Part of a series of “reading memos” that offer a brief summary of interesting academic content along with my personal reflections. This one covers Chapter 5 of Thinking in Systems: A Primer by Donella Meadows.

Summary

The authors begin by introducing the concept of bounded rationality, the idea that people generally make the best decisions they can given the context of what they know. These decisions often cannot optimize for the system as a whole, due to the lack of understanding of details outside of individual purviews. As a result, people often disagree with the decisions of others and society suffers suboptimal outcomes. The authors note that if someone were placed in another’s shoes, they would soon be making all the same decisions they originally couldn’t understand, simply because of the shift in mindset and the bounds of their rationality. To improve outcomes, people need to actively seek to step outside their bounds to understand broader problems. Systems can also be intentionally designed to improve information flows (i.e., feedback loops) and set up incentives for broader societal goals.

Several archetypes of system structures that have proven to be problematic are introduced, including: policy resistance (everyone optimizing for competing goals to the point where the status quo persists with unnecessarily wasted efforts), tragedy of the commons (overuse of an erodible resource), drift to low performance (downward spiral as people tend to believe bad news more than good news), escalation (reinforcing feedback loop leading to an arms race), competitive exclusion (natural tendency for monopoly creation), addiction (shifting problems to intervenors and becoming dependent on them without addressing root problems), rule beating (abiding by the letter but not the spirit of laws), and seeking the wrong goal (optimizing for a metric that ultimately leads to undesirable outcomes).

System Trap	The Way Out	Example
Policy Resistance	Let go (of extreme positions). Redefine unifying goals.	The fight over abortion policy
Tragedy of the Commons	Educate users. Regulate access or privatize the resource.	Use of public roadways
Drift to Low Performance	Let standards be enhanced by the best performances instead of being discouraged by the worst.	Failing public schools
Escalation	Don’t engage. Or negotiate a new system with balancing loops.	Smear campaigns, trade/price wars
Success to the Successful	Diversify to compete in new markets. Remove advantages for the strongest players and level the playing field.	Monopolies & monopsonies
Addiction/Dependence	Take the focus off short-term relief and put it on long-term restructuring.	Elder care facilities
Rule Beating	Redesign rules to release creativity in the direction of achieving the purpose of the rules.	Use-it-or-lose-it spending at the end of a fiscal year
Seeking the Wrong Goal	Specify indicators that reflect the real welfare of a system. Don’t confuse effort with result.	GDP/GNP as a measure of success

Reflection

This was an exceptionally insightful reading that exposed the many innate flaws with human nature which prevent societies from attaining their most ambitious or desirable goals. There were many references to well-known concepts in behavioral psychology and the study of cognitive biases, but the added context of systems thinking made this piece particularly profound. It did a great job of explaining many of the subpar outcomes we see in government more generally, and urban planning specifically. For example, I can now look at the housing crises in many U.S. cities and see that all the stakeholders involved are operating in their own bounded rationalities – from the local residents wanting to preserve the character of their neighborhood, to developers needing to turn a profit, to housing advocates who are desperate for more affordable housing. The result is a perfect example of the policy resistance archetype and explains why it is so difficult to make true progress on this problem.

At the same time, the authors’ suggested solutions for escaping the system traps are all quite surprisingly straightforward. Aligning the goals of stakeholders, standing down or letting go, designing better indicators and incentives, and improving feedback loops are all great, if not somewhat obvious, ideas. However, they are clearly difficult to implement in practice given the staggering number of seemingly intractable problems that exist in societies across the globe. Perhaps the underlying solution to them all (breaking out of bounded rationality) is too unnatural for most people to adopt or discover on their own.