The Inadequacy of Forrester System Dynamics Computer Programs for Institutional Principles of Hierarchy, Feedback, and Openness

By Hayden, F. Gregory | Journal of Economic Issues, June 2006 | Go to article overview

The Inadequacy of Forrester System Dynamics Computer Programs for Institutional Principles of Hierarchy, Feedback, and Openness


Hayden, F. Gregory, Journal of Economic Issues


The purpose here is to discuss the institutional systems principles of hierarchy, feedback, and openness, and to explain the inadequacy of Forrester-type system dynamics programs to apply those principles.

Hierarchy

It is the function of some system components to control what happenings are to happen, and to determine where, when, how, and to what extent they are to happen. Hierarchies exist to ensure that the happenings are happening as they should happen. The various system components that form the more powerful level in a structural hierarchy exert specific directives on the activities and deliveries of other components through a variety of forms that establish different kinds of control paths among institutional organizations.

Hierarchies contain many different kinds of criteria, rules, controls, regulations, and so forth. Technology is an example of system controls, as it provides criteria that must be met in a social system. Rules, regulations, and requirements are established in particular social settings to establish controls and sanctions necessary to meet normative criteria. Karl Polanyi used the concepts of permission, obligation, and prohibition to categorize criteria and control sets. John Commons clarified that system action, which includes exchange transactions, used the auxiliary verbs can, cannot, must, must not, may or may not do in order to categorize collective sanctions.

Figure 1 was presented by Robert Boyer as a summary of the "new institutional economics" concept of rules for the hierarchical relationships among the entries contained in the figure, about which he stated that the definitions indicate "a clear hierarchy" (2001, 85-89). Boyer's statement that the relationships among the entities in figure 1 are "Top-down: From the constitution to individuals: a clear hierarchy" (88) is an attempt to make hierarchy into a spatial order, rather than an institutional process, and to confirm a hierarchical concept by the placement of geometric figures on a page. Hierarchy is not a matter of the spatial concept of up and down, and figure 1 is not a clear top-down hierarchy. The order and placement of the figures could be changed and not change the meaning.

[FIGURE 1 OMITTED]

Figure 1 is a very misleading rendition of complex systems. The process of constitutionality and rulemaking is not a linear order connected with pluses and minuses. Constitutional order is an expression of a complex network that is established, renewed, and processed through institutions. Furthermore, institutions are guided by cultural values and normative criteria (see Hayden 1998), which are absent from figure 1. To have regulative power, constitutional activity has to be established in the various institutional organizations that are part of complex systems. Constitutional order is not an entity separate from institutions. In reality, constitutionality is expressed as a set of processes, flows, and deliveries within and among institutional organizations.

Furthermore, figure 1 is misleading because it has rulemaking in the top part of the figure but not the lower. First, the formulation of rules is spread throughout the socioecological matrix, and rules are constructed to be consistent with a whole array of normative criteria. For example, if a rule is established in bridge building that there is to be a three-inch weld every twelve inches, that rule has been established in response to criteria for concerns such as safety, monetary cost, wind conditions, and so forth. Second, "informal habits and ideology are expected to play a role in constitutional change as well as feedback from the performance of existing everyday-level institutions" (Schmid 2004, 3). Third, institutions that make rules must also use rules for making rules that come from other institutions, and "the rules for changing rules affect how everyday rules might be changed."

The institutions that make up constitutional processes are working institutions and not an entity positioned on high as depicted in figure 1.

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