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You cannot solve the problem with the same
thinking that created the problem Albert Einstein
Simulation Models, ICTs, and
Decision Making
Dr. John Shilling
Millennium Institute
January 28, 2013
Introduction
• Millennium Institute is devoted to helping
decision makers achieve sustainable
development
• Its Threshold 21 is an innovative system
dynamics simulation model to help strategic
decision making
• I worked at the World Bank and have been
involved with MI since I retired.
• At the Bank, I learned the limitations of
conventional models, which led me to T21
Why Models Are Useful Tools
• Need to understanding complex relations in
order to make decisions
• Relations need to be expressed in manner that
is manageable and understandable
• Keep track of larger number of factors than your
memory can
• Provide a basis for discussing more clearly
relations and processes with others involved
• Generate quantitative simulations of alternative
approaches and future outcomes
Basis of Modeling from Physics
• Developed by translating interactions of
physical objects into math equations that
represent what occurs
• Help determine further relations and
predict results of changes in a precise
manner that can be verified
• Examples of gravity, airplanes, electronics
• Based on inanimate objects, so highly
consistent
Shift to Social Science Models
• Use math approach of physics models to
quantify economic and social relations
• Derive relations from statistics and theories of
behavior, which are not precise
• Often the theoretic bases of models have
ideological rather than empirical origin
• Examples of market equilibrium, population
growth, budget balancing, technological
innovation
• Based on animate objects, so relations
change
Models to Simulate Economics
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Political Economy and conceptual models
Introduction of quantification into Economics
Linear models and Econometrics
Linear accounting frameworks: RMSM, MTEF
Non-linear and exponential modeling
Matrix models: I-O, SAM, and CGE
Broader Systemic models: T21
Benefits of Building Model
• Studies to build model reveal more about
relations in areas addressed by the model
• Identifies where more and better data is
needed to understand relations
• Provides a basis for analyzing the effects of
policies through simulations
• May clarify where theoretic basis isn’t valid
• Need to recognize that conventional models
only include a subset of all relevant relations
and don’t account for changing patterns of
behavior
ICT Has Enhanced Models
• They can now include much more data and
variables
• They can gain more information about key
issues from public opinion
• They can generate more detailed and graphic
output to illustrate results to “laymen”
• They can communicate more information to
decisions makers and other interested parties
• They can be used by many more people, and
even be the basis for games and apps
Models Help Decision Making
• They can illustrate the likely results of policy
changes, even over the longer term
• They can show the effects policies in one
sector have on other sectors if they include
several sectors
• They can show results in clear way, including
causal effects, to help build consensus and
reach better decisions
• They also help avoid negative side effects
• This, of course, depends on decision makers
seeking better policies, not ideological rule
System Dynamic Approach
• This innovation, as represented by the
Threshold 21 model, is major step forward
• It is based primarily on real world causal
relations observed in areas being modeled
• It readily integrates relations across sectors
• It can incorporate any quantifiable variable,
including those beyond the economy
• It takes account of lags in the effects of
policies and investments and generates long
term scenarios graphically
Why Take a Systemic View?
We Need to be Careful
To Avoid Unexpected Results!
We Face Serious Challenges
• Economies and societies depend on energy, water, and
natural resources – the foundation of development
• Economies depend on social structures, workforce skill,
innovation, and governance
• Reducing poverty requires social and environmental
services as well economic growth
• Economic, Environmental, and Social factors all interact,
• Climate change results from economic and social activities
and raises hurdles for sustainability
• These links need to be taken into account in model
simulations to assure sustainable growth and social stability
Why Use T21 S-D Approach
• Market models not take account of public goods, the
commons, and externalities
• Human welfare is not based on economic production
alone, but also social and environmental factors
• Long term and cross sector relations are important
• Equity and balance across gender, ethnic groups,
and classes are needed
• Management of natural resources is essential to
avoid excessive depletion
The T21 Process
• Includes activities in any sector that do effect other
sectors, directly and indirectly: with good and/or bad
impacts
• Takes account of the many years before impacts are
evident
• Deals with issues systemically
– Economic activities affect society and the environment -- Pollution,
and climate change
– Social activities affect the economy and environment -- Migration,
and land degradation
– Environmental factors affect the economy and society -- Soil
erosion, floods, drought, and heat waves
The Threshold 21 Structure
• System dynamics methodology
 Based on existing sector analyses, models
 Reflects observed real world relations
 Analyzes cross-sector links and feedback loops
• Composed of three main pillars
 Economic -- SAM, key market balances, and production
 Social -- dynamics in population, health, HIV/AIDS, education
 Environmental -- area specific issues and information
• Adapted to priority goals and vision for each individual country based on
its own data, structure, and patterns of activity
• Calibrated against history to provide reality checks and validation
• Generates multiple medium-to-long-term scenarios
• Transparent and easy to use
The Basic T21 Structure
production
population
labor
investment
health
society
infrastruc
ture
education
technology
economy
energy
government
poverty
households
row
land
climate
change
water
environment
emissions
minerals
sustainabi
lity
The Key Connections in T21
T21’s Role in Decision Making
• Provides an integrated approach to national planning
to take account of many factors
• Brings sector agents and stakeholders together to
identify key issues to be addressed
• Helps develop more efficient and cost effective paths
to the country’s goals, including MDGs and CCA
• Helps build joint ownership and support for changes
that emerge from the process
• Helps demonstrate benefits over a longer term to
build popular support
• Builds local capacity to continue and improve the
analysis and modeling process
Some Examples
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Ghana and MDGs
Bhutan and Cooperation
Mozambique and roads
Climate Change Adaptation in Namibia,
Kenya, Nigeria, and more
Thank You for Your Attention
Questions and comments are welcome
www.millennium-institute.org
[email protected]