Evangelyn C. Alocilja, Ph.D., Professor
Evangelyn C. Alocilja, Ph.D.
Professor in Biosystems Engineering
Department of Biosystems and Agricultural Engineering
Farrall Agricultural Engineering Hall
524 S. Shaw Lane, Room 213
Michigan State University, East Lansing, MI 48824-1323
Phone: 517-355-0083 and 517-432-8672; FAX: 517-432-2892; Email: [email protected]
Table of Contents Page
1. The Biosystems Engineering 1
The Biosphere 17
Systems concepts 33
2. Systemic Properties of Biological Systems
Systemic properties 127
3. Systems Methodologies
General systems methodology
Life cycle assessment
Steps in Biosystems Modeling
Input Functions of Time
Output Functions of Time
4. Growth and Feedback in Population Biology
Exponential growth equation
Lotka-Voterra’s predator-prey equation
Multispecies extension of Lotka-Volterra model
The dynamics of infection
Steady state and isocline analysis
5. Conservation of Mass in Natural Resource Systems
Three-compartment system 155
Multiple-compartment system 177
6. Oscillations and Stability in Biological Systems
Simple harmonic motion
Damped forced vibrations
Forced free vibrations
Stability test by the isocline and phase-plane methods
TOPICS T he field of Biosystems Engineering is emerging in response to such major
concerns as environmental integrity, food safety and quality, water security,
1 The Biosphere and natural resource availability. Biosystems engineering is defined
1 Systems concepts here as the analysis, design, and control of biologically-based
1 Engineering systems for the sustainable production and processing of food and
biological materials and the efficient utilization of natural and renewable
principles resources in order to enhance human health in harmony with the
environment. In this course, biosystems engineering is introduced to address the
large, complex, and time-dependent nature of biophysical systems. However, the
principles and examples can be applied and extrapolated to lower-level structures,
such as cells, organelles, organs, and organisms.
There is a growing worldwide concern for saving the environment from human
abuses and harmful actions. Such activities include irresponsible exploitation of our
natural resources, deforestation, pollution of air and water, dumping of non-
biodegradable products in our soil, uncontrolled production of ozone-depleting
chemicals, acid-rain effects in forests and lakes, and the overall degradation of the
environment. Human abuses have slowly destroyed our life support systems.
Consequently, the supply of safe food and water is increasingly compromised. The
major culprit, among other things, is the lack of understanding of the dire
consequences of uncontrolled economic development, unregulated technological
advancement, and mismanagement of natural resources.
Coupled with environmental dilemma is the fact that human population is
growing exponentially. While human population is expanding, natural resources are
declining. According to the World Population Prospects of the United Nations
(Archer, et al., 1987) human population will reach close to 8 billion in the year
2020. This implies that there will be more people competing for the consumption
of the same amount of natural resources, as illustrated in Fig. 1.1. Air, water, and
soil pollution, resource depletion, social chaos, and political upheaval are some of
the consequences already demonstrated and are expected to get worse in the future.
The Biosystems Engineering 1
Figure 1.1. Schematic representation of population growth without resource
growth, resulting in environmental consequences.
Human-initiated activities have already altered many environmental
situations worldwide. For example, cutting down of trees has increased soil erosion;
industrial operations have polluted the atmosphere; voluminous human and
industrial wastes have resulted in soil and water pollution; the quality of air and
water in many cities has reached hazardous level; and changes in heat and water
balances in the atmosphere and hydrosphere due to air and water pollution may be
factors affecting adverse climatic patterns. Not seen before are the emergence of
disease-causing and antibiotic resistant bacteria, such as Escherichia coli O157:H7
and Salmonella typhimurium DT 104. If the changes in the physical and chemical
environments are more extreme than the variations to which human and other
living organisms in the ecosystem can adapt, the ecological harmony may be
irreversibly disturbed. Therefore, all possible steps should be taken to put an end
to the deterioration of the natural environment, as our expression of concern for the
future generation. A step toward this end is to analyze problem with global
implications in a holistic manner and to propose solutions that reflect the
consideration of the whole biosystem. It is the responsibility of the present
2 The Biosystems Engineering
generation to maintain a balance among food supply, economic development, and
environmental protection in order to provide for, and ensure the survival of, the
1.1 The Biosphere
While the concept on the environment involves a complex system of interacting
living and non-living components encompassing the whole universe, for practical
and obvious reasons, let us begin with the biosphere as a component of planet
Earth. The biosphere is the space where biotic and abiotic worlds meet, at the
overlap and interface of the three major spheres: atmosphere, lithosphere, and the
hydrosphere (Archer et al., 1987), as illustrated in Fig. 1.2. It is the common
ground shared by humans and other living organisms, constantly interacting with
one another (Fig. 1.3). These living organisms also exchange matter and energy
with their environment. It is in this sphere where the most pressing problems of the
environment exist. In general, we shall refer to a system structure in the biosphere
involving a biological component as a biosystem. In particular, the biosystem is
defined here as any form of organization which is made up of living and non-living
components, interacting and interconnected as to achieve a unified purpose,
specifically with respect to food production, environmental preservation, economic
development, and technological advancement.
Figure 1.2. Schematic representation of the biosphere as an interface of the
atmosphere, lithosphere, and hydrosphere.
The Biosystems Engineering 3
Figure 1.3. Schematic of the biosystem in the biosphere.
1.2 Systems Concepts
System. The word “system” can be defined as anything formed of parts or
components placed together and interconnected to make a regular whole working
as if one body or entity as it relates an input to an output, or a cause to an effect.
There are at least four concepts in this definition. First, a system is made up of
components or subsystems which have defined relationships. Second, each of
these components are linked in such a manner that the output of one is an input to
the other. Third, the successful operation of one component depends upon the
other (unity). And fourth, system components are interconnected to form one
body or entity in order to achieve its purpose. A plant is a good example of a
biological system. Plant growth is orchestrated in its internal mechanism as to
reproduce itself. Under favorable conditions, a corn plant will bear corn grains (not
rice nor wheat grains). The photosynthetic process of converting solar radiation
into carbohydrates and finally biomass is a series of interconnected transformations.
When photosynthesis fails, biomass will not be produced. A car, an airplane, a
computer, a microscope, a dog, a tree, a house, a population, a person, a bacteria,
and a cell are each an example of a system.
Associated with the word “system” are terms that need clear understanding
and comprehension. These words are input, output, parameters, state variables,
4 The Biosystems Engineering
boundary, and environment. There are two kinds of input: controllable and
exogenous. Similarly, there are two kinds of output: desired and undesired. There
definitions are presented as follows.
Controllable Input. The controllable input variables are materials or energy which
are required to bring about the desired system output. These variables can vary
with time. For example, water is a material input in soil-plant systems, animal
production systems, and river or lake systems. The volume of water flowing into a
river may vary during the day. Food intake is a controllable input to the body.
Exogenous Input. The exogenous input variables are materials or energy, which
influence or affect the biosystem but the biosystem cannot affect them (at least for
the system under consideration). For example, solar radiation, air temperatures,
and rainfall are exogenous input to people, forest, crop, urban, and economic
Desired Output. The desired output variables are the transformation product of
the material input and the system processes (accounting for technologies) through
the use of energy and labor. For example, forage and grain are desired outputs of
the corn production system; milk, meat, eggs, and fur are desired outputs of the
animal system; profit is a desired output of a farm system; potable water is a desired
output of a regional system.
Undesired By-Products. The undesired by-products are the undesirable results
as the biosystem functions to produce the desired outputs. For example, nitrate
leaching is an undesired by-product of crop production system; phosphate runoff is
an undesired by-product of animal production system; water pollution is an
undesired by-product of an industrialized economy.
State Variables. The state variables summarize the status of the system. Knowing
the state variable (S) at any initial time t0 and the input function (I) at time t0,
together with the equations describing the dynamics of the system, it should be
possible to know the state of the system at any time t1 where t1 > t0. That is,
I(t0) + S0(t0) → S1(t1)
State variables can be classified into two: feasible and infeasible. The feasible states
are variables that satisfy the constraints of the system and therefore are valid
information in assessing the status of the system. The infeasible states are variables
that violate at least one constraint. For example, the weight of leaves, stems, grain,
and roots are state variables of a plant system; the amount of biomass and milk are
state variables of a dairy system.
System Parameters. System parameters are factors, which determine the initial
structure and condition of a biosystem. In mathematical equations, these are
constants representing technology or information. Parameters are differentiated
The Biosystems Engineering 5
from state variables in that, for deterministic systems, they do not change with time
during the operation of the system.
System Boundary. System boundary is the separation (real or imaginary) between
the system and the environment. For example, the physical boundary of a
household system may be the house structure itself, that is, everything inside the
house belongs to the system; everything outside belongs to the environment.
Environment. For any given biosystem, there is an environment. This
environment is the set of all objects, factors, and influences outside the boundary
of the system. All signals from the environment crossing the boundary into the
system must be one-way direction, that is, the signal may affect the system but the
system output should not affect the environment to the extent that it would modify
the signal (Eisen, 1988). The environment may occur in the following forms:
1. Natural environment -- For a biological (e.g. crop production) system, the
natural environment may include solar radiation, rainfall, ambient temperatures,
and wind speed.
2. State-of-resource-and-technology environment -- Formulation and structuring
of a crop production system may be affected by the type of irrigation to be
employed, or the crop variety to use, or the fertilizer management to practice. It
is also affected by the availability of production inputs, accessibility to markets,
3. State-of-knowledge environment -- Knowledge of the processes affect the
formulation and synthesis of a biosystem. When there is no clear understanding
of the biosystem, a less efficient and less sustainable management approach is
likely to be used. For example, our lack of deeper understanding on the extent
and ill-effects of nitrates and pesticide residues in groundwater contributed to
the neglect of sustainable practices in manufacturing industries, farms, golf
courses, household gardens and lawns, and other operations.
4. Institutional and Social Environment -- The institutional, organizational, and
social structures, such as government laws, regulatory bodies, lobby groups,
commodity associations, social customs, personal preferences, and manpower
skills, may influence the evaluation of objectives and the structuring of the
biosystem. For example, certain commodities dominate the market because of
5. Economic Environment -- Input costs, product prices, marketing costs, and
other economic factors affect the formulation, structuring and synthesis of a
biosystem. For example, cheaper inputs are likely preferred over more
6 The Biosystems Engineering
1.3 Engineering Principles
Basic engineering skills include analysis, design, and control.
Analysis. Analysis is the process of finding the solution (output) of a specified
system process, given a description of the system inputs. For example, a nutritious
food (input) fed into a healthy body (system process) could result in muscle gain
(output). An analysis can be done to determine the amount of muscle gain for every
gram of food intake in the same body structure. In the analysis, the amount of food
intake may be varied and the gain observed. Schematically, analysis can be
represented as follows:
Input Process Output ?
Design. Design is the specification of the system process in order to match
specific input to desired output. Continuing on our body example, two people given
the same amount of food may gain weight differently due to differences in their
body structure. To compensate for the difference, one person may be advised to get
more exercise in order to achieve the same weight gain. The concept of design can
be diagrammed as follows:
Input Process ? Output
Control. Control is the specification of inputs in order to achieve desired outputs
given a description of the system process. An individual may be prescribed a set of
food to achieve a desired weight gain. In schematic presentation, the relationship
can be seen as follows:
Input ? Process Output
Systems analysis is the application of organized analytical modeling
techniques appropriate for explaining complex, multivariable systems
(Vaidhyanathan, 1993). Our efforts in this course shall be directed towards the
application of modeling techniques to understand important dynamic phenomena
for the continuing stability of the biological system. The study shall be guided by
the principles of growth, conservation of mass, cybernetics, stability, and
Growth is the principle of gradual development of living matters toward
maturity. It is a process involving an increase in size, weight, power, wisdom, and
many other factors. Decay is the antithesis of growth. A gradual decline in
strength, soundness, health, beauty, and prosperity is part of decay. It is also a
process involving decomposition and rotting. Chapter 4 will cover extensively the
principle of growth.
The Biosystems Engineering 7
Conservation of mass (as well as energy and momentum) is the principle
that matter cannot be created nor destroyed during a physical or chemical change.
Within a closed system, the rate at which a substance increases or decreases is due
to the rate at which the substance enters from the outside minus the rate at which it
leaves. However, while matter cannot be destroyed nor created, it can be
transformed, transported, and stored. Conservation equations are "bookkeeping"
statements: they serve to keep track of all substances within the boundary of the
system, including the initial conditions. More discussions and illustrations will be
presented in Chapter 5.
Cybernetics is the science of how systems are regulated. The cybernetic
structure can either be open-loop or closed-loop. An open-loop biosystem can be
partitioned into two major structures: the bio-control and bio-process structures, as
illustrated in Fig. 1.4. The bio-control structure receives the external input signal
which represents a goal, an objective, or a reference of what is desired to be
achieved. The bio-process structure takes material resources and/or energy and acts
on them to produce the outputs. This structure is subject to disturbances, which
may cause variations in the output and in the process itself. In an open-loop
biosystem, the actuating signal can be altered at any time based on the objective of
the output and all other prior knowledge about the process. This actuating signal is
not influenced by the output of the system at any time.
Goals or Bio-control Actuating Bio-process
objectives Structure signals Structure
Figure 1.4. A generalized structure of an open-loop biosystem.
However, when the output affects the input signal, then the system is called
a closed-loop biosystem as shown in Fig. 1.5. In this case, a bio-sensor or control
measurement is present, which consists of a measuring device to record output
signals and convert them into internal input signals to the bio-control structure. The
internal input signals provide the bio-control structure with information on what is
happening in the bio-process structure. The engineering of the biosystem consists of
defining the nature of the bio-control structure, the character of the bio-process
structure, and the description of the bio-sensor so that the outputs agree with the
objective for which the biosystem is being directed.
The biosystem structure in Fig. 1.6 can be broadly represented by a control
structure that is human-dominated interfacing with the real structure (natural,
biological, and physical) as shown in Fig. 1.6 (Alocilja and Ritchie, 1992). The
decision maker resides in the control structure. It is in this structure that objectives
are defined and subsequently, decisions on controllable inputs are made in order to
8 The Biosystems Engineering
achieve the desired outputs, manage the undesired by-products, and control the
transformation processes. The decision maker in the control structure determines
how the processing components in the real structure are interconnected. The real
structure, on the other hand, is the object of control. It is composed of the natural,
biological, and human-made physical systems. This structure is multi-level and
requires an integration of multidisciplinary sciences. Constraints in the real
structure are fed back to the control structure. The control and real structures are,
therefore, highly coupled: the objectives as defined by the control structure,
determine the interconnections of the processes in the real structure, while the
statement of objectives in the control are constrained by the boundary conditions
existing naturally, biologically, and technologically in the real structure. Examples
1.1 and 1.2 provide illustrations of open-loop and closed-loop systems. Chapter 4
will illustrate further the concept.
Goals or + Bio-control Actuating Bio-process Output
objectives Structure signals Structure
Figure 1.5. A generalized structure of a closed-loop biosystem.
The Biosystems Engineering 9
Figure 1.6. Schematic diagram of a human-controlled structure.
The important factor in a controlled system is the presence of feedback,
which permits the system to compare what the effector is doing with what it is
supposed to be doing. A feedback loop exists if variable x determines the value of
variable y and variable y in turn determines the value of variable x. In living
systems, examples of effectors are muscle cells, cells which secrete various
1 0 The Biosystems Engineering
chemicals into the bloodstream, or cells which transport substances from part of
the body to another (Jones, 1973).
An example of an open-loop feedback system would be growing a corn
plant to which water and fertilizer are regularly added without regard to the
condition of the plant. Wilted or flooded, water is added regardless. The adding of
water and fertilizer is not influenced by how much the plant needs at any given
time. In this case, the flow of information is in one direction; there is no return
flow or “feedback” of information as to the actual situation of the plant. Figure 1.7
illustrates the concept graphically.
To grow corn Controller Corn plant Healthy or dying?
Figure 1.7. Schematic diagram of an open-loop corn plant culture.
Suppose the controller varies the amount of water according to how the
plant looks at any point in time. If the plant looks wilted, water is added; if the
plant looks “sick”, fertilizer is added; if the soil feels saturated, water is suspended.
In this instance, there is an information flow from the plant, which the controller
uses to regulate the input of water and nutrients. In this case, the system is closed-
loop feedback and illustrated in Fig. 1.8.
To grow corn Controller Corn plant Healthy or dying?
Figure 1.8. Schematic diagram of a closed-loop corn plant culture.
Ecosystems act as open loop systems because they receive radiant energy
from the sun and moisture from rain and snow which they cannot influence by
feedback. Living things in the ecosystem are influenced by temperature, which the
system has no control over. However, ecosystems also act as closed-loop systems
because there are many ways whereby they can regulate the flow of materials or the
effect of various physical impacts on them.
Negative feedback regulation is often referred to as deviation-counteracting
feedback, or homeostasis (DeAngelis et al., 1986). Many ecological systems have
generally been thought of as homeostatic systems. Although there is still
disagreement on the precise interactions responsible for the negative feedback and
on how tightly it regulates various ecological systems, there is some concensus that
negative feedback regulation is occurring at least to the degree that it normally
The Biosystems Engineering 11
keeps populations and communities from going completely out of control, although
it may not always be strong enough to prevent sizable fluctuations. Positive
feedback occurs when the response of a system to an initial deviation of the system
acts to reinforce the change in the direction of the deviation.
When a population or ecological community is perturbed slightly from
equilibrium, the balance of negative and positive feedback mechanisms in the
system tends to counteract the perturbation and restore the system to equilibrium
(if this equilibrium is inherently stable). Neither positive nor negative feedbacks
manifest themselves individually in a conspicuous way. However, when the
population or community is driven far from equilibrium (by a temporary unusual
environmental condition, for example), specific positive or negative feedback may
become very obvious. The system could be driven into a regime homeostatic
forces no longer operate. Positive feedback loop may act to amplify the deviation,
perhaps deriving the system to extinction. On the other hand, other positive
feedback loops may be activated that rescue the population from extinction and
allow it to increase to the point where homeostatic forces restore it to equilibrium.
Pest or epidemic outbreaks and the survival of rare species in environments of
scattered habitat islands are all problems that involve positive feedback in
The existence of a flow of information from the system “output” (in the
example, the plant’s appearance) to the controller that regulates the input to
maintain a stable set point (a healthy plant), is a commonly accepted emblem of a
cybernetic system. The systems considered in this chapter are more general than
this in two ways. First, the feedback will not always be purely information flow,
but may be a change in biomass, energy, or material that only incidentally conveys
information affecting the system input. Secondly, the feedback in question will not
necessarily maintain the system at a stable point, but may cause the system to
change from one state to another.
Example 1.1. A rider-bike system
Consider a system structure of a person riding a bicycle. The rider-bike system can
be decomposed into several components in a simplified manner, as shown in Fig.
1.9. The objective of the rider is to keep the bike in the center of the bike lane.
The output is the actual path of the bike. An error in the difference between the
objective and output are detected visually. This error detection activates the brain.
The brain transmits signals to the rider’s arms and muscles which control the
steering handles and the wheel directions.
1 2 The Biosystems Engineering
Desired + Brain, Actuating
path - arms & signals
legs Bicycle Output
Figure 1.9. A schematic diagram of a rider-bike control system.
Example 1.2. A Plant-water system
Consider a system of a potted rose that is watered daily. The objective is to grow a
beautiful, flowering rose bush. If water is added without regard to the condition of
the plant, the system is an open-loop system. However, if water is added only
when the plant needs it, or if the amount varies to meet the moisture requirement
of the plant, then the system is a closed-loop system—the output (condition of the
plant) affects the input (frequency and amount of water applied to the pot).
Related to cybernetics is the idea of homeostasis or stability of system
behavior. Stability is concerned with how the system handles perturbations or
disturbances. The basic notion of system stability is this: if a system initially at rest
is disturbed, does it gradually return back to rest or does it wander away? If the
system returns back to its rest position, then the system is stable; if it wanders
away, then the system is unstable.
Sustainability is the philosophical paradigm that addresses economic growth
and development within the limits set by ecology in the broadest sense—by the
interrelationships of human beings and their works, the biosphere, and the physical
and chemical laws that govern it (Ruckelshaus, 1989). The World Commission on
Environment and Development (Haimes, 1992) defined sustainable development
as the “development that meets the needs of the present without compromising the
ability of the future generations to meet their own needs.” According to Haimes
(1992), sustainable development has become the quintessential paradigm for
addressing the worldwide dilemma of advancing our economic development while
protecting environmental quality not only for this generation but future ones as
This book shall bring together many disciplinary sciences and study the
interrelationships among them so that we may be able to learn, understand, and
recognize the interconnections among food security, technological advancement,
environmental integrity, and economic development. In so doing, biosystems
engineers hope to be able to design and engineer a sustainable biosystem that will
be compatible with, and able to accommodate, change, complexity, and growth.
The Biosystems Engineering 13
1. Impacts of High Population. Study the schematic diagram of Fig. 1.1.
Identify the implications and effects of over-population. Note that
people need three basic things: food, clothing, and shelter.
2. Learning systems concepts from the headhunters. In a remote forest, there
happened to be three headhunters and three strangers arriving in the
same place at the same time. Considering that there was a one-to-one
ratio among them, peace prevailed. All were seeking to cross a river in
a boat that can hold at most two people and can be navigated by one or
two individuals. Due to their headhunting practice, the headhunters
could not be allowed to outnumber the strangers at any time and at any
place. All were able to cross the river in five and one-half round trips
without mortality. How did they do it? Let the bank where the people
were originally be designated as bank 1; the bank across be designated
as bank 2. Identify the system boundary, system parameters, input,
output, and state variables. Identify the feasible and infeasible states.
3. Analysis and design of the International Center Food Court. The International
Center Food Court (ICFC) is the place to be during mealtimes. Conduct
an analysis and suggest design improvement, if necessary, so customers
4. Systems definition in lake pollution. Pollution occurs when high amounts of
nutrients, through soil erosion and waste disposal, end up in the lake.
Nutrient accumulation favors the growth of certain tiny marine
organisms called phytoplankton. These plankton blooms appear as
patches on the surface of the water. During this process, oxygen in the
water is depleted and other living organisms are affected. In such a
condition, identify the system boundary, the environment, system
parameters, input, output, and state variables of a lake system.
5. Understand systems concepts in the classroom. Consider BE 230 class as the
system. For a given lecture hour, identify the controllable and
exogenous inputs, state variables, desired output, undesired by-product,
design parameters, and the different kinds of environment. Classify
input and output as either material or energy.
6. Fish tank. Given a fish tank (12 ft long, 6 ft wide, 6 ft tall) with 5 fish in
it (walls are the boundary), identify the following in quantitative terms:
Controllable input (how much food is needed of each per day?), desired
output, undesired by-product, state variables, system parameters, and
environment. Illustrate (draw) your system.
1 4 The Biosystems Engineering
Alocilja, E.C. and J.T. Ritchie. 1992. Multicriteria Optimization for a Sustainable Agriculture.
In F. Penning de Vries, P. Teng, and K. Metsalaar (eds.) Systems Approaches for
Agricultural Development. Kluwer Academic Publishers, Boston. pp. 381-396.
Archer, A.A., G.W. Luttig, and I.I. Snezhko. 1987. Man’s Dependence on the Earth. UNESCO,
DeAngelis, D.L., W.M. Post, and C.C. Travis. 1986. Positive Feedback in Natural Systems.
Springer-Verlag, New York.
Eisen, M. 1988. Mathematical Methods & Models in the Biological Sciences. Linear and One-
Dimensional Theory. Prentice-Hall, New Jersey.
Haimes, Y.Y. 1992. Sustainable Development: A Holistic Approach to Natural Resource
Management. IEEE Transactions on Systems, Man, and Cybernetics. 22(3):413-417.
Jones, R. 1973. Principles of Biological Regulation: An Introduction to Feedback. Academic
Press, New York.
Ruckelshaus, W.D. 1989. Toward a Sustainable World. Scientific American., Special Issue on
Managing Planet Earth. 261(3).
Vaidhyanathan, V.S. 1993. Regulation and Control Mechanisms in Biological Systems.
Prentice Hall, Englewood Cliffs, New Jersey.
The Biosystems Engineering 15
1 6 The Biosystems Engineering
Systemic Properties of Chapter
PP RR II NN CC II PP LL EE O ne major systems concept is that there is universality of characteristics
among systems. That is, any biological system will possess certain
1 Universal properties that will characterize it as a system. The following biological
system properties will be covered in this chapter, namely: hierarchy,
characteristics among modularity, network, wholeness, purpose, open system, feedback, stability,
systems. reproduction, and stochasticity. Order to which the properties are enumerated has
nothing to do with their relative importance. In some references, these properties
TOPICS are lumped together or are separately mentioned. Each property is described by
one or more sub-properties.
1 Modularity Hierarchy
1 Wholeness A biological system at one structural level can be partitioned into
1 Purpose subsystems of a similar class to form a lower level structure.
1 Open system
1 Feedback Consider a national food production system, as illustrated in Fig. 2.1. The
1 Stability system at the national level can be partitioned into political boundaries, such as
1 Reproduction region, state, county, city, and township, or economic sectors, such as agriculture,
1 Stochasticity natural resources, food, industries, communities, etc. Each of the political units
can be decomposed into production units, such as farming, processing, marketing,
distribution, and consumption systems. A dairy farming system can be partitioned
into the soil, crop, irrigation, harvesting, storage, feed processing, feed allocation,
animal herds, waste collection and storage, waste utilization, product packaging,
and product distribution. A plant system can be decomposed into the roots, leaves,
stems, panicles, and grains. Each of these organs can be partitioned into cells, the
cells into molecules, molecules into proteins, proteins into amino acids, amino
acids into base pairs, and so on.
Systemic Properties of Biological systems 17
Figure 2.1. Schematic diagram of a food production system in hierarchy.
1 8 Systemic Properties of Biological systems
A biological system may be a component of a larger system.
A biological system, with its inputs, processes, and outputs, is always part
of a system greater in scope or hierarchy. For example, the crop system is part of
the farm system; the farm system, part of the regional food production system; the
regional food-production system, part of the national economy; and so on. Political
systems follow similar hierarchy.
The components of a biological system are themselves systems.
The components of an agroeco-regional system may include several food
production systems while each production unit is a system in itself. A soybean
production system may include a soybean crop, a rotary tillage unit, a combine, and
a storage facility. Furthermore, each of these components has the properties of a
system. They can be partitioned into lower level components.
There are several functional hierarchy of analysis which are important in
distinguishing one biological system from the other. From a biological point of
view, these functional levels are (Archer et al., 1987): (1) macromolecular, the
activity of biologically active large molecules; (2) cellular, the level at which the
living unit is the cell; (3) whole organism or species, which is composed of living
cells; (4) population, a cluster of living organisms belonging to the same species;
and (5) ecosystem, the interaction and interconnection of living and non-living
populations and components of nature on a given space in the biosphere. Eco-
regional system, consisting of several ecosystems, can be added to this functional
hierarchy. An example of an eco-regional system is a regional rice-production
system, which may include irrigated lowland ecosystems, rainfed lowland
ecosystems, and upland ecosystems.
The systems forming at the lower level of the hierarchy interact with
the systems at the higher level through the flow of materials and
The phytoplankton, fish, microorganisms, aquatic plants, and water
comprise the lake system. At a higher level of analysis, the lake can be viewed as a
single entity (say, irrigation source or discharge sink) interacting with crop and
animal production systems, processing industries, and urban/rural population in a
geographic location to form a watershed system. Several watersheds form an eco-
regional system, such as the Great Lakes region. By repeating this process, it is
possible (at least conceptually) to move systematically from the lake (micro) to a
regional or national level of analysis (macro).
Systemic Properties of Biological systems 19
A biological system can be partitioned into natural, biological, and
Some examples of natural systems are the soil, lake, river, and watershed.
The plants, animals, insects, weeds, fungi, and other pests may be included in the
biological systems. Artificial systems may come in the form of tillage, harvesting,
transportation, food processing, and manufacturing facilities.
Each of the components in a biological system can be characterized as
In a discrete system, there is a clear boundary between the system and its
environment. In a soil-crop system, the soil, plants, and production machinery
have well-defined boundaries between the system and the environmental factors
such as solar radiation, temperature, rainfall, other plants, animals, human
intervention, etc. (Fig. 2.1). In a lake system, the plankton, fish, microorganisms,
and aquatic plants occur in discrete units.
The number of components constitutes the complexity of a biological
A system with 3 components may be easier to analyze than a system with
10 components. For example, a monoculture crop system may be less complex to
manage than a multi-crop system.
Each component of a biological system is viewed as performing one or
a combination of the three basic processes: transformation,
transportation, and storage.
Material transformation is the process of converting a material input of one
form into an output of another form with the application of energy and/or human
labor. Transport process is the transfer of a material from one location to another
without affecting the form or composition of the material. Storage is the flow of
material from input to output without affecting the composition of the original
form but flows at different points in time. A schematic representation is shown in
2 0 Systemic Properties of Biological systems
Figure 2.2. Schematic representation of transformation, transportation, and storage
The system components are united at finite number of interfaces by
means of common sub-components.
The joining of two components is effected by a sub-component which they
have in common. This is the basis upon which all biological system structures are
formed. The plants and animals in a swine production farm may interface at the
Systemic Properties of Biological systems 21
biomass-feed conversion subsystem. Grain storage and product marketing may
interface at the grain packaging subsystem. Food production and food distribution
systems may interface at the food packaging subsystem.
Changes in the system are transmitted through the interconnections.
The phosphorus biochemical cycle illustrates the connectedness of systems
and shows how one activity affects the other (Fig. 2.3). For example, phosphate
mining is connected to corn production system through the flow of fertilizers; a
corn production system is connected to a milk production system through the flow
of animal feeds.
The network in a biological system exhibits transitivity.
If subsystem 1 is connected to subsystem 2 and subsystem 2 is connected to
subsystem 3, then subsystem 1 is connected to subsystem 3. For example, if
phosphate mining in California supplies raw materials to the fertilizer production in
Michigan and the fertilizer production contributes to the lake pollution in the
Saginaw Bay, then the phosphate mining in California contributes to the lake
pollution in the Saginaw Bay (Fig. 2.3).
The network in a biological system is asymmetrical.
The roles of the components in the network are not interchangeable. For
example, the soil system holds the plants, not the other way around; the harvester
removes the crop, not vice versa; the animals feed on the crops, not the other way
(I hope so!). The relation of the soil to the plant is not the same as the relation of
the plant to the soil; the relation of the harvester to the crop is not the same as the
relation of the crop to the harvester.
The network in a biological system demonstrates seriality.
If the components in the system are transitive and asymmetrical, then they
are serially connected. For example, the pollution of Saginaw Bay by phosphates
and the application of phosphates in crop production and the production of feed for
animal production has a serial relationship.
2 2 Systemic Properties of Biological systems
Figure 2.3. A schematic diagram of a phosphorus biochemical cycle.
The network in a biological system exhibits interdependence.
The existence of one component in the system is conditioned by some other
components. For example, the quality of milking cows depends upon the quality of
feeds produced in a crop-dairy system. In another examples, a series of connected
lakes will exhibit interdependence.
A biological system exhibits coherence.
For example, a change in the feed ration of the dairy herds in a crop-dairy
system may affect the milk production component of the system. A change in the
marketing structure in the agroeco-regional system may alter the transportation of
products from the farms. A decrease in irrigation supply may reduce the yield or
the grain quality of crops.
Systemic Properties of Biological systems 23
At all levels of hierarchy, the successful and efficient operation of the
whole is the main objective of the biological system.
The individual components may not be operating in an optimum fashion at
a particular time, but each action is compatible with the overall system
requirements for the interest of the whole biological system. For example, an
animal is made up of diverse biological organs, such as the mouth, stomach, legs,
body, and head. Their movements are coordinated by some biological mechanisms
to achieve survival. Take the case of a cereal plant, such rice, maize, or wheat.
During its growth, the leaves maximize their growth (in terms of height and weight)
only at the earlier season, and then minimize their growth in favor of the panicle at
the later period of plant growth. The same is true of the stems and the roots. When
grain filling sets in, assimilates from the leaves and stems are sometimes
translocated to the grain. At the end of the season, the whole effort of the cereal
plant during the growth process is concentrated towards the production of grain.
If a component is not connected, it is not part of the system.
For example, agricultural trade agreement among some countries in
Southeast Asia provides that certain products of one country flows into the market
of the other countries. The countries involved in the agreement have formed a
trade (system) network. If one country ignores the agreement, then that country
has failed to be part of the system. As illustrated in Fig. 2.4, Production Unit 1 is
part of the cooperative system while it fails to become part of the system in B.
From a global perspective, the north and south hemispheres are connected through
the flow of materials in the atmosphere.
The properties and characteristics of a biological system involve not
only the joining of the properties and characteristics of the individual
components but also the nature of their interconnections.
For example, the properties of the farm-cooperative system are different
from the farm-market system partly due to their interconnections, as illustrated in
Fig. 2.4. The formation of a regional food production system is more than the
aggregation of the production, processing, and transport systems.
2 4 Systemic Properties of Biological systems
Figure 2.4. In diagram A, Farm 1 and Farm 2 are connected through the
cooperative system. In diagram B, Farm 1 and Farm 2 are not connected.
The interconnected biological system may possess certain
characteristics unique to itself, referred to as emerging properties,
which may not be a property of any of the components.
For example, the linking of plants, soils, irrigation, and fertilizer application
comprise a crop production system. Each of the components by themselves do not
make a production system. The linking of farms, storage, processing, and
Systemic Properties of Biological systems 25
marketing results in a regional economic system, whereas each of the components
cannot accomplish the objective of an economic market condition.
The operation of a biological system depends not only on the
operation of the individual components but also on the nature of their
Two biological systems with similar components and technical properties
behave differently if their interconnections are different. For example, a crop-swine
operation whose crop produce is partly sold to the market manifests a different
economic behavior than when all the crops are used in the farm as feed to the
swine. In a regional system, the economic condition of a system where the farms
are free to sell their produce to the outside market will be different than when the
farms are required to sell their produce to the cooperative. Figure 2.4 shows that in
diagram A, Farm 1 is connected to Farm 2 through their joint interconnection to
the Cooperative. In diagram B, Farm 1 is totally disconnected from Farm 2.
A biological system has one or more objectives which may be required
simultaneously or at different points in time.
A crop producer may have several objectives, such as to maximize profit,
minimize risk, minimize nitrate leaching, minimize runoff, minimize pesticide
residues, maximize output, and so on. These objectives may need to be addressed
simultaneously (parallel) or in sequence (cascade), depending on the priorities of
the producer, as illustrated in Fig. 2.5.
2 6 Systemic Properties of Biological systems
Figure 2.5. Diagram A illustrates a parallel system; diagram B illustrates a cascade
The objectives of a biological system may vary with spatial orientation.
A crop producer in Michigan may have different objectives than someone in
Iowa or Illinois due to environmental factors, political climate, market situation,
cultural factors, support services, etc. Their spatial orientation will contribute to
their variation (Fig. 2.6).
The objectives of a biological system may change with organizational
A corn production system may have as its objective the maximum
production of grain yield. A farm-level system may adopt profit as its major
objective. A regional-level system may be guided by environmental and
sustainability issues for its goals. An economic system at the national level may be
guided by political objectives.
Figure 2.6. A food producer in Michigan will have different objectives and
constraints than someone from another state due to spatial variability.
Systemic Properties of Biological systems 27
The objective of the biological system defines the structuring of the
system components so that they contribute to the optimum
performance of the whole biological system.
A crop producer sets his/her objectives first before designing the crop
rotation in a cropping sequence. The rotation and management strategies may vary
depending on whether he/she prefers profit over environmental preservation, or
whether he/she prefers corn over wheat or soybean.
A biological system follows the principle of equifinality.
A system can reach the same final state through different initial conditions
and by a variety of ways (von Bertalanffy, 1969). For example, environmental
sustainability can be achieved through many different policy initiatives and by
many different methods.
The choice of the system components may be influenced by the
availability of inputs, market information, facilities, and other factors
that may represent the “state of the art.”
A producer’s choice to grow corn over wheat is partly dictated by his/her
knowledge of the crop or market demand for the crop. His/her choice for dairy
production may be dictated by the facilities he/she can afford to secure or technical
skills required to operate.
A biological system exchanges matter or energy with its environment.
The plants exchange energy with the environment: the environment
provides carbon dioxide to the plants; the plants release oxygen to the environment.
The plants use up the nutrients from the soil and returns organic matter to the soil.
The feed supply, market prices, input supplies, drugs, and services influence the
structuring and management of a swine production system. The swine-production
system, in turn, supplies the meat and meat products and by-products, such as
manure and odor.
A biological system transforms materials from one form to another.
2 8 Systemic Properties of Biological systems
Photosynthates are converted into biomass in a plant system; feed is
transformed into milk in a dairy cow.
The components of a biological system are in continuous building up
and breaking down.
The cell needs continuous supply of energy to maintain and rebuild its
parts; the plant organs grow and die; the crop-dairy system needs materials, labor
and energy to replenish those parts which deteriorate or die.
A biological system attains a steady state, not in true equilibrium.
In steady state, there is a continuous inflow of energy from the external
environment and a continuous outflow of products of the system into the
environment, but the character of the system and the relation of the components
are the same (Katz and Kahn, 1969). For example, the catabolic and anabolic
processes of tissue breakdown and restoration within the body preserve a steady
state so that the body is not the identical organism it was but a highly similar
organism (Katz and Kahn, 1969). This property is also demonstrated in the
homeostatic processes of temperature regulation in the body where the body
temperature remains the same even if external temperature varies.
The products exported by a biological system into the environment
provide the sources of materials and energy for the repetition of the
cycle of biological system activities.
The carbon dioxide exhaled by humans and animals into the atmosphere is
needed by plants; plants export oxygen into the air which is needed by humans and
A biosytem acquires negative entropy.
The entropic process is a universal law of nature in which all forms of
organization move toward disorder or death (Katz and Kahn, 1969). A biological
system survives by maximizing the ratio of imported to expended energy, thus
acquiring negative entropy. For example, microorganisms, fish, plants, animals, and
other living organisms replenish energy continuously in order to survive. A crop-
dairy system will seek to improve the survival and profitability of the operation.
Systemic Properties of Biological systems 29
A biological system has internal feedback mechanism for survival.
Feedback enables the system to correct its deviations from the desired
course by re-introducing part of the output or state behavior at the input in order to
affect the succeeding output. For example, surviving plants under drought
conditions have feedback mechanisms to maximize available moisture by
controlling the stomatal opening. In most plants, stomates are open during daylight
and close during the night. Stomates are open to allow for the assimilation of
carbon dioxide needed for photosynthesis. However, if there is low moisture, the
stomates close, providing a protective mechanism during drought periods. When
carbon dioxide is low in the intercellular spaces and guard cells, the stomates open
to allow carbon dioxide to diffuse in. This is necessary feedback for photosynthesis
to complete. Certain succulent plants conditioned to hot, dry conditions, such as a
cactus, open their stomates at night, fix carbon dioxide into organic acids in the
dark, and close their stomates during the day so as to conserve water during the
hottest part of the day.
A biological system possesses the ability to react and adapt to the
environment for the continued operation of the whole system.
A prolonged environmental stress may lead to genetic changes or natural
restructuring of the system. For example, plants under drought conditions behave
differently from those under favorable conditions. Arid places have different
vegetation than the fertile lands, or tropical plants grow in the tropics while
temperate plants grow in the temperate regions. Some fruit trees avoid freezing
during low temperatures by forming ice crystals in the spaces between cells which
protects the tissues from low temperature damage. Adaptation can also be
observed in insects becoming immune to insecticides or fungi becoming immune to
The instability created by perturbations on the biological system
variables is usually temporary.
The perturbed variables may eventually return to their defined, stable limits
when corrective measures are applied at an appropriate period of time. For
example, the physiological processes of a plant may be affected in the presence of
drought conditions. It has been observed that during drought period, the plants
allocate more carbohydrates for growth to the roots, causing the roots to extend
3 0 Systemic Properties of Biological systems
deeper into the soil “in search of alternate water sources.” During this time, the
shoot growth is slowed down in favor of the roots. However, when water is
eventually supplied, the plant may be able to recover and the physiological
processes may return to normal as if the plant has not experienced any stress at all.
Another example is the stability mechanism in the cow. During extremely hot
weather, the cows respond to the environment by increasing their respiration which
may result in the reduction of milk. However, milk production returns to normal
when the hot weather is over. In cases where the perturbation is prolonged and
corrective measures are not applied, the biological system may be altered
irreversibly. Desertification is one irreversible damage that can happen with
The living components of a biological system has the ability to absorb
substances, grow, and reproduce.
A rice seed breaks and grows to a full plant bearing more rice seeds. This
growth process is made possible by the plant’s ability to absorb the required
amount of nutrients, water, and sunlight.
A biological system will tend to move in the direction of
differentiation and elaboration.
For example, a food production system will tend to move in the direction of
product specialization, product diversification, and progressive mechanization.
Some system variables of a biological system are affected by factors
that are random in nature or events that occur by “chance.”.
In stochastic events, probability theory is required to make predictions
about the output. For example, the plant system is highly affected by the stochastic
nature of weather variables (rainfall, solar radiation, air temperature, wind velocity,
humidity, etc.) and the farm enterprise is affected by the stochastic market
conditions. The uniformity of water distribution in an irrigation system is
influenced by the random behavior of the wind speed and direction. Rain is good
for the crop but if it comes at the time when the field is still being prepared for
planting, it may not be a welcome event. Too much water can also lead to
waterlogging which affects the growth of plants. Frost may come at the time when
plants are most sensitive to temperature stress. Hail, storm, typhoons, and
cyclones are oftentimes damaging to agricultural production. Weather may affect
the market situation due to fluctuations in the prices of commodities. When
Systemic Properties of Biological systems 31
production is bad in one area due to the weather, some commodity prices change
and another area may need to supply the market demand for the commodity.
& ! Case Studies
1. The article entitled “Persistence of the DDT Pesticide in the Yakima River
Basin Washington” (Rinella et al., 1993) provides a medium to understand
the systemic properties of a biological system while at the same time
illustrate how the natural environment, a precious natural resource, can be
so damaged by a seemingly “friendly” technology—the pesticides.
2. USGS Circular 1225 entitled "The Quality of Our Nation's Waters:
Nutrients and Pesticides" shows how economic development is tightly
connected to environmental quality. It presents issues where nitrogen and
phosphorus, so essential for healthy plant and animal populations, can
become sources of discomfort and threat to people and the environment.
3. USGS Circular 1153 entitled "A Strategy For Assessing Potential Future
Changes in Climate, Hydrology, and Vegetation in the Western United
States" demonstrates the interconnectedness of weather, water, and plants.
Archer, A.A., G.W. Luttig, and I.I. Snezhko. 1987. Man’s Dependence on the Earth. UNESCO,
Katz, D. and R.L. Kahn. 1969. Common Characteristics of Open Systems. In F.E. Emery (ed).
Systems Thinking. Penguin Books, Middlesex, England. pp. 86-104.
Rinella, J.F., P.A. Hamilton, and S.W. McKenzie. 1993. Persistence of the DDT Pesticide in the
Yakima River Basin Washington. U.S. Geological Survey Circular 1090, Denver, Colorado.
von Bertalanffy, L. 1969. The Theory of Open Systems in Physics and Biology. In F.E. Emery
(ed). Systems Thinking. Penguin Books, Middlesex, England. pp. 70-85.
3 2 Systemic Properties of Biological systems
Systems Methodologies Chapter
PRINCIPLES T he basic philosophy of the systems methodology, as applied here, is that for
some class of biological system problems, there is a present state, S0, at
1 For some class of time t0, and a desired state, S1, at time t1, and there are alternative ways of
getting from S0 to S1. That is,
problems, there is a Present state S0(t0) → Desired future state S1(t1)
present state and a For example, there are several ways of going from a person’s house to the city. The
desired state, and options include walking, driving a car, riding a bus, taking the train, flying in an
there are alternative airplane, taking the boat, etc. The systems methodology is both science and art.
ways of getting from Many times, problems are defined and solutions are discovered when the mind is
one state to the relaxed and the environment pleasant. So, before proceeding to the systems
other. methodology itself, here are some exercises to help stretch our imagination in
finding alternative (creative) ways of solving problems.
TOPICS 3.1 Creative Thinking
1 Creative Thinking Exercise 3.1. Remove Mental Locks
1 General Systems “Discovery consists of looking at the same thing as everyone else and
Methodology thinking something different.” (Nobel prize winning physician Albert Szent-
Gyorgyi, as quoted from von Oech, 1990, p. 7)
1 Life Cycle
Problem: Here is a Roman numeral seven (von Oech, 1990, pp. 8-9): VII. By
Assessment adding only a single line, turn it into an 8. Here is a Roman numeral nine: IX. By
adding only a single line, turn it into a 6. By adding another line, find another way
1 Biological Modeling to turn it into a 6.
1 Data Analysis
Exercise 3.2. Think Differently
“Nothing is more dangerous than an idea when it’s the only one you have.”
(French philosopher Emile Chartier, as quoted from von Oech, 1990, p. 26).
Systems Methodologies 33
Problem: Put a sheet of newspaper on the floor (von Oech, 1990, p. 8). Find a
way to let two people stand face to face on it, but not able to touch one another.
No cutting or tearing of the paper nor tying them up or preventing them from
moving is allowed.
Exercise 3.3. Look for the Second Right Answer
“The best way to get a good idea is to get a lot of ideas.” (Nobel prize
winning chemist Linus Pauling, as quoted from von Oech, 1990, p. 26).
Problem: Four shapes are shown in Fig. 3.1. Select the shape that is most different
from the others (von Oech, 1990, p. 22). Explain your choice.
Figure 3.1. Which shape is the most different?
3.2 General Systems Methodology
The systems methodology is not designed to make decisions but to enable
the decision-maker to ask the right questions. It is a procedure that systematically
evaluates and defines the problem from a multidisciplinary point of view, identifies
the true needs and ultimate objectives, constructs alternative solutions, and
evaluates these options according to the technological effectiveness, cost,
environmental risks, and other evaluation criteria of interest.
34 Systems Methodologies
The systems methodology is initiated when there is a problem, or when a
solution is vague and fuzzy. For example, an economic enterprise or an agricultural
economy may desire to increase profit, expand production facilities and products,
become competitive in the local or world market, reduce operating costs, adopt to
new technological innovations, respond to policies or regulations, adjust to
government subsidies, concern for the preservation of the environment, and cater
to the social milieu. Sometimes, the systems methodology is classified into “hard”
and “soft” (Checkland, 1981). “Hard” systems methodology is considered goal-
oriented and suited well to problems where the desirable goals are clear and well
defined. Mathematical modeling is often the approach used to find the optimum
solution. On the other hand, “soft” systems methodology is considered a systems-
based means of structuring a debate, rather than as a recipe for guaranteed efficient
achievement (Checkland, 1981).
The socio-political component of a biological system, such as politics,
customs, preferences, personal biases, social values, moral values, aesthetic
notions, etc. introduces fuzziness to any biological system problem. Identifying the
true problem and setting the objectives could lend to “debate” where “soft”
systems methodology could be helpful. However, the problem may include natural
or biological components, which need to be “engineered.” In this case,
mathematical modeling may become a necessary process in finding the best
solution. Therefore, in biological systems problems, there is a place for a
combination of both “hard” and “soft” systems methodologies. The systems
methodology presented in this book is an attempt to provide a structure where both
methodologies are blended to develop an approach that is most appropriate and
effective for any biological system problem.
Following the general systems engineering paradigm, the systems
methodology presented here is composed of five major stages, namely: problem
definition, goal setting, systems synthesis, systems evaluation, and system selection,
as illustrated in Fig. 3.2. These five stages operate in an iterative manner, that is,
the problem-solving process can be repeated many times until a satisfactory result
Problem definition and goal setting concern with what the job is; systems
synthesis and evaluation concern with how to do the job. Problem definition and
system selection operate in the “Existent” world (“what is”) while goal setting,
systems synthesis, and systems evaluation operate in the “Systems” world (“what
should be”). A structured debate could occur during the problem definition and
goal setting stages. The major activities in each stage of the methodology are
presented in a tabular form below.
Problem definition is the stage of need awareness and expression. The
problem is recognized when there is an indeterminate situation, such as a vague
objective, fuzzy approach to achieve a goal, and feelings of uncertainty. According
to Hall (1962, p.93) “the confusion is a function of both the situation and the
Systems Methodologies 35
inquirer.” The objective of this stage is to display and express the problematic
situation so that the true need can be isolated from the perceived need and the
appropriate solution or solutions can be identified.
Problem Definition System Selection
Existent World - What is?
Goal Setting Systems World - What should be?
Figure 3.2. Framework of the general systems methodology.
Problem Understand the real-world problem; state the problem.
Goal setting State the objectives; specify requirements; define performance;
define cost measures.
Systems Explore alternatives; integrate systems; design systems.
Systems analysis For each alternative system:
Decompose functions; design interfaces; modify system;
evaluate risk of system; establish total quality management and
project management for the system.
System selection Select best solution; documentation.
36 Systems Methodologies
Problem definition is an art in the sense that there are no straightforward
guidelines that would guarantee to generate a succinctly defined problem.
However, the following steps are outlined to help put the problem in perspective.
• Gather as many perceptions of the problem as possible from a wide
range of people with roles in the problem situation in order to
understand the different perspectives, while trying not to impose your
own observation. Be sure that all parties involved in the problem are
heard. Collect such information as control hierarchy, personal desires,
economic considerations, personal preferences, etc.
• Identify the true need as against the perceived need. The true need
usually defines the general, long-range problem.
• If multiple needs are identified, select one that would be studied further.
This is the problem you want to pursue.
• Collect as many facts as possible related to the identified need. These
facts will help define the root of the problem and will play a major role
in developing and selecting the solutions. Specifically:
• Define the level of functional hierarchy.
• List, define, and describe all possible controllable and exogenous
inputs, in terms of material flux, energy costs, and information
• Define the desired products and undesired by-products of the
• Define the processing components (processes or operations)
associated with the inputs and outputs.
• Define the boundary conditions between the biological system and
• Define the constraints of the biological system, that is, describe all
other boundary conditions that limit the area of feasible,
permissible, or acceptable solutions.
• Give the biological system a name.
• Identify the time frame of analysis.
Systems Methodologies 37
Goal setting is the stage where objectives are defined and stated in
quantitative and measurable terms. These objectives may reflect profit (long or
short-terms), market supply, cost, quality, efficiency, reliability, compatibility,
adaptability, permanence, simplicity or elegance, safety, or time (Hall, 1962, pp.
105-107). The objectives guide the search for alternative solutions, imply the type
of analysis required of the alternative approaches, and provide the criteria for
selecting the optimum system (Hall, 1962, p.9).
Some guidelines are presented for setting objectives (these are patterned
after general systems methodologies):
• Strive for a free flow of expressions and accept all reasonable
• Write down objectives and check for definiteness of purpose.
• Check for consistency and logical coherence of objectives at all
• Check for completeness (or exhaustiveness) of objectives by looking out
for measurable statements, such as profit, market, cost, quality,
performance, competition, compatibility, adaptability, longevity,
simplicity, safety, legal, social, and environmental constraints, owners,
implementors, beneficiaries, victims, etc. However, be aware that it is
not possible to ensure completeness during the initial stages of problem-
solving. Completeness may be improved as the methodology iterates.
• Incorporate risk and uncertainty in the objective statements.
• Identify the ultimate objectives. If agreement is lacking, appeal to
authority, if necessary.
• Give each objective a system of measurement. These measurements are
important during the implementation phase to determine whether the
objectives are attained or not.
• Check to see that each objective is physically, financially, economically,
technically, environmentally, legally, psychologically, and socially
feasible. If limiting factors are known, state them clearly but concisely.
• Resolve value conflicts by identifying logical, factual, and value
questions from among interested parties. Use tentativeness: the
possibility of modifying the objectives at a later date. Avoid dogmatic
attitudes, dictatorial approaches, and premature voting.
38 Systems Methodologies
Systems synthesis is the stage of generating alternative solutions. During
this ideation stage, components are put together to form alternative systems that
can satisfy the objectives. Systems synthesis is a very important part of problem-
solving because the subsequent stages of systems evaluation and system selection
are based from the pool of ideas generated during this stage. Constructing biological
system models is a major feature of this stage. The assembling of system
components to form an alternative biological system is done through mathematical
The general strategies of systems synthesis are:
• Generate alternative systems. Gather all known alternatives from
literatures, scientists, policy-makers, experienced people, and other
sources. Do not reject any alternative system at this stage. Encourage
free expression of ideas, both current and old-fashioned. However, if
the problem has never been done before, be creative and seek the help
of experts in the relevant fields.
• Use networking techniques, such as block diagrams and flow graphs, to
set up component models and their interconnections.
• Delineate subsystems or processing components and give each a name.
Identify inputs and outputs in terms of material flow rates, energy cost
functions, and technology for each subsystem or processing component.
Define the time-frame of analysis, the level of functional hierarchy, the
process associated with the inputs and outputs, the desired product and
undesired by-products, and the boundary between the processing
component and its environment.
• Define the biological system structure through the component
interconnections. Determine logical and time sequence.
Systems evaluation is the stage where alternative systems generated during
the systems synthesis stage are analyzed and consequences are derived with respect
to the stated objectives, assumptions, and boundary conditions in order to prepare
for the system selection stage. The objective of systems evaluation is to anticipate
relevant consequences that might render the system useless during the
implementation phase. This stage helps to identify the appropriate system with
minimum risk of failure. Therefore, uncertainty of consequences must be accounted
for by making probability statements about the outcome through empirical data or
Systems Methodologies 39
There are five skills that are useful to a biological system engineer in the
same way that they are useful to any systems engineer (Hall, 1962 pp.114-115),
• Able to select the right tool for a given analysis.
• Knows when to slow down and acquire greater facility with a given
• Able to speak the language of experts when consultation is required.
• Knows the limits of usefulness of a given tool.
• Knows when to stop analyzing and make a decision.
System selection is the stage where the “best” alternative system is selected
- “best” in the light of the objectives, assumptions, boundary conditions, and the
relevant consequences. The selection process may not be straightforward,
considering the uncertainty and interdependent behavior of the components in a
biological system. In such cases, the decision-maker may have to rely on authority,
experience, intuition, or some personal criterion.
When the biological system problem is fuzzy due to the socio-political
components, the system selection stage may involve a process of choosing the
“best” solution from among a set of optimum solutions, a process called
multicriteria or multi-objective optimization. The definition of “best” is subject to
the cultural, moral, political, or personal preference of the decision-maker.
Since problem-solving involves a thorough search of alternative systems to
satisfy a need, the ideas and alternative systems that have not been accepted are
still important and may be of use in the future. There are four ways to handle
rejected alternatives, as adapted from Hall (1962 p. 122). First, it should be
recognized that the rejected biological system models are unwanted only for this
case, regarding the rejection as tentative. New events may lead to a use of these
rejected alternatives. Second, subsystems of the rejected biological system may be
useful to improve on the selected system. Third, rejected alternative biological
system models represent the results of creative thinking therefore they should be
preserved with great care. Fourth, the reasons for rejecting an alternative biological
system must be made clear in an unbiased manner. Hall further suggested to
include a suitable section in the final report that discusses the reasons for rejecting
the alternative system.
40 Systems Methodologies
3.3 Streamlined Life Cycle Assessment (SLCA) for
Comparing Two Products
Life-cycle assessment or LCA is a way of evaluating the total environmental
impact of a product through every stages of its life -- from obtaining raw materials,
such as mining or logging, all the way to factory production, product distribution,
retail, use, and disposal, which may include incineration, landfill, or recycling.
Streamlined life cycle assessment or SLCA presented here is a simplified version of
the LCA methodology. The SLCA methodology in this section is a synthesis of
SLCA materials and the author's experience from classroom instruction to
undergraduate engineering students. For purposes of instruction, the SLCA
presented in this book is specific to the comparison of products having similar
utility. It is presented as a process to evaluate the environmental burden, health
impact, and resource consumption associated with two comparable products by
identifying the material and energy usage and environmental releases, assess the
impact of those material and energy uses and releases on the environment, and
evaluate opportunities to effect environmental improvements.
The Society of Environmental Toxicology and Chemistry (Todd and
Curran, 1999) defines LCA as a process to evaluate the environmental burdens
associated with a product system, or activity by identifying and quantitatively
describing the energy and materials used, and wastes released to the environment,
and to assess the impacts of those energy and material uses and releases to the
environment. The assessment includes the entire life cycle of the product or
activity, encompassing extracting and processing raw materials; manufacturing;
distribution; use; re-use; maintenance; recycling and final disposal; and all
transportation involved. LCA addresses environmental impacts of the system under
study in the areas of ecological systems, human health and resource depletion. It
does not address economic or social effects.
LCA studies the environmental aspects and potential impacts throughout a
product’s life (i.e. cradle-to-grave) from raw material acquisition through
production, use and disposal. The general categories of environmental impacts
needing consideration include resource use, human health, and ecological
Figure 3.3.1 illustrates the LCA framework, which consists of four phases:
goal and scope definitions, inventory analysis, impact analysis, and interpretation
(Graedel, 1998). The double arrows between the phases indicate the interactive
and iterative nature of LCA. For example, when doing the impact analysis, it might
become apparent that certain information is missing, consequently, the inventory
analysis must be improved.
Systems Methodologies 41
Goal and Scope Inventory
External Forces: Direct Applications:
• Technical • Product development and
• Economic improvement
• Social • Strategic planning
• Others • Public policy making
Figure 3.3.1. Methodological framework of life cycle assessment.
In order to understand SLCA, it is useful to look at the total material budget
from natural resource extraction to production until its return to the reservoir of its
origin. An ecological look of a material cycle is illustrated in Figure 2.1 (Chapter 2).
Phase 1. Goal and Scope Definition
The purpose of Goal and Scope Definition is to evaluate alternative designs
in order to maintain economic feasibility while also seeking to reduce the
environmental damage due to the current conventional design. It consists of goal,
flowchart, scope, functional unit, system boundaries, and data quality.
The goal of an LCA study shall clearly state the intended application,
reasons for carrying out the study and intended audience and user of results (Todd
42 Systems Methodologies
and Curran, 1999). Examples of goal statements are: (1) to compare two or more
different products fulfilling the same function with the purpose of using the
information in marketing or regulating the use of the products, (2) to identify
improvement possibilities in further development of existing products or in
innovation and design of new products, (3) to identify areas, steps etc. in the life
cycle of a product where criteria can be set up as part of eco-labeling by a
For example, an SLCA of alkaline and nickel batteries (DeKleine et al.,
2001) may be expressed as follows: the purpose of this SLCA study is to compare
the environmental impact of alkaline and rechargeable nickel alloy batteries as a
portable power supply. Another example is to compare and evaluate the
environmental impact of gasoline and ethanol as motor fuel (Radtke et al., 2001).
Goal formulation states the background and rationale of the goal or
objective of the study. In the battery example (DeKleine et al., 2001), goal
formulation was stated as follows: “As technology grows, so does the need for
batteries. Although conventional alkaline batteries meet all federal guidelines for
safe disposal and incineration, they are not necessarily good for the environment.
They use nonrenewable resources and represent a large volume of toxic materials in
the landfills. Dry cell batteries are made up of three components: the anode,
cathode, and electrolyte. In an alkaline battery the anode contains high purity zinc
powder, the cathode contains electrolytically produced manganese dioxide, and the
electrolyte is a concentrated potassium hydroxide solution. During cell discharge,
the oxygen-rich manganese dioxide is reduced and the zinc becomes oxidized, while
ions are being transported through conductive alkaline electrolyte. The
rechargeable nickel metal hydride is composed of the positive and negative
electrodes. The positive electrode contains nickel oxyhydroxide, and the negative
electrode contains a metal hydride. An aqueous potassium hydroxide solution is
the primary electrolyte. Minimal electrolyte is used to facilitate oxygen diffusion to
the negative electrode. During charging the process is reversed. Battery waste
disposal is not regulated under RCRA (Resource Conservation and Recovery Act)
and therefore it may be disposed in the trash. While new Municipal Solid Waste
(MSW) landfills are designed to handle small amounts of hazardous wastes, these
wastes can be better managed in a designated program for collection or recycling.”
In the fuel example (Radtke et al., 2001), the formulation was stated as
follows: “Crude oil is pumped from oil fields in different areas around the earth.
Extensive exploration has been required and will continue to be used to find
sources of oil. These oil fields are often located in inaccessible areas far away from
where the product is to be used. This has led to the development of an extensive
transportation system. However, since oil is a nonrenewable resource, there is a
finite supply and the economically accessible crude oil will eventually be
completely consumed. Geologists have developed several reliable methods for
finding oil in the earth. The methods range from using sensitive magnetic detection
equipment to producing seismic events with explosives. Unfortunately, positive
Systems Methodologies 43
identification can only be made through the drilling of a test well. Ironically, the
best of these oil fields are located in inaccessible, ecologically sensitive areas. This
means that they are far from where the final products will be consumed. This
inaccessibility requires extensive transportation efforts and generates substantial
costs. During this transportation process, some crude oil will inevitably be released
into the environment. These losses account for an estimated 35% of all of the oil
present in the oceans. Upon the completion of the transportation process, the
crude oil arrives at the refinery. On the other hand, ethanol can be produced from
most commercially grown crops. Crops containing high levels of sugar and starch,
such as sugar cane, potatoes, sugar beets, and corn, are most commonly used. For
the purpose of illustration, only corn will be examined. Corn production is relatively
simple compared to other ethanol producing biomass. Equipment requirements are
minimal and new varieties of corn have decreased the need for disease and
pesticide control. Corn needs water, sun, nitrogen, and fertilizers to grow.
Nitrogen is required for corn production. This can be met with the application of
any nitrogen product such as urea, ammonium nitrate, or manure. Other required
nutrients include phosphorus and potassium. Corn is harvested and transported to
an elevator or distillery.”
Flowcharting is important in understanding the process under consideration.
Making the process flow explicitly aids several decisions of the overall analysis1:
deciding the scope of the analysis to be performed, determining what data needs to
be collected, identifying at what point in the process environmental loading
originates, formulation of process alternatives, and judgment regarding
streamlining. After analyzing the process flowchart, it may become evident that
several different approaches could be taken to reduce the amount of emission to
the environment. If so much is put in landfill, an option might be to incinerate and
recycle more of the total. However, incineration leads to higher emissions into the
atmosphere and recycling has prohibitively high cost. The best option for reduction
might be to target the initial source.
Back to the fuel example, the SLCA flowcharts of the gasoline and ethanol
production processes are presented in Figures 3.3.2 and 3.3.3, respectively (Radtke
et al., 2001).
Scope defines the boundary of the assessment -- what are included in the
system and what detailed assessment methods are to be used (Todd and Curran,
1999; Graedel, 1998). In defining the scope, the following items shall be considered
and clearly described: the functions of the system; the functional unit; the system to
be studied; the system boundaries; allocation procedures; the types of impact and
the methodology of impact assessment and subsequent interpretation to be used;
data requirement; assumptions; limitations; the initial data quality requirements; the
44 Systems Methodologies
type of critical review, if any; and the type and format of the report required for the
study. The scope should be sufficiently well defined to ensure that the breadth, the
depth and the detail of the study are compatible and sufficient to address the stated
Crude Oil Air Emissions
Crude Oil Spillage
Transportation Consumer Use
Additional Petroleum Products
Figure 3.3.2. Schematic life cycle flowchart of gasoline production system (Radtke
et al, 2001).
Systems Methodologies 45
Sun Light Pesticides Inputs
Distillation Distiller’s Grains Consumer
Industrial Alcohol Products
Ethanol Fuel Compressed CO2
Transportation Consumer Use
Agricultural Use Air Emissions
Figure 3.3.3. Schematic life cycle flowchart of the ethanol production system
(Radtke et al, 2001).
In the battery example, the problem was bounded to reduce the amount of
batteries released in landfills to prevent more long-term environmental damage
done by the release of the toxins from batteries (DeKleine et al., 2001). The
identified constraints were:
46 Systems Methodologies


text:
Jack O Lantern
This guy is all dressed up for the Halloween Ball, complete with a festive top hat and fluffy collar. While he looks a bit complicated, Mr. O’ Lantern begins with some basic shapes sketched out with a pencil. Joley will show you how to fill in those shapes, add some details, and next thing you know, Jack O Lantern will be ready to party at your Halloween Bash!
Acrylic Paints: Red, Blue, Yellow, Black, & White
Paint Brushes: Large Flat, Skinny Round, & Medium Round

domain: hobby


August 23, 2012
401(k) Tax Break May Be Weak Incentive
Typical American households approaching retirement age had just $42,000 saved in 401(k)s and IRAs in 2010. This raises the question: Does the federal tax incentive designed to spur savings even work?
In what one retirement expert called “landmark” research, a new study has found that employers’ automatic enrollment and other employee mandates are far more effective ways to increase retirement savings than the federal tax exemption granted for retirement-fund contributions.
Harvard University Professors Raj Chetty and John Friedman, together with Soren Leth-Petersen and Torben Nielsen at the University of Copenhagen, tested the impact of both types of incentives on an enormous sample of 4.3 million people in Denmark. Chetty said the findings also hold implications for the United States.
They found that every $1 increase mandated for retirement savings – in this case, by a temporary Danish policy that required workers to contribute 1 percent of their earnings to government pension savings accounts – spurred 86 cents in additional savings by individuals. In contrast, the Danish government’s tax subsidy, which is very much like our own 401(k) tax break, spurred only 20 cents more in savings.
“This is a landmark study,” Dartmouth College professor Jonathan Skinner said about the paper, presented during the Retirement Research Consortium’s conference in Washington in early August.
The savings boost spurred by the Danish savings mandate, in effect from 1998 through 2003, is analogous to U.S. employer programs with automatic features, Chetty said. Such programs might automatically enroll workers in a 401(k) or raise employees’ savings as their earnings increase.
Some 42 percent of U.S. employers now automatically enroll employees in 401(k)s, giving them the option of dropping out. Research has also shown that automatic enrollment is more effective than trying to push employees to actively sign up for these savings programs.
To test the impact of tax subsidies, the researchers examined a different government policy: a 15-percent reduction in the tax break for high-income Danes who contributed to their capital pension retirement savings accounts – what would amount roughly to a partial reversal of 401(k) tax breaks in the United States. They found that contributions by high earners fell sharply when the tax break was reduced but that individuals were simply moving those funds to other types of savings accounts. In other words, saving overall was not very responsive to the tax incentive.
It’s important to note that this focus on “total savings” is critical to the researchers’ findings. They wanted to measure a change in savings in all of an individual’s various accounts, rather than savings that merely shifted among accounts in response to each policy.
“[T]he impacts of this [tax subsidy] reform on total savings are very limited,” the paper said. Chetty cautioned that further research, using data from the United States, is needed before one can draw definitive conclusions for U.S. policy, but the Denmark findings suggest that tax subsidies may not be the most effective way to raise retirement savings in this country.
At the research consortium, Chetty previewed the results of a forthcoming working paper, which is expected to go live on the National Bureau of Economic Research’s website in a few months. The Center for Retirement Research, which sponsors this blog, is a consortium member.
Full disclosure: The research cited in this post was funded by a grant from the U.S. Social Security Administration (SSA) through the Retirement Research Consortium, which also funds this blog. The opinions and conclusions expressed are solely those of the blog’s author and do not represent the opinions or policy of SSA or any agency of the federal government.
I continue to think that the Chetty et al. article is a landmark study, but I don’t think that it tells us anything about the effectiveness of the U.S. 401(k) program, as suggested above. The policy change in Denmark removed one flavor of retirement saving but left the other one intact — hence, no surprise that savvy Danes simply switched over to the other retirement saving plan.
This policy change was roughly equivalent to closing down Roth IRAs in the U.S. We wouldn’t be surprised that, as a consequence, people would move their Roth IRA money into traditional IRAs, with no impact on overall saving or tax revenue. But we can’t conclude from such a policy experiment that 401(k) tax incentives are ineffective.
I really cannot see how this could be considered comparable. High earners are not effected by the [savers] tax break. When referring to a regular 401(k) vs. a Roth 401(k) again, higher earners are not the ones who need to matter as much when considering retirement savings. Sure they do need to save more, but they also have more options than lower earners, and will always find the most tax advantaged ways to save for retirement.
The tax benefit is critical to enticing employers to offer plans, especially for owner-managers of small businesses. The Danish study underscores this. Drop the incentive and decision-makers will move to other venues but in the U.S. that plan termination would accompany that change. Sponsoring a plan in the U.S. takes significant time and imposes fiduciary liability on decision-makers. Many would not take this on without a benefit.
I’ve always said that the most important reason to join a 401(k) is you save before you spend. Automatic features help that.
Tax deferral matters the more you make, so many of the people who find the deferral meaningful are also highly compensated employees who have their contributions capped, and have most of their retirement money someplace else.
Mr. Miller’s comments are important. Even if the tax benefit did not induce people to save any more money for retirement, the money accumulates much more rapidly in a tax deferred account. At 8% earnings for 40 years, the accumulation from tax deferral more than doubles the after tax terminal amount.
Chetty, Friedman, Petersen and Nielsen have asked some important questions in an effort to explain savings behaviors. They took a logical approach, comparing the impact of mandatory contributions versus tax policy.
I would like to suggest that they look more carefully at tax policy and its impact. I would counter their argument by saying that the tax impact on savings behavior is not clearly understood by individuals. As a result, when individuals make decisions about the use of their hard earned income, they do not calculate the tax benefits of saving through a 401(k).
Over the last decade in my work as a financial advisor, it is clear that most middle class and upper middle class income earners do not even think about tax breaks when they decide how much to contribute to their 401(k). While mortgage interest deductions are very salient to individuals, the tax impact of 401(k) contributions are not noted, nor I believe, understood as clearly. In fact, many people overestimate the tax impact of mortgage interest deductions (as a recent researcher found in his contrast of mortgage interest and charitable deductions). So the mortgage interest tax break influences middle and upper class behavior quite clearly (as seen in the high rate of home ownership). By contrast, the lower salience of the retirement savings tax breaks do not seem to do so.
I would suggest that this line of inquiry be considered in formulating subsequent research. In my role as advisor, I have explained the positive tax impact to countless people—from spouses of high-paid lawyers down to single individuals who earn $50,000. They do not believe it. I have to repeatedly point out the dual positives: reduction in their tax payments plus the increase in their Net Worth.
The mortgage industry has clarified the tax impact of mortgage interest deductions. Perhaps retirement vendors should clarify the immediate tax impact of 401(k) contributions. They can demonstrate how an increase in 401(k) contributions can reduce taxes as much if not more than mortgage interest deductions. As a result, they may help increase retirement savings among income earners who are not part of the mandatory savings plans.
One additional area for possible further investigation is automatic enrollment in the U.S. federal government’s Thrift Savings Plan (TSP), which as you may know is the government’s version of a 401(k).
While the TSP celebrated its 25th birthday earlier this year, automatic enrollment in the TSP began two years ago in August 2010, and so far 97% or so of automatic enrollees since then continue to invest in the TSP — the total number of participants since then is approaching 300,000, according to the Federal Retirement Thrift Investment Board (FRTIB) figures at the end of May. Perhaps not quite the 4.3 million cited in the Denmark study, but in total there are about 4.5 million TSP account holders including uniformed service personnel and former government employees who have left service, so there is a sizable sample to compare and contrast among participants, if anything. To contrast the automatic enrollment of FERS civilian employees, for example, uniformed service personnel are not automatically enrolled, and the participation rate is only about 40% since service members were first allowed to participate in the TSP in 2002.
At any rate, please keep up the interesting posts in “Squared Away.” I enjoy reading what you and BC’s Financial Security Project have to say.
The percentage of companies eligible companies for 401(k) style programs is continuing to grow rapidly. The percentage of people who participate is continuing to grow rapidly as well. Add to that the growing percentage of companies that are instituting or increasing company contributions, and there is more than enough evidence to support this retirement savings option. In fact, reliable research indicates increased employee contributions, and satisfaction as time (and balances) grow.
Also, the growing lack of confidence is Social Security as a retirement “hope” makes more and more people want to find other ways to control their own retirement options, with less reliance on government. I would not be surprised to see serious effort to “re-invent” the self-controlled Social Security Investment Account in the near future, particularly if Romney is elected.
There is some thinking that Retirement as a concept has lost value; a “second life” either as a self-fulfillment goal, or as a second career (with much less stress and pressure) is becoming a real possibility, IF saving for that period in time were to lead to economic independence at a much earlier age, say 50 to 55, leaving time to pursue leisure while health still allows, and providing significant incentive for much more savings to achieve the goal.
Some people do not want to have taxes, but taxes might also be favorable. There are retirement plans that charge you through your taxes so that you can get a pension when you are older.


text:
Traditional “golden years” could be becoming rarer for older Canadian consumers as their debt loads rise, according to a new report.
Canadian consumers of all ages continued to increase their debt burden, said Equifax Canada’s second-quarter report, released on Monday. Total debt rose by nearly $77 billion, or 6.1 per cent, compared with the same time last year.
But consumers 65 and older had the greatest year-over-year increase, at 6.5 per cent, according to the credit-monitoring company.
“The traditional golden years that retirees anticipated have not become a reality as debt loads rise for those over 65,” said Henrietta Ross, CEO of Credit Counselling Services, in a statement.
“With reduced incomes, often coupled with increased expenses, these individuals are accumulating more debt to boost income through credit so that they can continue to enjoy a pre-retirement lifestyle that they may no longer be able to afford.”
She said seniors may be taking on debt to help their own parents or grown children, who may be struggling financially themselves.
Despite efforts from regulators to tighten lending standards, debt has increased across all age groups, partially driven by a 7.4 per cent increase in outstanding mortgage debt since last year, the report states. Auto loan balances have also increased 8.6 per cent, according to the report.
An increased demand for credit outside of mortgages is positive for the economy in the short term, Cristian deRitis, Moody’s Analytics senior director of Consumer Credit Economics, said in a statement. But, he warned, that increased demand “could limit the ability of overextended consumers to react to any financial bumps in the road in the future.”
Equifax’s report also found the national 90-day-plus delinquency rate decreased over the past three years, to a record low of 1.19 per cent.
Toronto has the highest delinquency rate out of major metropolitan areas, at 1.56 per cent of non-mortgage balances. But that’s an improvement since the city’s peak of 2.53 per cent in 2010, according to the report.
“Stable home prices and improvements in the labour market should continue to support the market in the future, while the outlook for consumer credit remains positive,” deRitis said. “A sudden rise in interest rates or deterioration in fundamentals in key export markets are risks to this forecast, however.”
While fears of another recession subside, consumers are continuing to accumulate high levels of debt, but with more fiscal responsibility, said Regina Malina, Equifax director of modelling and analytics.
The 90-day-plus delinquency rate for mortgages decreased 19.2 per cent from this time last year. Equifax noted that could be because of tighter mortgage lending rules introduced last summer.
Average mortgage balances have increased to $168,387 this year from $162,985 during the second quarter of last year.

domain: economics