UK Centre for the Understanding of Sustainable Prosperity (CUSP)

A system dynamics model

Prof Aled Jones* & Roberto Pasqualino*aled.jones@anglia.ac.uk; roberto.pasqualino@anglia.ac.uk

Agenda

• Introduction to CUSP

• SD approaches & CUSP

• Next steps

210/04/2017

In search of Sustainable Prosperity

A prosperous society is concerned not only with income and financial wealth, but also with the health and wellbeing of its citizens, with their access to good quality education, and with their prospects for decent and rewarding work. Prosperity enables basic individual rights and freedoms. But it must also deliver the ability for people to participate meaningfully in commons projects. Ultimately, prosperity must offer society a credible and inclusive vision of social progress.

Prof. Tim Jackson, Director of CUSP

CUSP partners

The research programme of CUSP is coordinated from the University of Surrey under the direction of Professor Tim Jackson.

CUSP’s academic partners include: University of Surrey, Anglia Ruskin University, Keele University, Goldsmiths College London, University of Leeds, Middlesex University, York University (Canada), University of Canterbury (New Zealand).

CUSP research themes:Meaning and Moral Framing of the Good Life

Arts and Culture in developing visions of prosperity

Political and Organisational dimensions of sustainable prosperity

Social and psychological understandings of the good life

Systems Analysis: Narratives of sustainable prosperity

Bottom up Systems Analysis

See also http://www.prosperitas.org.uk

Macroeconomic modelling project - Tim Jackson and Peter Victor

PASSAGE project supported by ESRC

System dynamics model of Financial Assets and Liabilities in a Stock-Flow consistent Framework (FALSTAFF)

Four-sector, demand-driven model of Savings, Inequality and Growth in a MAcroeconomic framework (SIGMA)

Blog: Prosperity and Sustainability in the Green Economy http://www.prosperitas.org.uk/blog.html#.VvKCEMfC6FI

Top down Systems Analysis

Building a global systems dynamic model incorporate finance and short term behaviours

Prof Forrester’s thoughts on the System Dynamics National Model

• Forrester (1980):

• “When fully assembled, the National Model will include 15 production sectors, such as consumer durables, manufacture of capital equipment, agriculture, housing, construction, services, and energy”

• Forrester (2003):

• “The system dynamics economic model has been developed over several decades. Initially it was to have been much larger than the current simplified model, which now has somewhat over 200 levels and 1400 auxiliary equations.”

• “Some people have questioned the need for such a large and complex model. Indeed, many applications in education and in policy design might be better handled with a collection of far simpler models. But I have felt that it is important to have a model in which the major modes of economic behaviours exist simultaneously for examining how the different modes may interact. … After the larger system is understood, it will be desirable to revert to much simpler special purpose models”

Research context

Our financial and economic system is exposed to catastrophic risks

from climate change and resource scarcity that it is unable to address

in its current form.

0

100

200

300

400

500

600 Maize, $/mt, real2010$

Wheat, Average,$/mtv, real 2010$

Rice, average ($/mt)

Average

Cereals, Global price, real 2010$

02468

101214161820 Oil price

Gas Price

Coal Price

Fossil fuels , Global price, 2010$

1. We live in a finite planet (Rockstrom

et al. 2009, Limits to Growth, 1972)

2. Resources getting scarcer as

environmental depletion, population,

urbanization increase (Jones et al.,

2013)

3. Implications for food security

threatened by climate change risk

(IPCC, 2013)

Where do we stand in 2015 according to Limits to Growth?

(Pasqualino et. Al 2015)

1972 20031991

• Lower productivity of the Industrial

sector shows the concern of human

society in coping with global

constraints

• Higher productivity of the Service

sector shows the focus of human

society to follow a different paradigm

of growth

• Higher food production due to

technology improvements and

Lower impact of food production to

Land Erosion due to good practice in

land use

Gap in the literature

(1971, 1972) Forrester, Meadows et al. World dynamics and Limits to Growth

(1976) Forrester’s System dynamics national model (SDNM)

Senge - 1978 comparison of investment function of SDNM with economic theory

Sterman - 1981 application of SDNM framework to Energy transition (conventional to unconventional) and the economy in the US 1980s

(2014-2016) Pasqualino update and application of such a framework to food and energy system modelling

SDNM – Includes:

• production sectors

• labor and professional mobility

• demographic sector and consumption

sectors

• commercial banking to make short-

term loans

• a monetary authority with its controls

over money and credit

• government services

• foreign sector

Global Economy

Energy supply

Manufacturing

Goods and

Services

Food and

Biofuels

Fossil Fuels

Renewable

Energy

Households

Banks

Public Sector

A model to evaluate the systemic risk

generated by food and energy supply trends

and shocks and their interactions with the

material and financial economies, in the short

term and under the constraints of a finite

planet.

Two closed system economy models

1210/04/2017

Global Economy

Energy supply

Manufacturing

Goods and

Services

Food and

Biofuels

Fossil Fuels

Renewable

Energy

Households

Banks

Public Sector

Large size model

• 240 stocks, 2500 auxiliaries, 600

parameters

• Out of equilibrium based on natural

resources depletion, labour

productivity change, population

growth

Medium size model

• 60 stocks, 650 auxiliaries, 200

parameters

• Simplified version to study

inequality, and test consumption

change patterns, productivity

growth

Closed system Generic economy

Banks

Public Sector

Households

Firms

Sensitivity analysis of shock scenarios

1310/04/2017

06 Sen 00106 Run 00306 Rin 00306 Run 00150.0% 75.0% 95.0% 100.0%

n price of output

7.0e-6

5.3e-6

3.5e-6

1.8e-6

01990 2000 2010 2020 2030

Time (Year)

06 Sen 00106 Run 00306 Rin 00306 Run 00150.0% 75.0% 95.0% 100.0%

f price of output

600

450

300

150

01990 2000 2010 2020 2030

Time (Year)

A double top-down approach

1410/04/2017

Global Economy

Energy supply

Manufacturing

Goods and

Services

Food and

Biofuels

Fossil Fuels

Renewable

Energy

Households

Banks

Public Sector

Global Economy

Energy supply

Manufacturing

Goods and

Services

Food and

Biofuels

Fossil Fuels

Renewable

Energy

Households

Banks

Public Sector

Global Economy

Energy supply

Manufacturing

Goods and

Services

Food and

Biofuels

Fossil Fuels

Renewable

Energy

Households

Banks

Public Sector

Global Economy

Energy supply

Manufacturing

Goods and

Services

Food and

Biofuels

Fossil Fuels

Renewable

Energy

Households

Banks

Public Sector

Global Economy

Energy supply

Manufacturing

Goods and

Services

Food and

Biofuels

Fossil Fuels

Renewable

Energy

Households

Banks

Public Sector

Global Economy

Energy supply

Manufacturing

Goods and

Services

Food and

Biofuels

Fossil Fuels

Renewable

Energy

Households

Banks

Public Sector

Global Economy

Energy supply

Manufacturing

Goods and

Services

Food and

Biofuels

Fossil Fuels

Renewable

Energy

Households

Banks

Public Sector

Global Economy

Energy supply

Manufacturing

Goods and

Services

Food and

Biofuels

Fossil Fuels

Renewable

Energy

Households

Banks

Public Sector

Towards a Hybrid SD-ABM model:• Current model as framework for a

generic macro-region splitting the world according to Currency/trade unions/…

• Modelling of foreign markets• Look at trade of labour, food, energy,

debt as connections among sectors • Focus on analysis and relative

parameterization among different regions

Updated version of the Limits to Growth with a team of 25 scientists• Based on LtG, proposal of a new simple

model of the global economy (As Simple As Possible)

• Focus on Narratives and Prosperity • APPG on LtG• Focus on the CUSP of the Global

Economy, Climate change, Consumption patterns, Restructuring of the economy, Risk in Finance, New set of Indicators, Planetary Boundaries…

1900 1950 2000 2050 21000

1

1

1 1

2

2

2

2

3

3

3

34 4

4

4

5

5

5 5

Year

5: Nonrenewable resources

3: Industrial output

4: Pollution level

2: Foodoutput

1: Population

?

15

• A “positive” critique on LtG and current global economic

framework will be available at:

• Pasqualino R. and Jones A. – “Resources, Financial

Risk, and Dynamics of Growth”, Routledge publisher

- TBP in 2017

• Regionalization of the global model and move towards a

hybrid System Dynamics-Agent Based model.

• Update on “simple” Limits To Growth model and focus on

communication and narratives based on key scenarios

• Focus the model on inequality, prosperity, happiness

Summary

16

Global Sustainability Institute, Anglia Ruskin Univertisy, Cambridge, UK