Systems Thinking is a way of understanding how our world works, and unlike standard analytical thinking that examines the parts, Systems Thinking looks at the whole system, its elements, interconnections and purpose and where it sits in relation to other systems.
It’s being used extensively in computing, engineering, epidemiology, information science, health, manufacture, management, and the environment but surprisingly, it hasn’t really taken off in the field of economics.
I should’ve said, ‘not surprisingly’ because the economic system is one system that has continually confused, befuddled and surprised people for centuries.
At a time of economic crisis, there are plenty of economic experts who can tell you why something happened after the fact, yet were unable to detect that it was going to happen.
Is this because of an analytical approach rather than a system approach?
I can imagine mainstream economists reading this saying, “This guy has no idea what he’s talking about. We take a systems approach. We look at how all the parts interact.”
All the parts of the economy maybe.
The problem with mainstream economics (yes another one)
The problem, I believe, is that the mainstream economics approach actually puts the economy at the top of all other systems (usually by ignoring all others), rather than seeing the economy as a part of a greater system. It’s a part of society and a part of the greater ecological system.
Another problem is that the behaviour of the economic system gives it a purpose that does not allow it to function properly within those greater systems and so causes seemingly intractable social and environmental problems.
For me to discuss this any further I need to return to Systems Thinking 101 and there is no better material for systems basics than that produced by Donnella H Meadows. In her book Systems Thinking: A Primer.
Meadows describes a system as a group of elements that have interconnections between them. All systems also have a purpose or function and observing the behaviour of the system reveals the purpose of the system.
For example, a car is made up of engine, radiator, battery, drive shaft, wheels, etc. They are interconnected by the energy in the system, the instructions from the driver to steer, accelerate, brake and generally make the vehicle move in the desired direction. Observing the behaviour of a car, would lead us to conclude that the purpose of this system is for transportation.
But a car is also an element of the transport system and only works by fitting into that larger system by using the fuel available at the petrol pump, or the roads that are designed for wheels. If all cars had fuel or wheels incompatible with the greater transportation system, cars couldn’t drive anywhere and the transport system wouldn’t work either.
So what does this tell us about economics?
The Economic System
The economy is made up of lots of elements including; businesses, people, capital, products, resources etc. These elements would be interconnected by money, marketing, maybe some would include ‘rational self interest’.
Observing the behaviour of the economic system we can see that it is considered to be working at maximum efficiency when it is growing. When there is more of everything – more credit, more businesses, more resources available etc. So the purpose of an economy based on its behaviour must be for it to grow.
However, how does this purpose of exponential growth position the economy in relation to the greater social system and environmental system?
Like a body builder who feeds increasingly large muscles with steroids at high risk of deleterious health outcomes to the major organs of his body, mainstream economists focus on only one part and ignore all implications that perpetual growth has for the systems it is contained within.
How does mainstream economic thinking then, affect communities and how can communities not fall for the same mistakes of thinking too narrowly about their own system?
Traditional economic development has for various reasons, been focused on the larger economic ‘body building’ projects but has failed to acknowledge the importance of all its smaller parts.
Like the body builder, it has focused on the muscles only and assumed big muscles mean a healthier body.
Like body builders, size matters for traditional economic development and growing the size of the community and its economy seems more important than the quality of that community and its economy.
For example, mainstream economists get very excited about the prospect of growing West Australian wheatbelt communities’ populations with fly-in/fly-out mine workers.
This is put forward on the basis of the general population benefits it brings without discussion as to the quality of the community that will come from large proportions of a population being totally absent for significant periods of time. In other words, there is no thought to the negative social implications of FIFO on the community.
When a coal ship runs aground, potentially destroying a large part of the Great Barrier Reef, mainstream economists complain that a $10,000 pilot to guide ships through the channels make it uneconomic. However, the cost to the environment can be many times more with just one disaster and feeds back into the greater economy as the tourist industry suffers.
With growth as its purpose, and little acknowledgement of interacting systems, mainstream economic thinking seems largely incompatible with the greater social and environmental systems and thereby causes many of the problems found in each of them.
It’s important that small community systems do not make the same mistakes.
Local Action With An Eye On The Larger System
Community visioning and strategic planning must take into account how the community’s system interacts with the systems of which it is a part.
There is no point coming up with a vision that doesn’t take into account the realities of the greater regional or global economy, the lifestyle needs of people you would like to live in your town or the limits and sensitivities of your natural environment.
It may be better to re-label community visioning in a Systems Thinking context, as a ‘community purpose’, as it can help to highlight the behaviour of the community and connect it to the greater system it influences and that influence it. So, if the current behaviour of a community system is part of a redundant purpose (e.g. a town builds fishing boats to catch and export fish but the fishery has been depleted) then a new or additional purpose may be required to provide resilience in the system.
When you think about the real reasons humans live in communities it is much more than just an economic one. We come together to be safe (groups provide a level of protection), happy (by having relationships with others, a certain type of lifestyle and sense of place) and wealthy (communities provide better ability to trade). All three are equally important.
However, because our thinking is skewed toward the ‘wealth’ reason, we tend to define our communities purpose purely from a single economic viewpoint. We start to describe ourselves this way; ‘we’re a mining town’, ‘a farming community’, ‘a tourist town’, a ‘fishing village’, a ‘tree-change’ or ‘sea-change’ community etc.
While these may be entirely accurate, they reduce the capacity of a community to think about itself in any other way, stifling creative solutions and limiting possibilities. Communities are encouraged to build ‘clusters’ around what they already do (are good at) when they should be able to think about building locally owned clusters of anything they can put their mind to so as to diversify(1).
To remain a single purpose community (and a cluster of farming related industries in a ‘farming community’ is still a single purpose) is to invite brittleness and collapse as opposed to resilience and strength.
So, what if your community’s purpose was not just to be a ‘tourist town’ but a place that provides safety, happiness and wealth for all its citizens? How would this affect the way the town behaved?
It would certainly mean broadening its focus and being open to different opportunities. It might mean acknowledging that not everyone in town chooses to live there because of tourism. It might be because of the quiet country lifestyle, a chance to operate a small farm or basic affordability. Do we really need to build that 10-storey hotel, owned by international investors?
Maybe it means that other locally owned enterprises not related to tourism deserve to get some attention from local authorities that will reflect the diverse reasons why people live in this ‘tourist town’?
Thinking like this may end up helping the tourist industry anyway. It may mean more business bookings and not just holidaymakers. Importantly it would mean less seasonality and more continuous money flow throughout the year for all business operators in town.
Question the behavior of your town. It may lead to a new or additional purpose.
What happens to our fishing village when the season is over?
Why doesn’t anyone want to bring their family to live in our mining town?
Does our farming community need to be so quiet when the harvest is done?
Who will generate the new ideas in our town of retirees?
Why is an overseas owned international hotel allowed to be developed in my town but residents can’t have a community garden?
It’s being used extensively in computing, engineering, epidemiology, information science, health, manufacture, management, and the environment but surprisingly, it hasn’t really taken off in the field of economics.
I should’ve said, ‘not surprisingly’ because the economic system is one system that has continually confused, befuddled and surprised people for centuries.
At a time of economic crisis, there are plenty of economic experts who can tell you why something happened after the fact, yet were unable to detect that it was going to happen.
Is this because of an analytical approach rather than a system approach?
I can imagine mainstream economists reading this saying, “This guy has no idea what he’s talking about. We take a systems approach. We look at how all the parts interact.”
All the parts of the economy maybe.
The problem with mainstream economics (yes another one)
The problem, I believe, is that the mainstream economics approach actually puts the economy at the top of all other systems (usually by ignoring all others), rather than seeing the economy as a part of a greater system. It’s a part of society and a part of the greater ecological system.
Another problem is that the behaviour of the economic system gives it a purpose that does not allow it to function properly within those greater systems and so causes seemingly intractable social and environmental problems.
For me to discuss this any further I need to return to Systems Thinking 101 and there is no better material for systems basics than that produced by Donnella H Meadows. In her book Systems Thinking: A Primer.
Meadows describes a system as a group of elements that have interconnections between them. All systems also have a purpose or function and observing the behaviour of the system reveals the purpose of the system.
For example, a car is made up of engine, radiator, battery, drive shaft, wheels, etc. They are interconnected by the energy in the system, the instructions from the driver to steer, accelerate, brake and generally make the vehicle move in the desired direction. Observing the behaviour of a car, would lead us to conclude that the purpose of this system is for transportation.
But a car is also an element of the transport system and only works by fitting into that larger system by using the fuel available at the petrol pump, or the roads that are designed for wheels. If all cars had fuel or wheels incompatible with the greater transportation system, cars couldn’t drive anywhere and the transport system wouldn’t work either.
So what does this tell us about economics?
The Economic System
The economy is made up of lots of elements including; businesses, people, capital, products, resources etc. These elements would be interconnected by money, marketing, maybe some would include ‘rational self interest’.
Observing the behaviour of the economic system we can see that it is considered to be working at maximum efficiency when it is growing. When there is more of everything – more credit, more businesses, more resources available etc. So the purpose of an economy based on its behaviour must be for it to grow.
However, how does this purpose of exponential growth position the economy in relation to the greater social system and environmental system?
Like a body builder who feeds increasingly large muscles with steroids at high risk of deleterious health outcomes to the major organs of his body, mainstream economists focus on only one part and ignore all implications that perpetual growth has for the systems it is contained within.
How does mainstream economic thinking then, affect communities and how can communities not fall for the same mistakes of thinking too narrowly about their own system?
Traditional economic development has for various reasons, been focused on the larger economic ‘body building’ projects but has failed to acknowledge the importance of all its smaller parts.
Like the body builder, it has focused on the muscles only and assumed big muscles mean a healthier body.
Like body builders, size matters for traditional economic development and growing the size of the community and its economy seems more important than the quality of that community and its economy.
For example, mainstream economists get very excited about the prospect of growing West Australian wheatbelt communities’ populations with fly-in/fly-out mine workers.
This is put forward on the basis of the general population benefits it brings without discussion as to the quality of the community that will come from large proportions of a population being totally absent for significant periods of time. In other words, there is no thought to the negative social implications of FIFO on the community.
When a coal ship runs aground, potentially destroying a large part of the Great Barrier Reef, mainstream economists complain that a $10,000 pilot to guide ships through the channels make it uneconomic. However, the cost to the environment can be many times more with just one disaster and feeds back into the greater economy as the tourist industry suffers.
With growth as its purpose, and little acknowledgement of interacting systems, mainstream economic thinking seems largely incompatible with the greater social and environmental systems and thereby causes many of the problems found in each of them.
It’s important that small community systems do not make the same mistakes.
Local Action With An Eye On The Larger System
Community visioning and strategic planning must take into account how the community’s system interacts with the systems of which it is a part.
There is no point coming up with a vision that doesn’t take into account the realities of the greater regional or global economy, the lifestyle needs of people you would like to live in your town or the limits and sensitivities of your natural environment.
It may be better to re-label community visioning in a Systems Thinking context, as a ‘community purpose’, as it can help to highlight the behaviour of the community and connect it to the greater system it influences and that influence it. So, if the current behaviour of a community system is part of a redundant purpose (e.g. a town builds fishing boats to catch and export fish but the fishery has been depleted) then a new or additional purpose may be required to provide resilience in the system.
When you think about the real reasons humans live in communities it is much more than just an economic one. We come together to be safe (groups provide a level of protection), happy (by having relationships with others, a certain type of lifestyle and sense of place) and wealthy (communities provide better ability to trade). All three are equally important.
However, because our thinking is skewed toward the ‘wealth’ reason, we tend to define our communities purpose purely from a single economic viewpoint. We start to describe ourselves this way; ‘we’re a mining town’, ‘a farming community’, ‘a tourist town’, a ‘fishing village’, a ‘tree-change’ or ‘sea-change’ community etc.
While these may be entirely accurate, they reduce the capacity of a community to think about itself in any other way, stifling creative solutions and limiting possibilities. Communities are encouraged to build ‘clusters’ around what they already do (are good at) when they should be able to think about building locally owned clusters of anything they can put their mind to so as to diversify(1).
To remain a single purpose community (and a cluster of farming related industries in a ‘farming community’ is still a single purpose) is to invite brittleness and collapse as opposed to resilience and strength.
So, what if your community’s purpose was not just to be a ‘tourist town’ but a place that provides safety, happiness and wealth for all its citizens? How would this affect the way the town behaved?
It would certainly mean broadening its focus and being open to different opportunities. It might mean acknowledging that not everyone in town chooses to live there because of tourism. It might be because of the quiet country lifestyle, a chance to operate a small farm or basic affordability. Do we really need to build that 10-storey hotel, owned by international investors?
Maybe it means that other locally owned enterprises not related to tourism deserve to get some attention from local authorities that will reflect the diverse reasons why people live in this ‘tourist town’?
Thinking like this may end up helping the tourist industry anyway. It may mean more business bookings and not just holidaymakers. Importantly it would mean less seasonality and more continuous money flow throughout the year for all business operators in town.
Question the behavior of your town. It may lead to a new or additional purpose.
What happens to our fishing village when the season is over?
Why doesn’t anyone want to bring their family to live in our mining town?
Does our farming community need to be so quiet when the harvest is done?
Who will generate the new ideas in our town of retirees?
Why is an overseas owned international hotel allowed to be developed in my town but residents can’t have a community garden?
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