This category excludes actions of the macroeconomic orthodoxy that keep out SD from economic policy formulation and public administration, on ideological and vested-interest grounds.

In all instances I was careful to explain matters clearly, and to avoid overstatement of expected benefits.

Robert Merton (Nobel 1997), 31 December 2008

It is necessary to read behind Professor Merton’s politeness, and between his lines, to understand how unwilling he was to have any connection with the proposed SD project that will resolve causes of the financial crisis that led to the Great Recession. In the following text he was clearly trying to steer me away from SD for the purposes concerned. I did not get an opportunity to explain to him in detail how the project will work. This text illustrates better than most the protracted neglect of SD’s development and reputation by the SDS.

I am quite familiar with System Dynamics. I was on the faculty of the Sloan School of Management at MIT for 18 years before coming to Harvard. Of course, Jay Forrester and I were colleagues. While in those earlier days the analyses from the system simulation were very interesting and useful in studying a number of practical problems, they tended to be limited in their application to economic analyses for two reasons: 1) to the extend that the designs did not have prices in the systems reacting endogenously to what happened to its other variables and so it led to predictions like the last barrel of oil in the world would be extracted in 2002, rather than recognizing that the price of oil would rise in response to diminishing supply and thus that last barrel would be so incredibly expensive that it would never be consumed; 2) the systems were completely deterministic [although they could be chaotic] and but excluding uncertainty as a fundamental and explicit element of the analysis, it was not particularly useful for modeling stock and other speculative market price dynamics, since these markets are the repository of all the private sector risks that have been contracted away from other participants [eg employees]. Options and other derivatives have essentially no value to society in the absence of risk and uncertainty and so modeling them without an explicit and rather sophisticated stochastic dynamics is of very limited value.

Of course I have not kept up with the system dynamics literature and I would not be surprised to learn that these earlier shortcomings have been corrected. I would note however that over the last several decades enormous financial and human resources have been devoted by industry and academe to the development and implementation of models for dynamics of speculative prices and their distributions including feedback systems, behavioral finance factors, regime changing models, stochastic volatility, jump-diffusion, levy and other fat-tailed processes, and from these the impact on derivative securities risk and prices. Backgrounds of the model builders come from economics, finance, management science, engineering, physics, mathematics, psychology, neuroscience, and history. These models have taken advantage of the high-speed computation, new simulation techniques, new numerical solution techniques, real-time data feeds technologies. Indeed the financial problems of these kind have ensured that even with Moore’s Law, computing power will always be a “scarce resource” in that one need only add one more dimension to the model to push what looks like excess computing capacity to being inadequate.

I say all of this not to discourage your interest in this important area of investigation but to alert you that much has been done along the lines of simulation, estimation and optimization in a dynamical framework. If one is to enter into this area, as with any field (biology,medicine, electrical engineering), one needs to understand the state of what is being done so that they make improvements. If one makes such improvements, there is great need for them and many, many outlets for publication, both scientific and trade journals and magazines.

In most cases when SD project proposals are rejected one never knows the real reasons. A few years ago I approached the UK Ministry of Defence’s procurement agency, to propose the modeling of it. The agency had been receiving bad publicity in regard to problems of system and dynamic complexity and under-staffing etc that anyone acquainted with military matériel procurement is very familiar with.

In a telecon with a senior Service officer at the agency he used the word ‘charlatan’ in relation to one who would describe the standard benefits from the type of SD model proposed. This individual rejected outright the contributions that a system-wide SD model could make to his agency’s effectiveness and efficiency. He is one of so many potential SD users to whom the SDS has never bothered to reach out.

Another important UK example comprised its national rail network. At the time (a few years ago) there was a huge redevelopment project known as ‘The Western Main Line’. Parliamentarians and the notorious British media were deeply unhappy with the whole network, and especially with the redevelopment project. Every week was an accountability and public relations crisis for Network Rail, the main agency concerned.

The control, ‘what if’ and analytical needs of the case were tailor-made for a SD application. I took proposals to Network Rail – and got nowhere. Despite their problems they were unwilling to consider a SD application. This was yet another example in which SD’s status as the modern approach to decision support had never been established. The atmosphere was therefore completely unpropitious for a single firm or practitioner to deliver a solution.

Yet another example that SD is regarded as tainted involves what is believed to be the only published detailed description of a major professional SD application and its use. The author of that article, Kenneth Cooper, is a senior figure of long standing in SD modeling.

As previously stated, the journal article never mentioned the term ‘system dynamics’. That was due to the known lack of public regard for SD, even in 1980. The application made legal history as the first occasion on which a model had acted as the main basis of proof in major civil litigation.

There was understandable concern that mentioning the controversial term ‘system dynamics’ would devalue and distract from the considerable professional impact that the case would otherwise have.

The case apparently did have its deserved impact. And nothing seems to have improved in the ensuing thirty years in the public reputation and standing of SD. That is the legacy of the SDS.