Topic 1 (Meadows)

• When analysing markets, a range of assumptions are made about the rationality of economic agents involved in the transactions
• The Wealth of Nations was written

  1776
• Rational


  (in classical economic theory) economic agents are able to consider the outcome of their choices and recognise the net benefits of each one
• Rational agents will select the choice which presents the highest benefits
• Producers act rationally by


  Selling goods/services in a way that maximises their profits
• Workers act rationally by


  Balancing welfare at work with consideration of both pay and benefits
• Governments act rationally by


  Placing the interests of the people they serve first in order to maximise their welfare
• Rationality in classical economic theory is a flawed assumption as people usually don't act rationally
• Marginal utility


  The additional utility (satisfaction) gained from the consumption of an additional product
• If you add up marginal utility for each unit you get total utility
• Systems thinking


  Focuses on the function or purpose of the system, the interrelationships and connections within the system, and the elements or parts of the system, rather than just the individual elements or actors
• Systems thinking leads to a different way of talking about problems, where people blame the system rather than the individuals
• In systems thinking, the parts of the system are often interchangeable, as the system's behaviour is determined more by the interrelationships and structure than the specific elements
• Systems thinking recognises that the whole is greater than the sum of its parts, and that holistic understanding is important, not just reductionist analysis
• Systems thinking challenges the idea of trade-offs between different parts of a system, as the system is seen as an integrated whole
• Characteristics of systems thinking

  • Focuses on function/purpose, interrelationships, and elements
  • Sees the whole as greater than the sum of parts
  • Avoids reductionism and trade-offs between system components
• Analysing a simple fishery system

  1. Identify elements (fish, fishing boats)

  2. Identify interrelationships (fish reproduction, fishing catch)

  3. Identify goal/purpose (fish population regeneration)

  4. Simulate system dynamics over time
• Regeneration rate


  Rate at which fish can successfully reproduce, depending on fish population size
• Catch per boat


  Depends on the number of fish available
• The relationships between fish population, regeneration rate, and catch per boat are nonlinear
• Simulating the simple fishery system shows the fish population initially declining but then stabilising, while the number of boats grows to a sustainable level