Causal Loop Diagrams

Causal loop is a convenient way to represent the feedback loop structure of systems. The
causal loop diagrams are used to describe basic causal mechanisms hypothesised to generate the
reference mode of behaviour of the system over time. A feedback loop contains two or more
casualty related variables that close back on themselves. The relationship between one variable
and next in the loop can be either positive or negative. A positive relationship means that if one
variable increases, the other also increases.

For example, in Fig. 3.1 the arrow from A to B means that an increase in A causes an increase in
B. It can also mean if A decreases, B will also decrease. The arrow starting from A and
terminating at B with a (+) sign at the end of the arrow means the cause–effect relationship is
positive.

Fig. 3.1: Cause and effect relationships

In a negative relationship, the two variables change inversely. For example, in Fig. 3.1 the arrow
in the direction of C to D means that if C increases, D will decrease. It can also mean if C
decreases, D will also increase. The arrow starting from C and terminating at D with a () sign at
the end of the arrow means the cause–effect relationship is negative.

Fig. 3.2: Positive feedback loop

Figure 3.2 shows an example of causal loop diagram with notation. This simple causal loop
diagram of population consists of two variables, population growth and population. This figure
illustrates a simple positive feedback loop consisting of two cause–effect relationships. In this
example an increase in population will cause an increase in population growth. The cause–effect
relationship is positive, and it is indicated by an arrow with a (+) sign starting at population and
terminating at population growth. The cause–effect relationship between population growth and
population is also positive. An increase in the population growth will cause an increase in
population. This is indicated by an arrow with (+) sign staring at population growth and
terminating at population. The loop formed from population to population growth and back to
population is reinforcing loop and it is indicated by a (+) sign with an arrow inside the causal
loop diagram.

Fig. 3.3: Positive and negative feedback loops

Figure 3.3 illustrates two feedback loops. In loop 1 the number of births increases with the
population and the births in turn increases population. These are positive relationships and
represented by arrows with a (+) sign. In loop 1 there are two positive relationships. Hence, it is
a positive and reinforcing loop. In loop 2 the number of deaths increases with population and the
population decreases as the death increases. In loop 2 the first relationship is positive, and it is
represented by an arrow (+) sign, while the second relationship is negative, and it is represented
by an arrow with () sign. One can easily determine if a loop is positive or negative by counting
the number of negative relationships in a loop. If there are an even numbers of negative
relationships in total in a feedback loop, then the loop is positive; if there are odd numbers of
negative relationships, the loop is negative. In fact, positive feedback loops generate growth, i.e.
the loop is reinforcing and negative feedback loops are goal seeking. In loop 2 number of
negative relationships is odd, i.e. 1. Hence, this loop is negative and goal seeking.
 Fig. 3.4: Coupled feedback loops

Let us now consider a coupled feedback loop of population, resource use and pollution as shown
in Fig. 3.4. Loop at the right corner is positive, i.e. reinforcing, while the loops at the bottom and
left corner are negative, i.e. balancing loop. In the positive loop, all the cause–effect relationships
are positive, while in negative feedback loops, the number of () relationships is 1, i.e. an odd
number.

Steps in Causal Loop Diagram

1. Define the problem and the objectives: We must first of all study the system based on
information collected through interview, focus group discussion, research report and case
study. We must describe the system and define the problem with the reference mode of
the behavior of the system.
2. Identify the most important elements of the systems: We should identify the key
variables affecting the behavior of the system, and it should be a good starting point to
develop the causal loop diagram. Other variables can be added during later stages of
causal loop development.
3. Identify the secondary important elements of the systems: Secondary variables within
the system boundary should be added after careful identification of the most important
variables. This would provide an opportunity to consider the secondary variables of the
system of importance in the causal loop diagram.
4. Identify the tertiary important elements of the systems: Tertiary variables within the
system boundary should be added after careful identification of the secondary variables.
However, tertiary variables of little importance can be omitted in the later stages once it
is established by simulated studies.
5. Define the cause–effect relationships: Find the cause–effect relationships using arrows
with polarity for the primary variables first, then for the secondary and tertiary variables.
 6. Identify the closed loops: Trace closed loops formed by cause–effect relationships for
the variables describing the system.
7. Identify the balancing and reinforcing loops: Identify the number of negative cause
effect relationships in each of the closed loops. The closed loops with odd number of
negative relationships are negative, i.e. balancing loops, and the others are positive, i.e.
reinforcing loops.

Examples

Population Problem

Population has been growing exponentially throughout the history. Population increases by a
fixed percentage per year, and also it decreases by a fixed percentage per year because of the fact
that the human has a limited life. Draw the causal loop diagram of the simple population model.

Fig. 3.5: Causal loop diagram of a simple population model

Three key variables are population, birth rate and death rate. Birth rate increases with population,
and also birth rate adds to population. These two are positive cause–effect relationships. Death
rate increases with the increase in population, and it is a positive cause–effect relationship, but
population decreases with the increase in death rate, and it is a negative cause–effect
relationship. Hence, the model consists of two fundamental loops. The regenerating loop R
generates new birth and adds it to population. The balancing loop B creates the death and
depletes it from the population. The birth creates a positive loop since all the cause–effect
relationships within this loop are positive, while there is an odd number of negative relationships
within the balancing loop, and hence it a negative feedback loop. Figure 3.5 shows causal loop
diagrams of a simple population model.
Price Determination of a Commodity

Fig. 3.8: Causal loop diagram of price determination of a commodity

The causal loop diagram of price determination of an agricultural commodity is shown in Fig.
3.8. The trader price is settled by price adjustment and expectation adjustment, and these form
one positive feedback loop R1 and one negative feedback loop B1. The price depends on relative
inventory coverage and trader price and the increase in price would reduce the consumption and
thereby forms the negative feedback loop B2. On the production side, price, profitability and
production also form a negative feedback loop B3. Also inputs, yield and production form a
negative feedback loop B4. R & D, yield and production rate form a positive feedback loop (R2).
The increase in population would increase the consumption rate and the population consists of
one positive feedback loop R3 and one negative feedback loop B5.

Global Warming

Global warming refers to an increase in the average temperature of the atmospheric

temperature resulting from greenhouse effect, and it is a prime concern in many
developing countries. Earth’s surface average temperature is increased by
emissions of greenhouse gases and incoming solar radiation. The emissions are
reduced by carbon sink of plant kingdom and algae in the sea. The water vapor
increases the absorbed radiation. Draw the causal loop diagram of this simple
global warming model.
 Fig. 3.12: Causal loop diagram of global warming

The causal loop diagram of the simple global warming model system is shown in
Fig. 3.12. Absorbed radiation is increased by solar radiation and CO2 in the
atmosphere and water vapour. The increase in air temperature causes increase in
photosynthesis in the plant kingdom and algae in the water body which decrease the
CO2 in the atmosphere (B1 and B2). Air temperature increases water vapor which
increases the absorbed radiation. This forms a positive feedback loop (R1). Thus,
there are one reinforcing loop and two distinct balancing feedback loops B1 and B2.