insect, unless they have separate dynamics
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Causal Links• Represent the relation between birth rate and population• does a decrease in birth rate means lower population• no lower than what it otherwise would have been• difference between stock and flow – to be discussed later
• Do you know the real value• value• Desired value• Perceived value (maybe different from real value)
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Practice: Relationship between more than two variables• Cause and effect are generally linked by a chain of variables• Reducing wages result in increasing employment
• What is the mechanism• Wage costs decrease and as a result profits will climb, which will
positively affect investments which will increase employment• If the number of seeds planted in a farm increases this will reduce
the plant heights, because the same amount of nutrition has to be shared among more plants
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Chain of Reasoning• If minimum wage rises, pressure to pay lower than minimum
wage will rise, unless the gross income rises• From Editorial in The Mint on Sept. 16:
A good monsoon will likely provide a boost to rural demand, though it remains to be seen how the positive effect on farm incomes from higher output is balanced by a negative effect from lower farm prices
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farm output rural income rural demand
farm prices
++
+
-
rainfall+
Causation vs. Correlation• Causation is about postulating cause and effect relation• Correlation is simply an observed phenomenon• if the structure of the system changes, correlation pattern may
change• In the last decade both the income inequality and the school
enrollment increased• At times it is more subtle• Does economic growth lead to lower birth rate, or is it the
lower rate attributable to literacy, education for women, and increasing costs of child rearing
• A modeler must be careful about postulating causation, no matter how strong the correlation (R2) may be 13
Causal Loops• A change in any variable sets up a chain reaction that
eventually results in further changes in that variable
_Demand
Price +
Price
Supply
_
+
Loops can be at different levels of details
A simple abstraction Making mechanism explicit
price
demand _
+
price
relative value
cost ofsubstitutes
Balancing Causal Loops
How does this system evolve
_Demand
Price +
A Different Causal Loops
How does this system evolve
Demand
Price +
+
Causal Loops: Balancing vs. Reinforcing
Balancing/Reinforcing loops have odd/even no. of negative links
Do not rely on counting alone, cross check if the polarity of the loop makessense – does change in a randomly chosen variable has the claimed effect onvariables (see the next example)
_Demand
Price +
Causal Loop Diagram
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travel time
traffic volume
trips per day
attractiveness ofdriving
average triplength
road capacitypressure to reduce
congestion
roadconstruction
-
+
+
+
+
-
+
+
+
+
desired traveltime
adequacy ofpublic transit
public transitfare
public transitridership
cars per personcars in regionpopulation andeconomic activity
in the region
-
+-
+
-
-
+
+
+
DELAY
DELAY
Traffic volumedepends on congestion,
closing severalfeedback loops that
cause traffic toincrease whenever new
roads are built
B1
B2
B3
B4
Convert the given text to a Causal Loop Diagram• Once a firm falls behind in its debt payment, its credit rating
goes down. With lower credit rating, it has to pay more interest for its loans.
• Money spent on public goods such as roads, school, and power encourages entrepreneurs to start businesses, which would create sustainable jobs and raise the state’s tax revenues. These taxes would make it possible to invest in more public goods.
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Loop Construction Practice• TV watching and social life• Use of pesticides: consider short and long term
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Virtuous vs. Vicious Cycle
• Traditional notion of virtuous cycle can be captured by a self reinforcing loop
• A virtuous cycle can easily become a vicious cycle• Kutch was not always a
desert, it was a green land
• Temporary changes in link polarity changes the nature of the loop• speculative bubbles are
formed when a demand-price loops become self reinforcing
• Art is to break a vicious cycle or convert it into a virtuous cycle
Rain ForestCover
+
Demand
Price
Supply
+_
_
+
Notes• Variable names to be chosen carefully• All links must have polarity• There must be loops in your System Diagram. Absence of loops
generally indicate incomplete reasoning.
• *All loops must be marked Balancing (B/-) or Reinforcing(R/+)
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Feedback System Thinking• Problems do not stem
from events and solutions do not operate in a vacuum.• Problems and solutions
coexist and are interdependent• Feedback results in
causal loops.• Seeks solutions that are
sympathetic with agents and their motivations
people using pesticide
students disinterest in academics
Dynamics of Farm Wages (Ashok Gulati in IE)
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Rising farm wages have increased the cost of production in agriculture across the board. No wonder farmers’ organisations have been demanding higher minimum support prices (MSPs) to cover their increased costs of production. Farmers often hold the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) scheme, …responsible for this strong push in farm wages and the overall scarcity of farm labour. This scheme, they claim, is hitting them adversely as rising costs are not fully compensated by either MSPs or market prices. But rapidly rising farm wages should also bring cheer to those who are concerned with reducing poverty in rural areas, especially because farm labour is generally at the bottom of the economic pyramid. It should also mean much faster decline in rural poverty than has been the case earlier......The pull of development, especially construction, is much more powerful than the push of MGNREGA in raising farm wages.