How to do structural validity of a system dynamics type simulation model: The case of an energy policy model

Abstract

System dynamics based simulation models are becoming increasingly popular in the analysis of important energy policy issues including global warming, deregulation, conservation and efficiency. The usefulness of these models is predicated on their ability to link observable patterns of behavior of a system to micro-level structures. This paper argues that the structural validity of the simulation model—right behavior for the right reasons—is a stringent measure to build confidence in a simulation model regardless of how well the model passes behavior validity tests. That leads to an outline of formal structural validity procedures available but less explored in system dynamics modeling ‘repertoire’. An illustration of a set of six tests for structural validity of a system dynamics model for energy policy analysis follows. Then using Theil inequality statistics, the behavior validity of the model is also tested. Finally, some conclusions on the increased appeal for simulation models for energy policy analysis and design are presented.