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Cases Exercise of CLD

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Addis Rheza Firmansyah
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14 views5 pages

Cases Exercise of CLD

Uploaded by

Addis Rheza Firmansyah
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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1.

Fish Bank Model

Below you find a description of a very simple fisheries model, also known as the
basic Fish Banks model. The two main variables in a fisheries model are fish and
ships. Suppose the number of fish only increases through the fish hatch rate and
decreases both through the fish death rate and the total catch per year. Suppose
that the fish hatch rate equals the fish times the hatch fraction. The fish death
rate is equal to the death fraction times the fish.
The death fraction is a function of the carrying capacity and the number of Fish.
The total catch per year depends on the number of ships and the annual catch
per ship which is a function of the fish density. The density is defined as the
amount of fish in the fishing area divided by the area.
Suppose that the number of Ships increases via the shipbuilding rate, which is a
function of the investment costs per ship, annual profits, and fraction reinvested.
The annual profits are calculated as the revenues minus the costs. Assume that
the revenues equal the total catch per year times the fish price and that the costs
equal the unit ship operating costs times the number of ships.
a) Make a CLD of this model. What can be learned from it?
b) In case of undesirable conclusions, change the diagrams to turn undesirable
into desirable.
1
2. Housing Policies

Real estate demand in densely populated urban areas with sufficient land to extend is
often rather price-sensitive. For instance, declining property prices are caused by
relative oversupply, i.e., real supply exceeding real estate demand.
Construction companies often initiate new projects based on increased property
demand due to particular prices. However, real estate construction projects are
usually completed with relatively long delays of about 2-3 years. Many construction
companies tend to operate parallel in the same areas. They are mostly unaware of or
do not keep track of other companies' construction projects, which can lead to over-
supply.
When there is an oversupply of housing (when the supply exceeds the demand),
prices will fall, which will, in turn, increase demand.
a) Make a CLD of this phenomenon (CLD 1.A)
b) What kind of dynamics would you expect to see in property prices? Create a
simple behavior over time (BOT).
c) What would be an adequate strategy of an intelligent construction company based
on the CLD that you have developed in 1.a? “Show in the “revised” CLD 1.B
where the intervention will impact variables of connections in the CLD.

2
3. A Traditional Bank Run

A traditional bank run starts when (correct or also incorrect) information about potential problems
at a bank leads to fear of a bank failure. More fear leads to a higher tendency to withdraw
personal savings. An increase in withdrawals leads to a decrease in the perceived solvency of
the bank, which leads to more fear of a bank failure. An increase in withdrawals also leads to a
decrease in liquid bank reserves and, hence, to lower bank liquidity.
Banks then must turn more illiquid assets into liquid assets (money) to have sufficient liquid
assets to pay for (future) withdrawals. Due to the long speed required to liquidate illiquid assets,
huge losses are often made, reducing the bank's solvency. The lower the bank's solvency, the
lower the perceived solvency, which leads to more fear of a bank failure. Weak or uncertain
economic conditions result in more fear and lower perceived solvency.

a) Make a causal loop diagram of this phenomenon.


b) This causal loop diagram should be similar to the one described in Eric Pruyt’s Paper (Figure
14 in Page 22). How many feedback loops are there? What are their polarities?
c) What does this CLD in Figure 14 suggest to the behaviors of the possible system?
• You could draw multiple BOTs for different parameters that you think are important in this case
and compare them e.g. fear vs withdrawal or others, and explain each BOT or each group of
BOT based on the CLD.
d) What the government must do to prevent this? If the early phase has occurred? And when
the bank runs occurs
e) Read the Paper above. Do you agree with the conclusions? Why?

3
4. Energy Transitions

Energy Transitions are dynamically complex: they are governed by many feedback effects and
long delays. Energy transitions are also deeply uncertain: major uncertainties –related to
individuals, particular technologies, the entire system, and hence for policy/decision makers in
the energy field– are omnipresent. Energy technologies face many uncertainties and must
overcome many hurdles before becoming commercially viable and entering the energy
technologies battlefield.
One of these hurdles is the so-called ‘valley of death.’ Quite often, entrepreneurs and technology
developers bring new technology to the pre-commercial stage. Still, due to a lack of investments,
it does not survive the phase between (subsidized) entrepreneurial technology development and
large-scale commercial take-off, in which subsidies are (often) forbidden. It is hard to predict
which promising technologies will make it and, hence, which might become future technologies.
Many self-reinforcing uncertainties influence perceived certainty related to each new technology.
The lower the perceived certainty, the higher the perceived risk, and the lower the entrepreneurial
willingness to acquire knowledge/experiment/lobby/. . . in order to bring technology to the point
where it would be considered a good investment. Resources for actions to reduce uncertainty
may help to take this hurdle and may lead to more perceived certainty and raise perceptions
about the potential success of the technology. This, in turn, reinforces (intrinsic) entrepreneurial
motivation, resulting in more willingness to act. A reduction of the perceived risk and an increase
in entrepreneurial motivation are the preconditions to further the state of development and
increase the willingness to invest of entrepreneurs and risk-taking energy companies, which in
turn leads to more real investments, contributing to the success of the technology, reinforcing the
willingness to invest, etc.
a) Make a CLD of the pre-battlefield struggle. How many loops are there? What is their polarity?
What would be appropriate names? (CLD 4.a)
b) What policy recommendations could be derived from this CLD? “Show in the “revised” CLD
4.b where the intervention will impact variables or connections in the CLD.
4
Notes on Valley of Death in New Technology Development

The "valley of death" is a term


used to describe the stage in the
technology development process
when a promising concept has
been proven to work in a lab
setting but still requires significant
development to be used in real-
world settings.

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