System dynamics is a methodology for studying and managing complex feedback systems, such as one finds in business and other social systems. In fact it has been used to address practically every sort of feedback system. While the word system has been applied to all sorts of situations, feedback is the differentiating descriptor here. Feedback refers to the situation of X affecting Y and Y in turn affecting X perhaps through a chain of causes and effects. One cannot study the link between X and Y and, independently, the link between Y and X and predict how the system will behave. Only the study of the whole system as a feedback system will lead to correct results.

The methodology:

• identifies a problem,
• develops a dynamic hypothesis explaining the cause of the problem,
• builds a computer simulation model of the system at the root of the problem,
• tests the model to be certain that it reproduces the behavior seen in the real world,
• devises and tests in the model alternative policies that alleviate the problem, and
• implements this solution.

Rarely is one able to proceed through these steps without reviewing and refining an earlier step. For instance, the first problem identified may be only a symptom of a still greater problem.

The field developed initially from the work of Jay W. Forrester. His seminal book Industrial Dynamics (Forrester 1961) is still a significant statement of philosophy and methodology in the field. Since its publication, the span of applications has grown extensively and now encompasses work in

• corporate planning and policy design
• public management and policy
• biological and medical modeling
• energy and the environment
• theory development in the natural and social sciences
• dynamic decision making
• complex nonlinear dynamics

Source: System Dynamics Society (www.systemdynamics.org)