Summary of Thinking in Systems by Donella Meadows: Part 6

Renewable Stock Constrained by a Renewable Stock

• Let’s look at a capital system that’s similar to the one from our previous example. However, now there’s an inflow to the resource stock. In other words, the resource is now renewable. For instance, the renewable resource in this system could be trees, and the capital stock could be sawmills.
• Living renewable resources such as trees can regenerate themselves from themselves through a reinforcing feedback loop. Nonliving renewable resources such as sunlight are not regenerated through a reinforcing loop. Instead, they have a steady input that keeps refilling the resource stock no matter what the current state of that stock might be.
• Again, let’s say that the lifetime of the capital is 20 years. And let’s also suppose that the company that owns the capital has a goal of 5 percent annual growth in its capital. On top of this, as with the nonrenewable resource, let’s say that as the renewable resource gets scarce, it costs more in terms of capital to harvest it.
• This simplified model of a company is affected by three nonlinear relationships:
  1. The price of the resource,
  2. The regeneration rate of the resource, and
  3. The yield per unit of capital.

One Type of Behavior

• With that said, this system can produce several types of behaviors. First, both the capital stock and the harvest rate of the renewable resource rise exponentially. Then the resource stock falls, but this stimulates the regeneration rate. And for a while, the resource can go on supplying an exponentially increasing harvest rate. But eventually, the harvest rate rises too high. And as a result, the resource falls low enough to reduce the profitability of the company.
• The balancing loop of falling harvest reducing profit brings down the investment rate in capital stock. This happens until the capital stock is brought into equilibrium with the resource stock. As a result, the capital stock can’t grow forever, but it can maintain a steady harvest rate forever.
• In other words, annual harvest of the renewable resource brings profits that allow for the growth of the capital stock. But, the harvest rate levels off after rising too high. And the result of the leveling harvest is that the resource stock stops falling and stabilizes.

Another Type of Behavior

• Next, what if there’s just a minor change in the strength of the balancing loop through the yield per unit of capital? Could this make a surprising difference?
• Let’s say that in order to increase the harvest rate, the company comes up with a technology to improve the efficiency of its harvesting equipment. So, as the resource declines, the equipment’s ability to harvest the same amount per unit of capital is maintained for just a little longer.
• In this case, there’s a slight increase in the yield per unit of capital that comes from the development of a more efficient technology. As a result, this creates a pattern of harvesting too much, as well as fluctuation around a stable value in not only the harvest rate, but also the stock of capital and the resource stock.

One More

• Now, if the harvesting technology gets even better, then the capital equipment can go on operating economically even when the resource is at a very low level. However, the result could be a near wipeout of both the resource and the company that’s dependent on harvesting the resource.
• In other words, an even greater increase in yield per unit of capital creates a pattern of overharvesting and collapse in the harvest rate, the stock of capital, and the resource stock. So, the renewable resource could be turned, for all practical purposes, into a nonrenewable resource.
• In some economies based on renewable resources, the small surviving resource population can build itself back up again once the capital driving the harvest is gone. But on the other hand, increases in technology and harvest efficiency have the ability to drive resource populations to extinction.

A Summary of Behaviors

• Once again, there are three possible behaviors in this renewable resource system:
  1. Overharvest and adjustment to a sustainable equilibrium,
  2. Overharvest beyond that equilibrium and fluctuation around it, and
  3. Overharvest followed by collapse of the resource and the industry that’s dependent on it.
• And the outcome that actually occurs depends on two things. The first is the critical threshold beyond which the resource population’s ability to regenerate itself is damaged. The second is the speed and effectiveness of the balancing feedback loop that slows capital growth as the resource becomes depleted.
• If the feedback is fast enough to stop capital growth before the critical threshold is reached, the system comes into equilibrium. But if the feedback is slower and less effective, the system fluctuates. And if the feedback is too weak, so that the capital can go on growing even when the resource is reduced below its threshold ability to regenerate itself, the resource and the industry that’s dependent on it both collapse.

Renewable and Nonrenewable Resources

• Nonrenewable resources are stock-limited. The entire resource stock is available at once. It can be extracted at any rate, limited mainly by the amount of extraction capital. But since the stock isn’t renewed, the faster the extraction rate, the shorter the lifetime of the resource.
• Renewable resources are flow-limited. They can support harvest indefinitely, but only at a rate equal to their regeneration rate. If they’re extracted faster than they can regenerate, they may eventually be driven below a critical threshold. At that point, they’ll become nonrenewable, for all practical purposes.
• Neither renewable nor nonrenewable limits to growth allow a physical stock to grow forever. However, the constraints they impose are quite different. And this difference comes from the difference between stocks and flows.
• With all the behavioral possibilities of complex systems, the trick is to understand what structures contain which latent behaviors, as well as the conditions that release those behaviors. Also, its’ important, where possible, to arrange the structures and conditions to reduce the likelihood of destructive behaviors and encourage the likelihood of beneficial ones.

If you’d like to review, here are parts one, two, three, four, and five of this summary.

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