Introduction to Policy Analysis

Systems Thinking:
Causal Loop Diagrams
Sunday, December 8, 2024

Hun Myoung Park, Ph.D.

Public Management & Policy Analysis Program

Graduate School of International Relations
 Systems Thinking
• Emphasis on interactivity and dynamics of
activities.
• Introductory work in system dynamics
• To describe the structure of a system
(physical and non-physical system)
• To produce a causal map or causal loop
diagram.

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 Causal Loop Diagram 1
• A CLD or causal map depicts the structure
of a system or a set of causal relationships
among variables (activities) in a system
• Used in system dynamics
• But general tool to describe concepts
(systems) and communicate with others

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 Causal Loop Diagram 2
• Components of CLD are
• Variables of a system
• Cause-and-effect relationships among
variables
• Feedback loop is a closed circuit of the
interconnection between variables
• Delay

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 Causal Loop Diagram 3
• Variables of a system.
– Interdependent (→ V →)
– Dependent (→ V), independent (V →)
• Cause-and-effect relationships
– “S” or + for the same direction
– “O” or - for the opposite direction
• Feedback loop
– “R” for reinforcing feedback
– “B” for balancing feedback
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Electrical Energy System
Demand
O

S
Price
O

S S
S
Nuclear Energy Supply Other Energy
S
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 Drawing a CLD 1
1. Identify a systemic problem that is chronic
and recurring and has a history and/or
pattern.
2. Set a boundary and level of simplicity

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 Drawing a CLD 2
3. Identify key variables (activities) that are
significant events or phenomena that
jointly influence the overall system.
– Use nouns or noun phrases
– Include “the level of,” “the amount of,”
“the number of,” or “the size of,” if
possible.
– Use a neutral or positive term. Avoid
such words as “failure” and “increase.”
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 Drawing a CLD 3
4. Begin with more interesting variable
(activity) and
– Work backward (begin with an event and
look for its cause)
– Work forward (begin with an event and look
for its consequence)
– Move back and forth (both directions).

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 Drawing a CLD 4
5. Indicate “cause-and-effect” relationship
using a link and arrow.
– A departing point influences the destination
(A→B).
– No bi-directional arrow allowed (A↔B).
– Instead, use separate arrows (A→B, B→A)

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Drawing a CLD 5
Effect 0
S

Cause 0

Cause 1

O
Effect 1

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 Drawing a CLD 6
6. Indicate the type of the relationship
between two variables on the link.
• + or S (same direction) means a positive
relationship between two variables. If A
increases, B will increases; if A
decreases, B will decreases.
• - or O (opposite direction) indicates a
negative relationship. If A increases, B
will decrease; if A decreases, B will
increase.

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 Drawing a CLD 7
7. Delay means that it takes long time for an
cause results in its effect.
– Depicted by || or “Delay” on the link
– “[M]ake system’s behavior unpredictable
and confound our efforts to control that
behavior.” (Anderson & Johnson,1997, p.57)

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 Drawing a CLD 8
8. If a link between two variables is not clear,
redefine the variables or insert an
intermediate variable between the two.
9. Keep revising iteratively; No CLD is ever
ending. Begin with a simple CLD and try
more challenging one incrementally.
10. Label feedback loop with either “R” for
reinforcing or “B” for balancing

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 An Example of CLD 1
• “Work backward” begins with the
important effect and then seeks
subsequent cause-effect chains.
• “Begin at the beginning” or work forward
• “Go back and forth”

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 An Example of CLD 2
Bank Failure
?

Bank Failure
O
?

Bank Failure
O
Bank's Solvency

Bank's Solvency

Withdrawals of
Funds

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 An Example of CLD 3
• Bank failure as a system problem
• First ask, “What caused the bank failure?”
• Probably “bank’s solvency” is the cause
of “bankruptcy (bank failure).”
• What is the relationship between the two
variables? When bank’s solvency is low,
bank failure is more likely (high). – or O

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 An Example of CLD 4
• Then ask, “What caused bank’s
solvency?”
• Keep asking similar questions

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 An Example of CLD 5
Bank Failure
O

Bank's Solvency Depositors'

Confidence
O

Bank Failure
O
Withdrawals of O
Funds

Depositors'
Bank's Solvency
Confidence
O

Withdrawals of O
Funds
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 Feedback Loop 1
• A feedback loop is a closed circle of
interconnection between variables or a
series of mutual cause and effect (causal
relationships).
• Mutual causation is the simplest
feedback loop. A→B→A→B→…
• The loop is internally initiated by the
system and insensitive to environment.

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 Feedback Loop 2
• A closed circle requires that an activity
influences (comes back to) itself
eventually.
• Initial cause and ultimate consequence is
NOT distinguishable clearly.
• Given endless cause-effect chains, such
distinction is almost meaningless in most
circumstance.

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 Feedback Loop 3
• “[E]verything is indeed connected to everything
else, so, in principle, it doesn’t matter where
you start” (Sherwood, 2002: 128).
• “[C]ycling back means that what was originally
a cause is now suddenly an effect” (Weick,
1979: 77).
• “[A]ny change made anywhere will eventually
itself be changed by the consequences it
triggers” (Weick, 1979: 77)

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Feedback Loop 4

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 Feedback Loop 5
• The interdependent relationships in a
structure (system) are more important
than initial cause or starting point.
• Structure characterizes the system and
starting point does not matter.
• Reinforcing feedback loop?
• Balancing feedback loop?

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 Reinforcing Feedback Loop 1
• A reinforcing or positive feedback loop
• A feedback loop with even number of
negative signs (-) or O (i.e., 0, 2, 4, …).
• Depicted by “R” or “+” in the center of a
feedback loop
• Self-reinforcing feedback
• Deviation amplifying feedback.
• No regulation or control
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Reinforcing Feedback Loop 2
Bank Failure
O

Depositors'
Bank's Solvency R (+)
Confidence
O

O
Withdrawals of
Funds
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 Reinforcing Feedback Loop 3
• “Reinforcing loops can be seen as the
engines of growth and collapse”
(Anderson & Johnson, 1997: 54).
• Destabilize the system and deviate from
its equilibrium
• Form a vicious circle or virtuous circle

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 Balancing Feedback Loop 1
• A balancing or negative feedback loop
• A feedback loop with odd number of
negative sign (-) or O (i.e., 1, 3, 5, …).
• Depicted by “B” or “-” in the center
• Goal seeking feedback, stabilizing
feedback, deviation-counteracting, or
self-refraining feedback

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Balancing Feedback Loop 2
Birth S

O
Population
S

B (-)

Death
S
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 Multiple Feedback Loop 1
• What if there are multiple feedback loops
in a system? Some loops are balancing,
while others are reinforcing
• If “loops are of unequal importance,” then
ask, “Which feedback loop is dominating
in the system?”
• Such dominating or the most important
loop will determine the fate of the system
in the end (Weick, 1979: 74).
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 Multiple Feedback Loop 2
• “[T]he greater the number of inputs to
and/or outputs from an element, the
more important that element is” (Weick,
1979: 75).
• “[C]lose loop that contains the greatest
number of these important elements”
(Weick, 1979: 75-76)

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 Multiple Feedback Loop 3
• What if there is no dominant feedback loop?
All feedback loops are equally important.
• Count the number of balancing or negative
feedback loops
• Count the total number of negative
relationships (whenever it appears in a loop)
• An odd number indicates a balancing or
deviation-counteracting system
• An even number indicates deviation-amplifying
system (Weick, 1979: 76).

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 Multiple Feedback Loop 4
In a Loop In a System
Presence of No influential loop
an influential
(unequal) loop
# of negative Follow the # of negative or
relationships type of the balancing loops
between influential loop in a system
activities
If odd number, If odd number,
balancing loop balancing system
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 How To Change a System?
• Add/delete activities (new system)
• Change in a relationship from – (opposite)
to + (same direction)
• Change in a relationship from – (same)
to - (opposite direction)
• Add/delete some relationships
• Shock (external input) will be decayed
without changing the structure of a
system
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 References
• Anderson, Virginia, and Lauren Johnson. 1997.
Systems Thinking Basics: From Concepts to
Causal Loops. Waltham, MA: Pegasus
Communications.
• Sherwood, Dennis. 2002. Seeing the Forest for
the Trees: A Manager. London: Nicholas Brealey
Pub.
• Weick, Karl E. 1979. The Social Psychology of
Organizing. 2nd ed. Reading, MA: Addison-
Wesley Pub. Co.
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