3.1) Stocks and Flows
An important distinction missing from basic causal loop diagrams is the difference between stock variables and flow variables.
Stocks represent an amount/accumulation of something, measured in units.
Examples include:
- Population
- Bank balance
- Natural capital
- Carbon dioxide in the atmosphere
Question: Can you think of another example of a stock?
Flows represent changes to a stock, measure in units/time
Examples include:
- Birth rate
- Monthly income
- Yearly carbon emissions
Question: Can you think of other examples of flows?
Identifying a variable as either a stock or a flow may appear straightforward, but the two are often confused. In discussions of the recent financial crises, deficits (an annual flow of money from creditors to spending) are often confused with debt (the total stock of money owed to creditors). A decrease in deficit will still result in an increasing debt. Only when the deficit is negative, i.e. a "surplus", does the debt decrease.