Archive for the 'Economics' Category

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DICE

Published on June 11, 2010 in Climate, Economics, Optimization, Published and Vensim. 0 Comments Tags: , , , , , .

This is a replication of William Nordhaus’ original DICE model, as described in Managing the Global Commons and a 1992 Science article and Cowles Foundation working paper that preceded it.

There are many good things about this model, but also some bad. If you are thinking of using it as a platform for expansion, read my dissertation first.

Units balance.

I provide several versions:

  1. Model with simple heuristics replacing the time-vector decisions in the original; runs in Vensim PLE
  2. Full model, with decisions implemented as vectors of points over time; requires Vensim Pro or DSS
  3. Same as #2, but with VECTOR LOOKUP replaced with VECTOR ELM MAP; supports earlier versions of Pro or DSS
    • DICE-vec-6-elm.mdl (you’ll also want a copy of DICE-vec-6.vpm above, so that you can extract the supporting optimization control files)

Note that there may be minor variances from the published versions, e.g. that transversality coefficients for the state variables (i.e. terminal values of the states for optimization) are not included. The optimizations use fewer time decision points than the original GAMS equivalents. These do not have any significant effect on the outcome.

WORLD3-03

Published on April 23, 2010 in Economics, Environment, Published and Vensim. 2 Comments Tags: , , .

This is the latest instance of the WORLD3 model, as in Limits to Growth – the 30 year update, from the standard Vensim distribution. It’s not much changed from the 1972 original used in Limits to Growth, which is documented in great detail in Dynamics of Growth in a Finite World (half off at Pegasus as of this moment).

There have been many critiques of this model, including the fairly famous Models of Doom. Most are ideological screeds that miss the point, and many modern critics do not appear to even have read the book. The only good, comprehensive technical critique of World3 that I’m aware of is Wil Thissen’s thesis, Investigations into the Club of Rome’s WORLD3 model: lessons for understanding complicated models (Eindhoven, 1978). Portions appeared in IEEE Transactions.

My take on the more sensible critiques is that they show two things:

  • WORLD3 is an imperfect expression of the underlying ideas in Limits to Growth.
  • WORLD3 doesn’t have the policy space to capture competing viewpoints about the global situation; in particular it does not represent markets and technology as many see them.

It doesn’t necessarily follow from those facts that the underlying ideas of Limits are wrong. We still have to grapple with the consequences of exponential growth confronting finite planetary boundaries with long perception and action delays.

I’ve written some other material on limits here.

Files: WORLD3-03 (zipped archive of Vensim models and constant changes)

Payments for Environmental Services

Published on April 19, 2010 in Economics, Environment, External, Published and Vensim. 0 Comments

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Model Name: payments, penalties, and environmental ethic

Citation: Dudley, R. 2007. Payments, penalties, payouts, and environmental ethics: a system dynamics examination Sustainability: Science, Practice, & Policy 3(2):24-35. http://ejournal.nbii.org/archives/vol3iss2/0706-013.dudley.html.

Source: Richard G. Dudley

Copyright: Richard G. Dudley (2007)

License: Gnu GPL

Peer reviewed: Yes (probably when submitted for publication?)

Units balance: Yes

Format: Vensim

Target audience: People interested in the concept of payments for environmental services as a means of improving land use and conservation of natural resources.

Questions answered: How might land users’ environmental ethic be influenced by, and influence, payments for environmental services.

Software: Vensim

Files:

http://modelwiki.metasd.com/images/d/db/SSPP_PES_and_Env_Ethic_2007-09-25.vmf

Industrial Dynamics

Published on March 11, 2010 in Business, Chaos & oscillations, Delays, Economics, Published and Vensim. 0 Comments Tags: , , .

The first major model (Chapter 15) from Forrester’s classic Industrial Dynamics (1961), an SD must-read. Replicated by Tom Fiddaman.

IDch15 (Vensim .vmf & auxiliary files)

IDch15 (Vensim .vpm)

Heat Trap

Published on March 10, 2010 in Climate, Economics, Vensim and Working Paper. 0 Comments Tags: , , , , .

Replicated by: Tom Fiddaman

Citation: Hatlebakk, Magnus, & Moxnes, Erling (1992). Misperceptions and Mismanagement of the Greenhouse Effect? The Simulation Model . Report # CMR-92-A30009, December). Christian Michelsen Research.

Units: no

Format: Vensim

This is a climate-economy model, of about the same scale and vintage as Nordhaus’ original DICE model. It’s more interesting in some respects, because it includes path-dependent reversible and irreversible emissions reductions. As I recall, the original also had some stochastic elements, not active here. This version has no units; hopefully I can get an improved version online at some point.

Heat trap (Vensim .vmf)

A Behavioral Analysis of Learning Curve Strategy

Published on March 9, 2010 in Business, Economics and Vensim. 0 Comments Tags: , , , .

Model Name: A Behavioral Analysis of Learning Curve Strategy

Citation: A Behavioral Analysis of Learning Curve Strategy, John D. Sterman and Rebecca Henderson, Sloan School of Management, MIT and Eric D. Beinhocker and Lee I. Newman, McKinsey and Company.

Neoclassical models of strategic behavior have yielded many insights into competitive behavior, despite the fact that they often rely on a number of assumptions-including instantaneous market clearing and perfect foresight-that have been called into question by a broad range of research. Researchers generally argue that these assumptions are “good enough” to predict an industry’s probable equilibria, and that disequilibrium adjustments and bounded rationality have limited competitive implications.  Here we focus on the case of strategy in the presence of increasing returns to highlight how relaxing these two assumptions can lead to outcomes quite different from those predicted by standard neoclassical models. Prior research suggests that in the presence of increasing returns, tight appropriability and accommodating rivals, in some circumstances early entrants can achieve sustained competitive advantage by pursuing Get Big Fast (GBF) strategies: rapidly expanding capacity and cutting prices to gain market share advantage and exploit positive feedbacks faster than their rivals. Using a simulation of the duopoly case we show that when the industry moves slowly compared to capacity adjustment delays, boundedly rational firms find their way to the equilibria predicted by conventional models.  However, when market dynamics are rapid relative to capacity adjustment, forecasting errors lead to excess capacity, overwhelming the advantage conferred by increasing returns. Our results highlight the risks of ignoring the role of disequilibrium dynamics and bounded rationality in shaping competitive outcomes, and demonstrate how both can be incorporated into strategic analysis to form a dynamic, behavioral game theory amenable to rigorous analysis.

The original paper is on Archive.org ; it was eventually published in Management Science. You can get the MS version from John Sterman’s page here.

Source: Replicated by Tom Fiddaman

Units balance: Yes

Format: Vensim

Behavioral Analysis of Learning Curve Strategy (Vensim .vmf)

World Dynamics

Published on March 9, 2010 in Economics, Environment, Published and Vensim. 0 Comments Tags: , , , .

Model Name: World Dynamics

Citation: Jay W. Forrester (1971) World Dynamics. Cambridge, MA: Wright-Allen Press

Source: Standard Vensim distribution

Units balance: Yes

Format: Vensim

World Dynamics (Vensim .vmf)

The Energy Transition and the Economy

Published on March 9, 2010 in Economics, Energy, Resources, Thesis and Vensim. 2 Comments Tags: , , .

Model Name: The Energy Transition and the Economy: A System Dynamics Approach

Citation: John D. Sterman, 1981. PhD Dissertation, MIT Sloan School of Management

Source: Replicated by Miguel Vukelic (a heroic effort)

Units balance: Yes

Format: Vensim (Contains data variables and thus requires an advanced version or the free Model Reader)

The Energy Transition and the Economy (Vensim .vpm)

Payments for Environmental Services

Published on March 9, 2010 in Economics, Environment, Published and Vensim. 0 Comments Tags: , , , .

Model Name: payments, penalties, and environmental ethic

Citation: Dudley, R. 2007. Payments, penalties, payouts, and environmental ethics: a system dynamics examination Sustainability: Science, Practice, & Policy 3(2):24-35. http://ejournal.nbii.org/archives/vol3iss2/0706-013.dudley.html.

Source: Richard G. Dudley

Copyright: Richard G. Dudley (2007)

License: Gnu GPL

Peer reviewed: Yes (probably when submitted for publication?)

Units balance: Yes

Format: Vensim

Target audience: People interested in the concept of payments for environmental services as a means of improving land use and conservation of natural resources.

Questions answered: How might land users’ environmental ethic be influenced by, and influence, payments for environmental services.

Software: Vensim

Payments for Environmental Services (Vensim .vmf)