Moxnes 2004 System Dynamics Review

Misperceptions ofErling Moxnes: Misperceptions of Basic Dynamics 139
basic dynamics: the case

of renewable resource management
Erling Moxnes*
Erling Moxnes is a Abstract

professor in System
Previous laboratory experiments, using quite complex resource simulators, suggest that renewable
Dynamics at the
resources are over-utilised because of a general tendency for people to systematically misperceive
University of Bergen.
the dynamics of bioeconomic systems. Here, similar experiments with simplied simulators
Here he teaches
involving the management of reindeer rangelands are carried out. Sufcient information is given
traditional system
for the subjects to construct perfect mental models. Misperceptions persist for a simulator contain-
dynamics,
ing only the basic building block of all dynamic systems: one stock and two ows. Results
experimental
deteriorate in a second treatment where a two-stock model is used. Compared to earlier studies
methods, and
using questionnaires, where subjects do not benet from repeated outcome feedback, the experi-
optimization in
ments show that, even in these simple systems, information feedback is not sufcient to make up
the universitys
for misperceptions. Simulations are used to test two hypothesised decision rules: the optimal
International Master
policy is rejected; a simple feedback rule is not. Altogether, the experiment and the simulations
Program in System
provide both a motivation for and an introduction to studies of system dynamics. Copyright
Dynamics. His
2004 John Wiley & Sons, Ltd.
research is mainly
concerned with Syst. Dyn. Rev. 20, 139162, (2004)
studies of
misperceptions
of dynamics and
uncertainty in
There are numerous examples of overexploitation and at times extinction
connection with of renewable resources, think of, for example, whales, forests and sh, as
sustainable well as some reindeer pastures. A prominent theory for why this happens is
development in areas the tragedy of the commons (Hardin 1968; Gordon 1954; and others back
such as renewable to Aristotle). However, overexploitation has also taken place for privately
resources and energy.
owned renewable resources and for shared resources with policies in place
to tackle the commons problem. An alternative or supplementary theory for
overexploitation is misperception of dynamics. Laboratory experiments show
overinvestment and overutilisation even when the subjects (students and
professionals) have full property rights and monetary incentives to behave
optimally (Moxnes 1998a,b; 2000). These results are consistent with experi-
mental studies of other complex dynamic systems (e.g., Sterman 1989a,b;
Funke 1991; Brehmer 1992), showing, with few exceptions, considerable
deviations from normative standards.
The laboratory experiments used thus far have been characterised by con-
siderable complexity and ambiguity about model structure and parameters.
Here we construct similar experiments, but reduce the complexity to a min-
imum. In the present experiments it is possible to reconstruct perfectly the
underlying model and its parameters from the instructions. Consequently,
Correspondence to: Prof E. Moxnes, Dept. of Information Science, University of Bergen, PO Box 7800, N-5020,
Bergen, Norway. E-mail: Erling.Moxnes@i.uib.no
Thanks to the editors and referees for valuable comments and to the students for participating in the experiments
and for ensuing discussions.
System Dynamics Review Vol. 20, No. 2, (Summer 2004): 139162 Received March 2003
Published online in Wiley InterScience Accepted July 2003
(www.interscience.wiley.com). DOI: 10.1002/sdr.289
Copyright 2004 John Wiley & Sons, Ltd.
139
140 System Dynamics Review Volume 20 Number 2 Summer 2004
observed subject behaviour can be compared to optimal normative behaviour.

There are two treatments with different levels of complexity. The simplest
model consists of only one resource stock with one inow and one outow, i.e.
the basic building block of all dynamic systems. If subjects systematically
misperceive such a simple dynamic system, it should motivate further studies
of dynamic systems and signals a need for improved education in dynamic
systems in general.
From a methodological point of view it is interesting to note that a deve-
lopment towards more and more simple experimental designs parallels tend-
encies seen in the investigations of judgement under uncertainty. According to
Edwards (1982, p. 361): The simple example . . . didnt occur to us; instead
we were sure that we would need to use a fairly complex situation in order to
get non-Bayesian behaviour.
Other attempts at testing misperceptions of simple dynamics have been
made by Booth Sweeney and Sterman (2000), Kainz and Ossimitz (2002), and
Ossimitz (2002). These investigations show systematic misperceptions of
perfectly described, simple open-loop dynamic systems. The three studies
contribute importantly to our knowledge about how people misperceive the
basics of dynamic systems. They all use an experimental design different from
ours, asking subjects to project consequences over time of certain actions; the
subjects are not asked to manage simulators with information feedback and
repeated decisions. When we choose the latter design, we allow the subjects to
benet and learn from feedback. Hence, errors made at an early stage can be
corrected at later stages. An important question is: will the available feedback
be sufcient to avoid serious effects of misperceptions in our simple dynamic
systems?
Compared to the more complex experiments of renewable resources, we nd
that the basic tendency towards misperception remains when the experiment
is simplied to one stock with two ows. Compared to the simple experiments
asking for projections, the basic misperceptions remain when feedback and
repeated decisions are allowed. A second treatment with a two-stock model
shows that complexity matters. Finally we use model simulations to examine
subject policies. An optimal strategy (constant target escapement1) is rejected
while a simple feedback rule is not.
The experimental design
Treatment T1one stock

The task faced by the subjects is one of managing a renewable resource, a
reindeer rangeland. The most important dynamic factor for reindeer manage-
ment is lichen, the plant providing the main source of winter fodder for the
reindeer. Figure 1 shows how the stock of Lichen is increased by Growth (total
Erling Moxnes: Misperceptions of Basic Dynamics 141
Fig. 1. The stock and

ow structure of the
simple design, T1
growth minus decay) and reduced by Grazing. Grazing in turn depends on

Grazing_per_animal and the Herd_size. The Herd_size is the decision vari-
able, to be set once each year. The subjects are told that the herd size can be
varied freely (as if animals can be sold and bought in a market). Growth
depends on the stock of Lichen as described by the solid line in Figure 2.
Fig. 2. Growth curve

with calculated data
points. The + signs
denote historical
grazing rates
The subjects in the experiment do not get to see the structure of the problem
as depicted in Figure 1. The stock and ow diagram is one of the tools of
system dynamics and has typically not been available to decision makers thus
far. Consequently, a structuring of the problem by this tool has not been
available either. Therefore, the subjects get verbal descriptions. However, the
descriptions (Appendix 1) are sufcient to construct the model in Figure 1.
Regarding the growth curve, the subjects learn that there will be no growth
when the lichen thickness equals zero (the seed is missing) and when it
equals 60 mm (due to crowding). They are also told that growth reaches a
maximum somewhere between these extremes. They do not get to see the
growth curve in Figure 2 since such growth curves have not been estimated
until recently for lichen ranges (Moxnes et al. 2002). Consequently such growth
curves have not been used in policy discussions. The subjects get exact infor-
mation about the parameter Grazing_per_animal (0.004 mm/year). In addition
they receive perfect information (gures and tables) about the development of
the herd size and the lichen thickness over the last 15 yearsthe most recent
period before they take over the management of the range. Real decision
makers deal with less precise information, implying that they face a somewhat
more complex problem.
If the structure of the model is known, the time series can be used to estimate
the growth curve from the time-series data. We measure the stock of lichen Lt
by its average thickness (mm) and write the equation:2
L t+1 = L t + gt hNt (1)
where Nt is the herd size, gt is the growth rate for lichen, and h is grazing per
animal. Rearranging the equation with gt on the left-hand side:
gt = L t+1 L t + hNt (2)
we get data points for growth as a function of the lichen thickness; see the open
squares in Figure 2. The data points for the last two years of the historical
period provide data points to the left of the peak of the curve; hence the
location of the maximum growth is found at a lichen thickness of 30 mm. This
is the lichen thickness that gives the maximum sustainable yield (gmax = 5 mm/
year) and that represents the desired sustainable situation. Knowing that h
equals 0.004 mm/year, we nd the maximum sustainable herd size equal to
Nmax = gmax/h = 1,250. If one is able to perform the above calculations, one has a
perfect model to work with after spending just a few minutes on calculations.
In the base treatment, T1, the task faced by the subjects is to reach the
maximum sustainable herd size (and the maximum sustainable growth of
lichen) as quickly as possible. The initial condition is one of overgrazing, with
a lichen thickness L0 = 24.4 mm, i.e. less than the desired 30 mm. Figure 2
shows that initial growth g0 is slightly lower than gmax, while the initial grazing
rate (hN0) is 50 percent higher than g0 (shown by the far left + sign in Figure 2).
The optimal policy is to reduce the herd size to zero in the rst year, increase
the herd to 1,056 in the second year, and then reach the maximum sustainable
herd of 1,250 and the corresponding lichen thickness of 30 mm in the third
year (recall that the subjects are allowed to sell or buy any quantity of reindeer
in the market). Given that Figure 2 has been properly constructed by the
subject, an approximate solution is intuitively simple. First, the gure makes
clear that grazing must be brought below the current growth rate to rebuild
lichen. Second, three years with around 50 percent overgrazing since the growth
peak was passed implies that three years with about 50 percent undergrazing is
needed to return to the growth peak. Third, to reach the desired situation as
quickly as possible, however, the herd should be reduced to zero in the rst
year. Then feedback about the development could be used to ne tune the herd
size to the maximum sustainable state. The optimal policy is consistent with
the constant target escapement policy known from resource economics (e.g.,
Clark 1985).
Since it is possible to get very close to the optimal policy with simple means,
we choose the optimal policy as our benchmark to judge observed subject
behaviour. This is different from earlier, more complex experiments where
underlying simulators have not been fully explained and where there has been
ambiguity about both models and parameters. Hence in our case there is no
need for learning and thus the problem is in principle much simpler than the
previous experiments requiring learning. In practice, the difference may be of
little importance if the subjects are not able to perform the above calculations.
Then they have to rely on learning-by-doing anyway.
Treatment T2two stocks

The second treatment, T2, is equal to T1 except that animals cannot be varied
freely; the growth of the herd size is limited by recruitment from the existing
herd (animals can be slaughtered but not bought), see Figure 3. Thus, in
addition to lichen, also the livestock of reindeer Nt is modelled by a stock
variable:
Nt+1 = Nt + Rt max(0, Nt + Rt DNt) (3)
where Rt is the recruitment of livestock and the expression in parentheses
denotes the slaughtering of livestock. Since the livestock consists of 90 percent
females and 10 percent males, all male calves in excess are excluded from Rt.
DNt is the desired herd size, the decision variable. We see that if DNt is larger
Fig. 3. The stock and

ow structure of the
complex design, T2
than Nt + Rt, no livestock is slaughtered and the population growth is limited

by the recruitment. Also note that compared to the model in T1, there will be a
one-year delay after the desired herd DNt is changed until the lichen stock is
affected.
The subjects receive exact information about all parameters needed to calcu-
late Rt; see Appendix 2. Thus, also in T2, subjects have perfect knowledge
about the model such that learning-by-doing is in principle not needed. The
optimal solution is more complicated than in T1, although the same logic
applies regarding the lichen dynamics. In T2 one must take into consideration
that if the herd size is reduced too much in the rst year, there will be a
shortage of reindeer at the time lichen reaches the desired level (30 mm). A
rough estimate of the maximum growth rate for the herd could be used to
indicate an appropriate rst-year level for the herd size and to get quite close
to the optimal solution. The optimal solution or the benchmark shown in
Figure 5 is found by trial and error.
Subjects and design details

For both treatments, subjects were recruited among students with varied
backgrounds entering the international Masters degree programme in System
Dynamics at the University of Bergen. T1 was run in September 2002 (n = 16)
and 2003 (n = 18), while T2 was run in September 2000 (n = 16) and 2001 (n =
15). In all runs except the one in 2000, each subject had three trials with the
same simulator. The T1 simulator was programmed in Excel3 while T2 was
programmed in Powersim.4 The person in each group and each trial getting
closest to the maximum sustainable situation in the shortest time was pro-
mised and received a small prize. Each subject was situated at a separate
PC with no communication allowed with other subjects. Importantly, each
subject was granted private property rights to his or her lichen pastures and
herds. Thus, the commons problem was ruled out by the design.
Results
Figure 4 shows 95 percent condence intervals for average herd sizes and
lichen thicknesses for trial one in T1. Optimal paths are shown with dashed
lines. Graphs are shown separately for the classes of 20025 and 2003. In the
early years, the average herd size is signicantly higher than the optimal one
and, in later years, it is signicantly lower. Hence, on average the subjects in
T1, the simplest case, are not successful in reaching the maximum sustainable
herd size within 15 years. The lichen thickness is signicantly lower than the
optimal lichen thickness in all years after the initial one. There is no signic-
ant difference between the classes of 2002 and 2003, with respect to neither
herd size nor lichen.
Fig. 4. Optimal and

95 percent condence
intervals for the
average first trial
results for herd size
and lichen thickness;
T1-2002 (thick lines)
and T1-2003 (thin
lines)
Figure 5 shows 95 percent condence intervals for average herd sizes and
lichen thicknesses for trial one in T2. Graphs are shown separately for the
classes of 2000 and 2001. Optimal paths are shown with dashed lines; it takes
three more years to reach the desired situation in T2 than in T1 because of the
recruitment limitations for the reindeer. When the 95 percent condence
intervals for the average herd sizes and lichen thicknesses are considered,
there are almost perfect overlaps between the experiments in 2000 and 2001.
When the results of T1 and T2 are compared, the patterns are largely the
same. However, the distance from the optimal situation seems larger in the
complex case with two stocks, T2. To see if the differences are statistically
signicant at the 5 percent level, we compare lichen thicknesses relative to
optimal lichen thicknesses for the two treatments. Figure 6 shows condence
intervals for the pooled results of T1 (2002 and 2003) and for T2 (2000 and
2001). T2 appears to produce better results in year one and two, but this is only
because the subjects in T2 cannot inuence lichen in the rst year and hence
cannot deviate from the optimal response. After that, the average relative
lichen thickness is lower in T2 than in T1. Comparing the results year by year,
Fig. 5. Optimal and

95 percent condence
intervals for average
trial results for herd
size and lichen
thickness; T2-2000
(thick lines) and
T2-2001 (thin lines)
Fig. 6. 95 percent
condence intervals
for average lichen
thicknesses for
treatments T1 (thin
lines) and T2 (thick
lines)
we nd the p-values shown by the dashed line in Figure 6.6 The difference is
statistically signicant in the time interval from 4 to 13.
Next we look at how the results improve over repeated trials. Such improve-
ments are at times referred to as learning. However, one should be aware that
improvements over trials could also be the result of trial-and-error with no
deeper learning involved. A probably less biased test of learning is to invest-
igate how new insights are transferred from one case to another (Bakken 1993;
Paich and Sterman 1993; and Jensen 2004). When that is said, lack of improve-
ment over repeated trials with the same case does signal lack of learning.
Hence, what we present here indicates an upper limit for learning. Radical
and sudden shifts in individual strategies may also indicate learning and we
report the frequency of such events. However, before we consider learning,
we have to address another problem: the subjects interpretation of the term
sustainable.
In the introduction to the experiments we say: Note, however, you should
make sure that your operation is sustainable. We took for granted that all
subjects interpreted this to mean that the herd size they ended up with could
be sustained forever, without destroying the food resource lichen. Later dis-
cussions with subjects have revealed that some of them interpreted the term
sustainable otherwise. They seem to have interpreted sustainable to mean that
the lichen resource should last for the 15 years of the experiment, but no longer
than that. This is an interesting nding in itself. Furthermore, it implies that
we have to remove these subjects as outliers when we investigate improve-
ments towards a truly sustainable maximum herd size over trials.
We dene this subgroup to be those who in both of the two last trials
approximately deplete lichen in the last year or those who approximately
deplete lichen in the third trial while not depleting lichen in the second trial.
We nd the following frequencies of misperceived sustainability: T2-2001
none out of 15, T1-2002 four out of 15, T1-2003 four out of 18.
When these subgroups are removed, improvements over trials are as shown
in Figure 7. In T1 the average lichen thickness moves quite rapidly towards the
optimal level from trial one to trial two. Then the improvement is considerably
smaller from trial two to trial three. In the complex case, T2, improvements
are slower. Even after the third trial there is a considerable improvement
potential.
Finally, we show results indicating learning over time during the rst trial.
The example in Figure 8 is from treatment T1-2002. For most subjects the
development of lichen is nearly linear over time. Three major exceptions
are highlighted by thick lines. The subject with a lichen level closest to the
optimal one seems to realise by the second year what is needed to get a
favourable development in lichen. The two others make sudden and large
reductions in the herd size in year 9. In the group T1-2003 one subject is doing
it right from the very beginning, two make sudden and large reductions in the
herd size around year 4 and one makes a strong reduction in year 8. In the
Fig. 7. Optimal
and average lichen
development over
three trials.
Treatments from
above: T1-2002,
T1-2003, and T2-2001
group T2-2001, one subject does it nearly right from the very beginning and
two make strong reductions in the herd size around year 5. In the T2-2000
group one subject makes a drastic reduction around year 6. To summarise, for
the pooled results (T1 and T2) for trial one, 17 percent either do it quite right
Fig. 8. Indications of
learning during the
rst trial, treatment
T1-2002
from the very beginning or make rather drastic reductions in the herd size after
a while.
Discussion
First we discuss our main hypothesis about misperception of simple dynamic

systems with feedback, then we examine policies that may explain behaviour
by the use of simulations, and nally we discuss policy implications.
Observed biases
First we note that the observed mismanagement in both T1 and T2 is largely
consistent with what has been found in experiments with more complex
models and more experienced subjects, see Moxnes (1998b; 2000). This sug-
gests that the simplest design, T1, captures the essence of the problem. People
have difculties in managing a system with one stock and two connected
ows, i.e., the basic building block of all dynamic systems. The results from
our simple design, T1, also seem consistent with the results from the studies
where subjects are simply asked to project consequences over time of certain
actions (Booth Sweeney and Sterman 2000; Kainz and Ossimitz 2002; Ossimitz
2002). Compared to these studies, which typically also deal with one stock and
two connected ows, we nd that precise outcome feedback each and every
period is not sufcient to eliminate mismanagement even in a one-stock-and-
two-ows system.
From all this follows that a priori one may suspect misperceptions to occur
in all dynamic systems and that outcome feedback will not make up for wrong
initial projections of consequences. While we think that is a sound suspicion,
we cannot rule out that certain variants of the basic building block are easier to
manage. Our version of the one-stock-and-two-ows system has a nonlinear
growth function that complicates management (Figure 2). Without such a

nonlinearity, people seem to benet from outcome feedback in a one stock
model (Moxnes and Saysel 2004). Renewable resources are also easier to
manage if the catch-per-unit-effort drops with the stock (Moxnes 2000). There
are also renewable resources that are of a ow-type rather than a stock-
type. A simple example is the water ow in a river. For year-to-year manage-
ment, pure ow-type resources are not complicated by stock-and-ow dynamics.
On the other hand, most renewable resource systems are more complex than
our one-stock model. Comparing treatments T1 and T2, we nd that the aver-
age bias increases when one extra stock is introduced. This effect of increased
complexity is consistent with ndings in Paich and Sterman (1993) and Diehl
and Sterman (1995). While we think that the one-stock representation in
T1 captures the fundamental difculty of the problem, the additional stock
complicates the control of the system and typically slows down reactions.
Furthermore, the second stock (in our case reindeer) plays a signicant role
for most renewable resources. For instance, in sheries the shing capacity
(eet and gear) represent this additional stock, while the sh represents the
renewable resource comparable to lichen. The experimental analysis by Moxnes
(1998a) shows strong tendencies towards overinvestment in capacity with
implications for the shing effort. A rough representation of the climate change
problem has three major stocks: one for heat, one for greenhouse gases, and one
for the capacity to emit greenhouse gases.
Mental models and policies

Then we turn to explanations of the observed behaviour. What mental models
did the subjects employ and what policies did they use? Figures 4 and 5 show
that we must reject the hypothesis that the average subjects used an optimal
policy. The 95 percent condence interval is far from the optimal path for
lichen. It seems highly likely that the failure to behave optimally is due to
an inability to formulate an appropriate model for the decision problem. We
assert this because it is a common experience in the eld of system dynamics
that it is difcult to formulate appropriate dynamic models: it requires a
language in which to represent dynamic systems and an ability to translate
available normal language information into the modelling language. Further-
more, in our case, it does not seem logical that a subject who is able to formu-
late a perfect mental model will mismanage the resource. As suggested earlier,
a near-to-optimal management strategy follows quite easily from the perfect
model. Even without a perfect estimate of the growth curve, one should come
close to the optimal solution, given that one has a qualitatively correct model.
Whenever people know that they lack an appropriate mental model of a pro-
blem or they are uncertain about the relevance and precision of their mental
model, they have to rely on outcome feedback to correct actions over time.
Consistent with a view that most problems have an element of complexity and
uncertainty, Forrester (1961) claims that: Economic and industrial activities

are closed-loop, information-feedback systems. Hence we will investigate
feedback policies. According to Kleinmuntz (1985): . . . since the complexity
of the environment far exceeds that of the information processing system,
from the decision makers viewpoint the task has an essentially probabilistic
character. This implies that heuristics suggested in the literature on judge-
ment under uncertainty (e.g., Tversky and Kahneman 1974) may be appro-
priate when feedback policies are operationalised. Since there are always
many options with regard to the choice of policy, we start by discussing
mental models that may have guided the choice among alternative policies (or
heuristics).
Only 6 percent in T1 and 3 percent in T2 choose a rst year herd size lower
than 1500. The three subjects involved may have had proper qualitative dy-
namic mental models, although none of them did behave fully optimally.
Alternatively, these subjects, as well as some of those that reduced the herd
towards 1500 in the rst year, could have used the following simplied
dynamic mental model: since lichen has decreased historically, the historical
grazing must have exceeded the growth of lichen. From this dynamic mental
model it follows that the herd size must be reduced. However, the model is too
imprecise to say how much. Thus, even for this minority group a feedback
policy is needed to stabilise lichen and to search for the maximum sustainable
herd size.
The observed behaviour suggests, however, that a vast majority had highly
inappropriate mental models. One such mental model is a static one saying:
the more animals, the less lichen, and vice versa.7 Figure 9 shows that this
model is strongly supported by the data for the historical period provided in
the instructions to T1 (a regression yields an impressive t-ratio = 63 for the
slope). Choosing such a static model could be seen as consistent with the
representativeness heuristic in cognitive psychology (Tversky and Kahneman
Fig. 9. Data from the

historical period
before the subjects
take over management
and data for the (lower
of two) median subject
in the rst trial of T1-
2002
1974): people tend to ignore prior (here: hard-to-represent structural) informa-

tion and concentrate on the representativeness of data (here: the negative
correlation indicated by the time-series data). According to the same literature,
the impressive t of the static model could cause over-condence in such a
model.8 Using this static model, the logical thing to do is to increase the herd
further as long as there is lichen left. Close to one third of the subjects in each
of the four treatments do that from the very beginning.
However, those who increase the herd size or reduce it carefully, as the
median subject in Figure 9 does, quickly receive confusing feedback: the
lichen observations are no longer in accordance with the static model. In fact,
when the new data (black squares) for the median subject is considered in
isolation, the correlation becomes positive: the more animals, the more
lichen (again, a t-ratio = 13 for the slope is impressive). A few subjects switch
to this strategy after a short while, maybe rationalising that to begin with
there were more animals and more lichen and that development could be
reversed, as it could in a static model.9 Similar tendencies are seen in more
complex experiments (Moxnes 2000).
Most subjects, like the median subject in Figure 9, continue to reduce the
herd size. A likely mental model says that there is no other alternative; lichen
must be negatively inuenced by more reindeer. To save this hypothesis in
light of the conicting observations, subjects may add auxiliary hypotheses
including, for example, time delays, unknown external forces, nonlinearities
such as the grazing per animal must increase when the herd size is reduced,
etc. Such a revised mental model is highly likely to be perceived as ambiguous
or uncertain such that outcome feedback is needed.
We propose the following feedback policy for the herd size Nt:
Nt = NTradt NTradt (DL Lt)/DL (4)
The policy is formulated as an anchoring and adjustment heuristic, consistent
with what has been suggested in studies of judgements under uncertainty.
The anchor is the traditional herd size NTradt, reecting a certain faith in the
appropriateness of the historical management or of the initial herd size. The
adjustment has as its goal to close the gap between the desired thickness of
lichen, DL, and the actual thickness, L t. The adjustment is set relative to NTradt.
Thus, if the parameter is set equal to 1.0 and L t equals zero, the adjustment
will be equal to NTradt, implying that the herd size Nt will be reduced to zero.
Lower values of will lead to weaker adjustments and vice versa.
The traditional herd size NTradt is likely to be updated by recent experi-
ences. We choose a policy where NTradt is a smoothed version of the actual
herd size Nt:
NTradt+1 = NTradt + (Nt NTradt)/AdjTime (5)
As our a priori choice we will assume an adjustment time, AdjTime, of 10
years. According to Brekke and Moxnes (2003), random initial values can have
effects that last for that many simulated years. The desired lichen thickness is
set equal to 20.5 mm, assuming a certain erosion of the goal from the initial
lichen thickness. The value is adjusted slightly from a rst guess to improve
the t between actual and simulated development for the (lower) median
subject in T1-2002; see Figure 10. We have no prior ideas about the value of the
parameter and adjust it to get a good t, = 0.9.
Fig. 10. Simulated and

actual development
for the subject with the
(lower of two) median
lichen thickness in
year 15 in T1-2003.
Units: number of
reindeer and mm
lichen
The overall impression is that the simple feedback policy explains the major
tendencies: a gradual decrease in the herd size and then a stabilisation. A
simple statistical test suggests that we cannot reject the proposed model.10 As
always, an apparently good t does not prove that the proposed model is the
correct one. One could for instance augment the model by assumptions about
the relative change in lichen having an impact on the speed of the herd
reductions (Moxnes 1998b), one could add assumptions about variations in
the desired lichen thickness (e.g., a drift towards accepting a low standard);
and one could add assumptions about implementation delays and about
particular wait-and-see policies in the rst few years to get more data and
to become familiar with the task. Probably, none of these models would be
rejected by the data after calibration of parameters. Thus, with these additional
hypotheses, we could probably obtain ts for most subjects equally good to
that shown in Figure 10. However, the main conclusion would remain, that
behaviour is consistent with the use of some sort of feedback policy, a type of
policy it is hard to imagine that the subjects could do without, given that they
did not possess the perfect mental model.
By variation of the parameter , the feedback policy presented in Eqs 4 and
5 can produce developments that span the main area covered by observed
developments. Figure 11 shows how the lichen thickness develops when is
Fig. 11. Simulated

development with
three different values
of : = 0.9 (line 1),
= 0.4 (line 2) and
= 1.6 (line 3).
Unit: mm
reduced to 0.4 and increased to 1.6 from its original value of 0.9. That varies
among subjects is to be expected. Different from the appropriate mental model,
the applied mental models are not likely to give precise indications of needed
herd reductions to close the gap between desired and actual lichen levels.
Thus, the value of is likely to vary with personal characteristics such as
aggressiveness and risk aversion. Hence, one should not be very surprised that
the results vary a lot, as shown in Figure 8.
The explanatory power of the feedback policy suggests that the subjects
abandon the static mental model. In fact, the static model predicts that a
desired lichen thickness of around 20 mm is obtained by keeping the herd at a
level slightly higher than the initial one and is therefore rejected by the data.
However, another experiment with professional reindeer herders indicated
that the static mental model is not abandoned for all purposes (Moxnes 2000).
In each time period the subjects were asked to make forecasts of the next years
lichen thickness. All gave projections that were biased in the direction of what
the static model predicted. This suggests that for the analytical problem of
making forecasts, the static mental model is still relied upon, while decisions
are made according to a feedback policy. A similar inconsistency is found in
Broadbent et al. (1986), where an information treatment leads to better answers
in a questionnaire while task performance is largely unaffected.
Does the improved performance over trials in Figure 7 indicate that mental
models also improve? As noted earlier, the improvements denote upper limits
for learning. Furthermore, there exist quite compelling alternative explana-
tions to learning in terms of mental model improvements. According to Figure
11, considerable improvements could be obtained by using a more aggressive
version of the feedback rule; that is by using higher values of . Adjustment of
could simply be motivated by poor results in previous trials and does not
require any change in the mental model. Probably even more important, sub-
jects learning towards the end of the rst trial that the proper long-term herd
size is around 1,250 could set the herd size to a corresponding level in the rst
year of the second and third trials. If so, what is learnt could be the near-to-
optimal herd size for one specic district and not something that is useful for
the management of other reindeer rangelands or other renewable resources.
The difference between T1 and T2 suggests that it is easier to make quick
adjustments of the rst-year herd size when the herd can be varied freely.
Comparison to observed real management

The behaviour in both T1 and T2 is similar to what has been observed in many
reindeer districts around the world, including districts where institutions
have been in place to control the commons problem, see case data in Moxnes
et al. (2002). Figure 12 shows one such case presented in a graph similar to
the one in Figure 2. The data extends from 1944 (high lichen density) to 1967
(low lichen density). According to one anecdote, some experts started to warn
against overgrazing just after the peak of the growth curve had been passed
in the second half of the 1950s. These warnings were largely ignored by the
Fig. 12. Herd size

(+ signs) and an
estimate of the (net)
lichen growth curve
measured in standard
annual lichen takeouts
per year.11 Source
Moxnes et al. (2002)
administration and the politicians until the mid 1960s, at which point the herd
size had to be reduced to around one third of the maximum sustainable herd
size. This was not a desired development for anyone involved.
For purposes of comparison, data for the (lower) median subject in T1-
2002 is presented in a similar graph in Figure 13. The gure includes both the
Fig. 13. Herd size (+

signs) for the (lower)
median subject in T1-
2002 and the assumed
(net) lichen growth
curve. Lichen
thickness in mm is
converted to density
measured in g/m2 by a
factor of 20 g/m2/mm
historical period and the period managed by the subject. The overall pattern is
the same. In both cases the decision makers spend many years on insufcient
reductions in the herd size.
For subjects who deplete lichen severely, the herd declines more or less in
parallel with the decline in the growth rate. Decision makers do what they
believe is correct, and the result is a steady decline in the lichen level. This
causes frustration both to subjects in the experiment and those involved in real
management.
Policy implications
The above anecdote suggests that experts need better tools for communication.
In other cases of reindeer management experts have been known to give con-
icting advice, indicating that there is also a need for better communication
between experts. Furthermore, disagreements between experts imply an even
greater need for appropriate communication tools such that policy makers can
compare and evaluate the conicting advice.
Figure 14 may help clarify the information problem. On the left-hand side
the client makes decisions. Complexity and uncertainty typically imply that
information feedback is used when decisions are made. Normally the client is
a dictator when it comes to making decisions; the analyst or modeller can only
inuence the client through information. On the right-hand side, the modeller
builds a model of the problem, simulates and arrives at policy insights. The
modeller may present these policies to the client without further explanation.
Fig. 14. Illustration of

client and modeller
interactions (this is
not a formal causal-
loop diagram)
However, clients responsible for decisions are not likely to substitute black
box formulas for their own judgement. Experience tells them to be somewhat
sceptical of experts, and particularly so if the experts give diverging policy
advice.
For these reasons the best alternative seems to be to present information that
inuence the clients mental model of the problem. For this purpose the
analyst may benet from a model of the clients mental model. In our case it
seems that most subjects (clients) tend to think in terms of a static model (with
some auxiliary assumptions) and to employ feedback strategies. They seem to
lack proper dynamic representations. Depending on the time the client is
willing to set aside, various options are available. The pedagogical tools and
the principles of system dynamics (Sterman 2000) are known to help students
in this discipline. Group model building (Vennix 1996) involves the clients
directly in the model building. The more traditional approach is to present
nal model structures and simulation results. All approaches take consider-
able time.
If only a short time is available, for instance a lecture or a media appearance,
the presentation must be simple and focus on the essentials. Figures 2, 12 and
13 may represent such a simple representation. Once the gure is understood,
it focuses attention on adapting the herd size to the lichen growth. The gure
explains why a small reduction in the herd size can be insufcient to halt the
decline in lichen. Such a result is not surprising with this model in mind;
actually with this model in mind it is surprising that anybody could make the
decisions portrayed in Figures 12 and 13. However, one should not take for
granted that this graphical representation is easily understood. While Moxnes
(1998b) found that the results improved with this graph as an information
treatment, even researchers with considerable experience in formal analysis
happened to misperceived the gure. A large fraction of the subjects did not
consider the stock nature of lichen. More in accordance with a static model,
they pictured that if the herd size was reduced to the maximum growth rate,
the lichen stock would adjust accordingly and immediately. Hence it is a
challenge to avoid this misperception when using the growth curve in short
appearances.
Conclusions
Compared to earlier more complex experiments, the present experiments show

that even minimal representations of a renewable resource are sufcient to
cause severe mismanagement of the type observed in the real world. Compared
to earlier studies using questionnaires, where subjects do not benet from
repeated outcome feedback, our experiments show that such feedback is not
sufcient to achieve rapid learning over time and over repeated trials.
At the heart of the problem lie peoples difculties in formulating appropri-
ate mental models of dynamic systems, even when the system only encompasses
the basic building block of all dynamic systemsone stock with two con-
nected ows. Peoples mental models seem biased towards static, correlational
representations and they tend to apply feedback rules when making decisions.
On the other hand, once a simple, dynamic model is available, a quite simple
heuristic could in our case lead to appropriate management. In this lies a
considerable hope for improved management of renewable resources.
Finally, our experience is that the simple experiment12 represents an ef-
cient way to motivate students and others to study dynamic systems in general
and renewable resources in particular. By constructing and using a simulation
model to analyse the behaviour produced by the students themselves, the
students get an introduction to the power of simulation models to study
otherwise complex dynamic problems involving human decision making.
Notes
1. If the resource stock is greater than the target, the harvest reduces the stock
to the target. If the stock is below the target, the harvest is set equal to zero.
2. Here we use the notation of a discrete time model. However, the model in
Figure 1 can still be thought of as a continuous model, which is simulated
with a time step of 1.0. This is acceptable since the implicit time constants
are much longer than 1.0.
3. T1 is written in Excel 5.0/95 and is available from http://www.i.uib.no/
staff/erling/publications.htm
4. T2 is written in Powersim Constructor and is available from http://
www.i.uib.no/staff/erling/publications.htm
5. One outlier, who increased the herd size to 5,000 in the second year, has
been removed, hence n = 15.
6. We use the following formulae: tp = (11 12)/ s 1/n1 + 1/n2 , where tp is

student-t distributed with n1 + n2 2 d.f. and where s 2 is the pooled sample
variance.
7. By static model we mean a model without dynamics, e.g. Lichen =
f (Herd_size).
8. Figure 9 gives a clear example of Tversky and Kahnemans illusion of
validity. It seems likely that people have more condence in a static model
when there are many rather than few data points (open squares) along the
apparent straight line; p-values in regressions certainly improve with the
number of data points. However, the model is erroneous independent of
the number of data points one gets along the apparently straight line.
Actually, when the model is simulated with a simple feedback policy, it
produces cycles, which show up as a circling pattern in the phase diagram
of Figure 9.
9. Also a gradient search would lead in the same direction.
10. We regress the deviation between Median_herd and Sim_Herd against the
Median_herd and nd that both the constant (p-value = 0.70) and the slope
(p-value = 0.86) are statistically insignicant.
11. A standard annual lichen takeout, is what is eaten of lichen by one reindeer
in one year under normal lichen conditions.
12. The experiment and the instructions can be downloaded from http://
www.i.uib.no/staff/erling/publications.htm
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Appendix 1
Instructions for the base treatment, T1

You will play the role of the owner of a reindeer herd. Your task is to produce
as much reindeer meat as possible each year. Note, however, you should make
sure that your operation is sustainable. This means that you should aim for
the highest possible sustainable slaughtering rate. You should also try to reach
this desired state as quickly as possible. For your information, sustainable
meat production will be maximized when the sustainable herd size is max-
imized. Thus your focus should be on the maximum sustainable herd size.
Each year your only decision is to set the desired number of reindeer for the
next year. You get only 15 years to reach the desired state, and no new trial. Do
the best you can. The subject who gets the best results will receive a symbolic
prize.
You are the sole owner of a given reindeer pasture. Nobody else has reindeer
or other animals in your pasture. In summer, there is plenty of grass and herbs.
The limiting resource is lichen to support the reindeer throughout the winter.
Lichen is a small plant growing on the ground. Biologically it is a combination
of fungus and algae. The lichen plant grows in the summer time, growth stops
in the winter, and then the plant continues to grow on top of itself the next
summer, and so on. When there is very little lichen present, there is only little
growth. When there is a lot of lichen, the net growth of lichen tends towards
zero, what grows up is just compensating for what rots at the bottom of the
plant. In between these extremes, net lichen growth reaches a maximum.
When the reindeer graze, they eat the top of the plant, and the plant continues
to grow on top of what is left. As a way to keep track of how much lichen there
is in the pasture, one can measure the average height of the plants, also referred
to as the thickness of lichen.
The size of the area is indicated by the following piece of information: In one
year, the lichen eaten by 1,000 animals is sufcient to reduce the average lichen
thickness for the entire pasture by 4 mm. We simplify and assume that the
intake of lichen per animal does not depend on the amount of lichen, as long as
there is lichen available. Still, lichen is vital for the survival of reindeer; if
there is no lichen, all the animals will die. You do not have to think about the
sex ratio, the number of calves, losses of animals, the age structure or whether
the reindeer are slaughtered, sold or bought. You can vary the herd size freely.
All measurements of the herd size and the lichen thickness are perfect and
there are no random variations from year to year in the number of animals or
the growth of lichen.
Before you take over the pasture, the previous owner has increased steadily
the number of reindeer from 1150 to 1900. As a consequence, the lichen
thickness (mm) has dropped from 50 to 24.4 mm. This development is shown
in the diagrams and table below. (Not shown here; however, the data can be
inferred from Figures 2 and 13, or they can be seen in the downloadable
version of T1, see Note 3).
Appendix 2
Instruction for treatment T2

The instruction to treatment T2 deviates from the one to T1 primarily in the
following addition:
The number of animals that are slaughtered is given by your decision about
the desired herd size. To maintain a xed sex ratio of the livestock, all female
calves and a few male calves become livestock each fall; the rest of the male
calves are slaughtered at 5 months old. Livestock animals are slaughtered in
order to obtain the desired herd size. Ten percent of the livestock is males.
Each year 85 percent of the females gets a calf, which survives until the fall.
50 percent of the calves are females. It is assumed that the slaughter weight
of male calves is 20 kg and that the slaughter weight of livestock is 40 kg.

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Misperceptions ofErling Moxnes: Misperceptions of Basic Dynamics 139

basic dynamics: the case

Erling Moxnes is a Abstract

observed subject behaviour can be compared to optimal normative behaviour.

The experimental design

Treatment T1one stock

Fig. 1. The stock and

growth minus decay) and reduced by Grazing. Grazing in turn depends on

Fig. 2. Growth curve

Treatment T2two stocks

Fig. 3. The stock and

than Nt + Rt, no livestock is slaughtered and the population growth is limited

Subjects and design details

Fig. 4. Optimal and

Fig. 5. Optimal and

First we discuss our main hypothesis about misperception of simple dynamic

growth function that complicates management (Figure 2). Without such a

Mental models and policies

uncertainty, Forrester (1961) claims that: Economic and industrial activities

Fig. 9. Data from the

1974): people tend to ignore prior (here: hard-to-represent structural) informa-

Fig. 10. Simulated and

Fig. 11. Simulated

Comparison to observed real management

Fig. 12. Herd size

Fig. 13. Herd size (+

Fig. 14. Illustration of

Compared to earlier more complex experiments, the present experiments show

6. We use the following formulae: tp = (11 12)/ s 1/n1 + 1/n2 , where tp is

Funke, J. 1991. Solving complex problems: exploration and control of complex

Instructions for the base treatment, T1

Instruction for treatment T2

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