Causal loop diagram

A causal loop diagram(CLD) is a diagram that aids in visualizing how interrelated variables affect one another. The diagram consists of a set of nodes representing the variables connected together. The relationships between these variables, represented by arrows, can be labelled as positive or negative.

The amount of the Bank Balance will affect the amount of the Earned Interest as represented by an arrow pointing from Bank Balance to Earned Interest. Since an increase in Bank Balance result in an increase in Earned Interest, this link is positive (which can be denoted with a ""+""). The Earned Interest gets added to the Bank Balance (also a positive link). The causal effect between these nodes forms a positive reinforcing loop (which can be denoted with an ""R"").

There are two kinds of causal links, positive and negative. Positive causal links means that the two nodes move in the same direction, i.e. if the node in which the link start decreases, the other node also decreases. Similarly, if the node in which the link starts increases, the other node increases. Negative causal links are links in which the nodes changes in opposite directions (an increase cause a decrease in another node, or a decrease cause an increase in another node). To determine if a causal loop is reinforcing or balancing one can start with an assumption, e.g. "Node 1 increases" and follow the loop around. The loop is reinforcing if one, after going around the loop, ends up with the same result as the initial assumption and balancing if the result contradicts the initial assumption. Or to put it in other words: Reinforcing loops have an even number of negative links (zero in the simple example above) and balancing loops an uneven number.

Identifying reinforcing and balancing loops is an important step for identifying Reference Behaviour Patterns, i.e. possible dynamic behaviours of the system. A reinforcing loop is associated with an exponential increase/decrease. Balancing loops are associated with reaching a plateau. If the system has delays (often denoted by drawing a short line across the causal link), the system might fluctuate.

ee also

* system dynamics

External links

* [http://www.excelsoftware.com/systemmodels.html System Models & Simulation] - Shows a causal loop diagram of a dynamic system that is parameterized with data and equations, then simulated and graphed.