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INSTTTUTIONAL DEPARTMENT

Apr1l 18, 1977

Research Notes

Some Significant Aspects o f t h e Systems Dynamics

National Modeling Project

"You will reply that reality is under no obligation to be

i n t e r e s t i n g .

--Jorge Luis Borges

I n t r o d u c t t o m

The Systems Dynamics Group of the Sloan School of Management at

M.I.T. is in process of constructing a national economic model.

T h i s p r o j e c t

draws on some twenty years of work, led by Professor Jay W. Forrester, on the

modeling of economic decision-making through the methodology of systems dy-

namics analysis (see Jay W. Forrester, "A New View of Business Cycle Dynamics,"

Journal of Portfolio Management, Fall 1976, and references incorporated there-

1 n ) • R e c e n t l y , we h a v e b e e n b e c o m i n g p r o g r e s s i v e l y more a c q u a i n t e d w i t h t h e

work of the Systems Dynamics Group. In t h i s regard, F. Eberstadt & Co., Inc.

has sponsored seminars for i n s t i t u t i o n a l i n v e s t o r s : i n New York and Boston a t

which Professor Nathaniel J. Mass, Director of the Systems Dynamics National

Modeling Project, has presented the core analysis and discussed the implica-

cions of the Group's ongoing efforts.

These notes are intended to identify certain aspects of the Systems

Dynamics Group's work which we consider to be particularly significant.

We

r e c o g n i s e t h a t b o t h t h e m e t h o d o l o g y and t h e c o n c l u s i o n s o f t h i s work have

raised controversial issues among professional economists as well as "common

readers." This has been particularly the case with respect to application

of the systems dynamics approach to the very long-run analysis of world trends,

as presented in Professor Forrester's 1971 book, World Dynamics, and publicized

most dramatically in The Limits o f Growth. Here, we are exclusively concerned

with the National Economic Model which the Systems Dynamics Group is now con-

structing. In particular, we are concerned with the economic behavior and