Integrating Economics and System Dynamics Approaches for Modelling an Ecological‐Economic System

This article documents trans‐disciplinary collaboration between system dynamics (SD) practitioners and economists to produce knowledge useful for studying ecological–economic systems. The article introduces a multi‐sector, ecological–economic model (EEM) of population–resource dynamics. Incorporating key concepts from economics on markets and prices, the model shows that SD models are able to represent the complex dynamics of an EEM, including out‐of‐equilibrium states and adaptation that strive to find new equilibria more realistically. The sensitivity analyses produce important implications, including the major finding that model behavior varies significantly with the degrees of price adjustment times. This finding justifies the Meadows' et al. limits to growth model, which omits an endogenous price mechanism, and also suggests that further research on non‐instantaneous price adaptation mechanisms is needed. The article encourages modellers to incorporate out‐of‐equilibrium aspects of an economic system as appropriate and highlights the potential for SD practitioners to contribute to economics, especially ecological economics.