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68-686: The model was documented in the book Dynamics of Growth in a Finite World . It added new features to Jay Wright Forrester 's World2 model. Since World3 was originally created, it has had minor tweaks to get to the World3/91 model used in the book Beyond the Limits , later improved to get the World3/2000 model distributed by the Institute for Policy and Social Science Research and finally the World3/2004 model used in

136-544: A digital computer . The team perfected magnetic-core memory , and developed the "multi-coordinate digital information storage device" (coincident-current system), the forerunner of today's RAM . In 1948-49 the Whirlwind team created the first animation in the history of computer graphics , a "jumping ball" on an oscilloscope . Whirlwind began operation in 1951, the first digital computer to operate in real time and to use video displays for output. It subsequently evolved into

204-745: A Finite World provides several different scenarios. The "reference run" is the one that "represent the most likely behavior mode of the system if the process of industrialization in the future proceeds in a way very similar to its progress in the past, and if technologies and value changes that have already been institutionalized continue to evolve." In this scenario, in 2000, the world population reaches six billion, and then goes on to peak at seven billion in 2030. After that population declines because of an increased death rate. In 2015, both industrial output per capita and food per capita peak at US$ 375 per person (1970s dollars, about $ 2,730 today) and 500 vegetable-equivalent kilograms/person. Persistent pollution peaks in

272-506: A base year. The result would be that the GDP in 2000 equals $ 300 million × 1 ⁄ 2 = $ 150 million , in 1990 monetary terms. We would see that the country's GDP had realistically increased 50 percent over that period, not 200 percent, as it might appear from the raw GDP data. The GDP adjusted for changes in money value in this way is called the real GDP . The factor used to convert GDP from current to constant values in this way

340-467: A city grows and decays." The study's findings, presented more fully in Forrester's 1969 book Urban Dynamics , suggested that the root cause of depressed economic conditions was a shortage of job opportunities relative to the population level, and that the most popular solutions proposed at the time (e.g. increasing low-income housing availability, or reducing real estate taxes) counter-intuitively would worsen

408-518: A country becomes increasingly in debt, and spends large amounts of income servicing this debt this will be reflected in a decreased GNI but not a decreased GDP. Similarly, if a country sells off its resources to entities outside their country this will also be reflected over time in decreased GNI, but not decreased GDP. This would make the use of GDP more attractive for politicians in countries with increasing national debt and decreasing assets. Gross national income (GNI) equals GDP plus income receipts from

476-515: A country's borders, but by an enterprise owned by somebody outside the country, counts as part of its GDP but not its GNI; on the other hand, production by an enterprise located outside the country, but owned by one of its citizens, counts as part of its GNI but not its GDP. For example, the GNI of the US is the value of output produced by American-owned firms, regardless of where the firms are located. Similarly, if

544-637: A country's citizens at home and abroad rather than its "resident institutional units" (see OECD definition above). The switch from GNP to GDP in the United States occurred in 1991. The role that measurements of GDP played in World War II was crucial to the subsequent political acceptance of GDP values as indicators of national development and progress. A crucial role was played here by the U.S. Department of Commerce under Milton Gilbert where ideas from Kuznets were embedded into institutions . The history of

612-406: A country's production has increased (or decreased, if the growth rate is negative) compared to the previous year, typically expressed as percentage change . The economic growth can be expressed as real GDP growth rate or real GDP per capita growth rate . GDP can be adjusted for population growth, also called Per-capita GDP or GDP per person . This measures the average production of a person in

680-404: A mental model changes with time and even during the flow of a single conversation. The human mind assembles a few relationships to fit the context of a discussion. As the subject shifts so does the model. When only a single topic is being discussed, each participant in a conversation employs a different mental model to interpret the subject. Fundamental assumptions differ but are never brought into

748-496: A model with the Club of Rome along the lines of that popularized in The Limits to Growth . Today system dynamics is most often applied to research and consulting in organizations and other social systems. Forrester was born on a farm near Anselmo, Nebraska , where "his early interest in electricity was spurred, perhaps, by the fact that the ranch had none. While in high school, he built

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816-498: A problem: Only the widespread scientific illiteracy and innumeracy —all you need to know in this case is how to execute the equation y = x ∗ e r t {\displaystyle y=x*e^{rt}} —prevents most of the people from dismissing the idea of sustainable growth at healthy rates as an oxymoronic stupidity whose pursuit is, unfortunately, infinitely more tragic than comic. After all, even cancerous cells stop growing once they have destroyed

884-516: A thesis on 'Hydraulic Servomechanism Developments'. In 1949 he was inducted into Eta Kappa Nu (ΗΚΝ) the Electrical & Computer Engineering Honor Society. During the late 1940s and early 50s, Forrester continued research in electrical and computer engineering at MIT, heading the Whirlwind project . Trying to design an aircraft simulator, the group moved away from an initial analog design to develop

952-589: A wind-driven, 12-volt electrical system using old car parts—it gave the ranch its first electric power." Forrester received his Bachelor of Science in Electrical Engineering in 1939 from the University of Nebraska–Lincoln . He went on to graduate school at the Massachusetts Institute of Technology , where he worked with servomechanism pioneer Gordon S. Brown and gained his master’s in 1945 with

1020-467: Is US$ 5,040,107.75 (in a million). Predictably, as a developed country, Japan has a higher GNI (by 182,779.46, in millions of USD), which is indicative that the production level in the country is higher than that of national production. On the other hand, the case with Armenia is the opposite, with GDP being lower than GNI by US$ 196.12 (in million). This demonstrates that countries receive investments and foreign aid from abroad. The Total income divided by

1088-683: Is also believed to have created the first animation in the history of computer graphics , a "jumping ball" on an oscilloscope . Later, Forrester was a professor at the MIT Sloan School of Management , where he introduced the Forrester effect describing fluctuations in supply chains . He has been credited as a founder of system dynamics , which deals with the simulation of interactions between objects in dynamic systems . After his initial efforts in industrial simulation, Forrester attempted to simulate urban dynamics and then world dynamics, developing

1156-425: Is also sometimes expressed as: The third way to estimate GDP is to calculate the sum of the final uses of goods and services (all uses except intermediate consumption) measured in purchasers' prices. Market goods that are produced are purchased by someone. In the case where a good is produced and unsold, the standard accounting convention is that the producer has bought the good from themselves. Therefore, measuring

1224-838: Is calculated this way it is sometimes called gross domestic income (GDI), or GDP (I). GDI should provide the same amount as the expenditure method described later. By definition, GDI is equal to GDP. In practice, however, measurement errors will make the two figures slightly off when reported by national statistical agencies. This method measures GDP by adding incomes that firms pay households for factors of production they hire – wages for labour, interest for capital, rent for land and profits for entrepreneurship. The US "National Income and Product Accounts" divide incomes into five categories: These five income components sum to net domestic income at factor cost. Two adjustments must be made to get GDP: Total income can be subdivided according to various schemes, leading to various formulae for GDP measured by

1292-471: Is called the GDP deflator . Unlike consumer price index , which measures inflation or deflation in the price of household consumer goods, the GDP deflator measures changes in the prices of all domestically produced goods and services in an economy including investment goods and government services, as well as household consumption goods. Real GDP can be used to calculate the GDP growth rate, which indicates how much

1360-469: Is contributed at each stage of production. This approach mirrors the OECD (Organisation for Economic Co-operation and Development) definition given above. Gross value added = gross value of output – value of intermediate consumption. Value of output = value of the total sales of goods and services plus the value of changes in the inventory. The sum of the gross value added in the various economic activities

1428-419: Is credited as a co-inventor of magnetic core memory , the predominant form of random-access computer memory during the most explosive years of digital computer development (between 1955 and 1975). It was part of a family of related technologies which bridged the gap between vacuum tubes and semiconductors by exploiting the magnetic properties of materials to perform switching and amplification. His team

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1496-404: Is known as "GDP at factor cost". GDP at factor cost plus indirect taxes less subsidies on products = "GDP at producer price". For measuring the output of domestic product, economic activities (i.e. industries) are classified into various sectors. After classifying economic activities, the output of each sector is calculated by any of the following two methods: The value of output of all sectors

1564-507: Is needed, remain as valid as ever. At least one study disagrees with the criticism. Writing in the journal Global Environmental Change , Turner notes that "30 years of historical data compare favorably with key features of the 'business-as-usual' scenario called the 'standard run' produced by the World3 model". A number of researchers have attempted to test the predictions of the World3 model against observed data, with varying conclusions . One of

1632-400: Is not reorganized according to who pays for or profits from the impacts, so who is actually responsible for economic impacts is never determined. In their view The authors of the book Surviving 1,000 Centuries consider some of the predictions too pessimistic, but some of the overall message correct. ...[We] come to the well-known study, Limits to Growth , published under the sponsorship of

1700-587: Is that GDP defines its scope according to location, while GNI defines its scope according to ownership. In a global context, world GDP and world GNI are, therefore, equivalent terms. GDP is a product produced within a country's borders; GNI is product produced by enterprises owned by a country's citizens. The two would be the same if all of the productive enterprises in a country were owned by its own citizens and those citizens did not own productive enterprises in any other countries. In practice, however, foreign ownership makes GDP and GNI non-identical. Production within

1768-399: Is that land and fertilizer are used for farming , and more of either will produce more food. In the context of the model, since land is finite, and industrial output required to produce fertilizer and other agricultural inputs can not keep up with demand, there necessarily will be a food collapse at some point in the future. The nonrenewable resource system starts with the assumption that

1836-513: Is the Montreal Protocol (1987) that limited the industrial production of fluorocarbons that damage the ozone layer and generated the 'ozone hole' over Antarctica. The publication of Limits to Growth has greatly contributed towards creating the general willingness of governments to consider such issues. Technological developments have also lead to improvements in the efficiency of the use of energy and other resources, but, most importantly,

1904-450: Is then added to get the gross value of output at factor cost. Subtracting each sector's intermediate consumption from gross output value gives the GVA (=GDP) at factor cost. Adding indirect tax minus subsidies to GVA (GDP) at factor cost gives the "GVA (GDP) at producer prices". The second way of estimating GDP is to use "the sum of primary incomes distributed by resident producer units". If GDP

1972-555: The Computer History Museum "for his perfecting of core memory technology into a practical computer memory device; for fundamental contributions to early computer systems design and development". In 2006, he was inducted into the Operational Research Hall of Fame. Forrester wrote several books, including: His articles and papers include: GDP Gross domestic product ( GDP ) is a monetary measure of

2040-777: The DYNAMO language in which the simulation was written and those who took the model apart line-by-line quickly realized that we had to deal with an exercise in misinformation and obfustication rather than with a model delivering valuable insights. I was particularly astonished by the variables labelled Nonrenewable Resources and Pollution . Lumping together (to cite just a few scores of possible examples) highly substitutable but relatively limited resources of liquid oil with unsubstitutable but immense deposits of sedimentary phosphate rocks, or short-lived atmospheric gases with long-lived radioactive wastes, struck me as extraordinarily meaningless. He does however consider continuous growth in world GDP

2108-598: The Human Development Index or Better Life Index , as better approaches to measuring the effect of the economy on human development and well being . William Petty came up with a concept of GDP, to calculate the tax burden , and argue landlords were unfairly taxed during warfare between the Dutch and the English between 1652 and 1674. Charles Davenant developed the method further in 1695. The modern concept of GDP

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2176-474: The market value of all the final goods and services produced and rendered in a specific time period by a country or countries. GDP is often used to measure the economic health of a country or region. Several national and international economic organizations maintain definitions of GDP, such as the OECD and the International Monetary Fund . The ratio of GDP to the total population of

2244-497: The 'Club de Rome' - an influential body of private individuals. A first attempt was made to make a complete systems analysis of the rapidly growing human-biological-resource-pollution system. In this analysis the manifold interactions between the different parts were explicitly taken into account. The conclusion was that disaster was waiting around the corner in a few decades because of resource exhaustion, pollution and other factors. Now, 35 years later, our world still exists, ... So

2312-553: The 'growth lobby' has laughed and proclaimed that Limits to Growth and, by extension, the environmental movements may be forgotten. This entirely misses the point. Certainly the timescale of the problems was underestimated in Limits to Growth , giving us a little more time than we thought. Moreover, during the last three decades a variety of national or collaborative international measures have been taken that have forced reductions in pollution, as we shall discuss. A shining example of this

2380-427: The accounting year. ) So for example if a car manufacturer buys auto parts , assembles the car and sells it, only the final car sold is counted towards the GDP. Meanwhile, if a person buys replacement auto parts to install them on their car, those are counted towards the GDP. According to the U.S. Bureau of Economic Analysis, which is responsible for calculating the national accounts in the United States, "In general,

2448-582: The air defence system Semi-Automatic Ground Environment (SAGE). In 1956, Forrester moved to the MIT Sloan School of Management , where he was the Germeshausen professor and after his retirement continued until 1989 as Professor Emeritus and Senior Lecturer. In 1961 was published his seminal book Industrial Dynamics the first work in what later is named System Dynamics. The work is a result of analyzing operations of Sprague Electric in Massachusetts. The study

2516-465: The book Limits to Growth: the 30 year update . World3 is one of several global models that have been generated throughout the world (Mesarovic/Pestel Model, Bariloche Model, MOIRA Model, SARU Model, FUGI Model) and is probably the model that generated the spark for all later models . The model consisted of several interacting parts. Each of these dealt with a different system of the model. The main systems were The simplest useful view of this system

2584-540: The concept of GDP should be distinguished from the history of changes in many ways of estimating it. The value added by firms is relatively easy to calculate from their accounts, but the value added by the public sector , by financial industries, and by intangible asset creation is more complex. These activities are increasingly important in developed economies, and the international conventions governing their estimation and their inclusion or exclusion in GDP regularly change in an attempt to keep up with industrial advances. In

2652-401: The country. GDP per capita is often used as an indicator of living standards. The major advantage of GDP per capita as an indicator of the standard of living is that it is measured frequently, widely, and consistently. It is measured frequently in that most countries provide information on GDP every quarter, allowing trends to be seen quickly. It is measured widely in that some measure of GDP

2720-553: The income approach. A common one is: The sum of COE , GOS and GMI is called total factor income; it is the income of all of the factors of production in society. It measures the value of GDP at factor (basic) prices. The difference between basic prices and final prices (those used in the expenditure calculation) is the total taxes and subsidies that the government has levied or paid on that production. So adding taxes less subsidies on production and imports converts GDP(I) at factor cost to GDP(I) at final prices. Total factor income

2788-443: The information required (especially information on expenditure and production by governments). The raw GDP figure as given by the equations above is called the nominal, historical, or current GDP. When one compares GDP figures from one year to another, it is desirable to compensate for changes in the value of money—for the effects of inflation or deflation. To make it more meaningful for year-to-year comparisons, it may be multiplied by

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2856-544: The initial basis for the World3 model used by Donella and Dennis Meadows in their popular 1972 book The Limits to Growth . Forrester met Aurelio Peccei , a founder of the Club of Rome in 1970. He later met with the Club of Rome to discuss issues surrounding global sustainability; the book World Dynamics followed. World Dynamics took on modeling the complex interactions of the world economy , population and ecology , which

2924-538: The instability of the current global socioeconomic system and the general kinds of changes that will and will not lead to stability. We have relatively great confidence in the feedback-loop structure of the model, with some exceptions which I list below. We have a mixed degree of confidence in the numerical parameters of the model; some are well-known physical or biological constants that are unlikely to change, some are statistically derived social indices quite likely to change, and some are pure guesses that are perhaps only of

2992-684: The international market. Total GDP can also be broken down into the contribution of each industry or sector of the economy. GDP is often used as a metric for international comparisons as well as a broad measure of economic progress . It is often considered to be the world's most powerful statistical indicator of national development and progress. However, critics of the growth imperative often argue that GDP measures were never intended to measure progress, and leave out key other externalities , such as resource extraction , environmental impact and unpaid domestic work . Alternative economic indicators such as doughnut economics use other measures, such as

3060-458: The invaded tissues. Others have put forth criticisms, such as Henshaw, King, and Zarnikau who in a 2011 paper, Systems Energy Assessment point out that the methodology of such models may be valid empirically as a world model, but might not then also be useful for decision making. The impact data being used is generally collected according to where the impacts are recorded as occurring, following standard I/O material processes accounting methods. It

3128-453: The more recent of these, published in Yale 's Journal of Industrial Ecology , found that current empirical data is broadly consistent with the 1972 projections, and that if major changes to the consumption of resources are not undertaken, economic growth will peak and then rapidly decline by around 2040. Jay Wright Forrester Jay Wright Forrester (July 14, 1918 – November 16, 2016)

3196-468: The open. Goals are different and are left unstated. It is little wonder that compromise takes so long. And it is not surprising that consensus leads to laws and programs that fail in their objectives or produce new difficulties greater than those that have been relieved. The paper summarized the results of a previous study on the system dynamics governing the economies of urban centers, which showed "how industry, housing, and people interact with each other as

3264-460: The population is the Per capita income . The international standard for measuring GDP is contained in the book System of National Accounts (2008), which was prepared by representatives of the International Monetary Fund , European Union , Organisation for Economic Co-operation and Development , United Nations and World Bank . The publication is normally referred to as SNA2008 to distinguish it from

3332-430: The previous edition published in 1993 (SNA93) or 1968 (called SNA68) SNA2008 provides a set of rules and procedures for the measurement of national accounts. The standards are designed to be flexible, to allow for differences in local statistical needs and conditions. Within each country GDP is normally measured by a national government statistical agency, as private sector organizations normally do not have access to

3400-503: The products must be bought by somebody, therefore the value of the total product must be equal to people's total expenditures in buying things. The income approach works on the principle that the incomes of the productive factors ("producers", colloquially) must be equal to the value of their product, and determines GDP by finding the sum of all producers' incomes. Also known as the Value Added Approach, it calculates how much value

3468-445: The ratio between the value of money in the year the GDP was measured and the value of money in a base year. For example, suppose a country's GDP in 1990 was $ 100 million and its GDP in 2000 was $ 300 million . Suppose also that inflation had halved the value of its currency over that period. To meaningfully compare its GDP in 2000 to its GDP in 1990, we could multiply the GDP in 2000 by one-half, to make it relative to 1990 as

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3536-415: The region is the GDP per capita and can approximate a concept of a standard of living . Nominal GDP does not reflect differences in the cost of living and the inflation rates of the countries; therefore, using a basis of GDP per capita at purchasing power parity (PPP) may be more useful when comparing living standards between nations, while nominal GDP is more useful comparing national economies on

3604-573: The rest of the world minus income payments to the rest of the world. In 1991, the United States switched from using GNP to using GDP as its primary measure of production. The relationship between United States GDP and GNP is shown in table 1.7.5 of the National Income and Product Accounts . Another example that amplifies the difference between GDP and GNI is the comparison of developed and developing country indicators. The GDP of Japan for 2020

3672-427: The right order of magnitude. The structural assumptions in World3 that I consider most dubious and also sensitive enough to be of concern are: A detailed criticism of the model is in the book Models of Doom: A Critique of the Limits to Growth . Czech-Canadian scientist and policy analyst Vaclav Smil disagreed with the combination of physically different processes into simplified equations: But those of us who knew

3740-408: The same result. They are the production (or output or value added) approach, the income approach, and the speculated expenditure approach. It is representative of the total output and income within an economy. The most direct of the three is the production approach, which sums up the outputs of every class of enterprise to arrive at the total. The expenditure approach works on the principle that all of

3808-669: The situation by increasing this relative shortage. The paper further argued that measures to reduce the shortage—such as converting land use from housing to industry, or increasing real estate taxes to spur property redevelopment—would be similarly counter-effective. 'Counterintuitive Behavior of Social Systems' also sketched a model of world dynamics that correlated population, food production, industrial development, pollution, availability of natural resources, and quality of life, and attempted future projections of those values under various assumptions. Forrester presented this model more fully in his 1971 book World Dynamics , notable for serving as

3876-401: The source data for the expenditures components are considered more reliable than those for the income components [see income method, above]." Encyclopedia Britannica records an alternate way of measuring exports minus imports: notating it as the single variable NX. GDP can be contrasted with gross national product (GNP) or, as it is now known, gross national income (GNI). The difference

3944-478: The total amount of resources available is finite (about 110 times the consumption at 1990s rates for the World3/91 model). These resources can be extracted and then used for various purposes in other systems in the model. An important assumption that was made is that as the nonrenewable resources are extracted, the remaining resources are increasingly difficult to extract, thus diverting more and more industrial output to resource extraction. The Dynamics of Growth in

4012-536: The total expenditure used to buy things is a way of measuring production. This is known as the expenditure method of calculating GDP. GDP (Y) is the sum of consumption (C) , investment (I) , government expenditures (G) and net exports (X − M) . Here is a description of each GDP component: C , I , and G are expenditures on final goods and services; expenditures on intermediate goods and services do not count. (Intermediate goods and services are those used by businesses to produce other goods and services within

4080-415: The use of computerized system models to inform social policy was superior to simple debate, both in generating insight into the root causes of problems and in understanding the likely effects of proposed solutions. He characterized normal debate and discussion as being dominated by inexact mental models: The mental model is fuzzy. It is incomplete. It is imprecisely stated. Furthermore, within one individual,

4148-400: The warnings from Malthus onward have finally had their effect as may be seen from the population-limiting policies followed by China and, more hesitantly, by India. Without such policies all other efforts would be in vain. However, the basic message of Limits to Growth , that exponential growth of our world civilization cannot continue very long and that a very careful management of the planet

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4216-473: The words of one academic economist, "The actual number for GDP is, therefore, the product of a vast patchwork of statistics and a complicated set of processes carried out on the raw data to fit them to the conceptual framework." China officially adopted GDP in 1993 as its indicator of economic performance. Previously, China had relied on a Marxist-inspired national accounting system. GDP can be determined in three ways, all of which should, theoretically, give

4284-478: The year 2035 at 11 times 1970s levels. There has been criticism of the World3 model. Some has come from the model creators themselves, some has come from economists and some has come from other places. In the book Groping in the Dark: The First Decade of Global Modelling , Donella Meadows (a Limits author) writes: We have great confidence in the basic qualitative assumptions and conclusions about

4352-414: Was an American computer engineer , management theorist and systems scientist . He spent his entire career at Massachusetts Institute of Technology , entering as a graduate student in 1939, and eventually retiring in 1989. During World War II Forrester worked on servomechanisms as a research assistant to Gordon S. Brown . After the war he headed MIT's Whirlwind digital computer project. There he

4420-521: Was controversial (see also Donella Meadows and The Limits to Growth ). It was the start of the field of global modeling . Forrester continued working in applications of system dynamics and promoting its use in education. In 1972, Forrester received the IEEE Medal of Honor , IEEEs highest award. In 1982, he received the IEEE Computer Pioneer Award. In 1995, he was made a Fellow of

4488-483: Was first developed by Simon Kuznets for a 1934 U.S. Congress report, where he warned against its use as a measure of welfare (see below under limitations and criticisms ). After the Bretton Woods Conference in 1944, GDP became the main tool for measuring a country's economy. At that time gross national product (GNP) was the preferred estimate, which differed from GDP in that it measured production by

4556-445: Was the first book Forrester wrote using system dynamics to analyze industrial business cycles. Several years later, interactions with former Boston Mayor John F. Collins led Forrester to write Urban Dynamics , which sparked an ongoing debate on the feasibility of modeling broader social problems. The book went on to influence the video game SimCity . Forrester's 1971 paper 'Counterintuitive Behavior of Social Systems' argued that

4624-456: Was the first model of supply chains proving that ups and downs of inventory is due to fluctuations in demand, revealing internal differences that his continuous approach could detect. The phenomenon was called the Forrester effect and today more frequently described as the "bullwhip effect". Forrester was the founder of system dynamics , which deals with the simulation of interactions between objects in dynamic systems . Industrial Dynamics

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