Meaning of Stock/Level (SD6881)

[SDMAIL Alan McLucas]

Posted by  "Alan McLucas" <A.McLucas at adfa.edu.au>

There appears to be an increasing trend for some authors to proffer 
models having "stocks" containing soft variables or intangibles as being 
legitimate for their research.  I have seen two examples of this in the 
past week alone (one in a review of a journal article, and one in the 
examination of a thesis).

Stocks in system dynamics models represent quantities of material.  The 
stock-and-flow representation has precise and unambiguous meaning: 
stocks accumulate or integrate their flows; the net flow into the stock 
is the rate of change of the stock (Sterman, 2000: 195).

If this is true, then the veracity of any system dynamics model we build 
will be dependent upon what we mean by the term "material".  Ambiguity 
can occur when we build models where a stock contains material that is 
not strictly physical in nature.  Sterman (2000: 199 -200) gives an 
example of a manager having an expectation about how customer ordering 
might change over time.  The stock "Expected Customer Orders" 
<<widgets/week>> is affected by the inflow "Change in Expected Order 
Rate" <<widgets/week/week>>.  In this example the <<widgets>> do not 
physically exist, that is, there is no physical material flowing. 
 Unfortunately, the possibility that we can have stocks of materials 
that are not physical in nature is sometimes interpreted as meaning that 
it is quite legitimate to build models where the stocks are soft 
variables or intangibles.  

In the preceding example, if we were to substitute an intangible such as 
"Trust" for "Customer Orders" or "Expected Trust" for "Expected Customer 
Orders" then the SD model fails.  In the case of intangibles, inflows 
and outflows CANNOT produce accumulations that are calculated by 
numerical integration: a model having a stock "Trust" with an inflow 
"Change in Trust" will fail the essential mass-balance test.  

The only way that such a model could be correct is if initial stock of 
"Trust", measured as a*1<<trust units>> had a further amount of trust 
added at the rate of x*1<<trust units / units of time>> and an amount of 
trust deducted at a rate of y*1<<trust units / unit of time>>, with the 
current stock being calculated as Trust = INTEGRAL (Inflows - Outflows, 
Initial Trust) (see Sterman, 2000: 195).  "Trust" is an intangible which 
cannot be represented by this integral equation.  Therefore, we cannot 
build system dynamics models that contain stocks of intangibles such as 
"trust".  I appreciate the desire to build models which incorporate soft 
variables and intangibles, because ignoring such variables leads to 
erroneous models (Forrester), but building models that purport to 
represent soft variables and intangibles as stocks is not the answer.  

Am I missing something?

Regards,

Alan

Dr Alan McLucas
School of Information Technology and Electrical Engineering,
Australian Defence Force Academy,
Posted by  "Alan McLucas" <A.McLucas at adfa.edu.au>
posting date  Wed, 9 Apr 2008 15:18:08 +1000