Layers of Limits

Layers of Limits

Systems surprise us because our minds like to think about single causes neatly producing single effects. We like to think about one or at most a few things at a time. And we don’t like, especially when our own plans and desires are involved, to think about limits.

But we live in a world in which many causes routinely come together to produce many effects. Multiple inputs produce multiple outputs, and virtually all of the inputs, and therefore outputs, are limited. For example, an industrial manufacturing process needs:

• capital
• labor
• energy
• raw materials
• land
• water
• technology
• credit
• insurance
• customers
• good management
• public-funded infrastructure and government services (such as police and fire protection and education for managers and workers)
• functioning families to bring up and care for both producers and consumers
• a healthy ecosystem to supply or support all these inputs and to absorb or carry away their wastes

A patch of growing grain needs:

• sunlight
• air
• water
• nitrogen
• phosphorus
• potassium
• dozens of minor nutrients
• a friable soil and the services of a microbial soil community
• some system to control weeds and pests
• protection from the wastes of the industrial manufacturer

It was with regard to grain that Justus von Liebig came up with his famous “law of the minimum.” It doesn’t matter how much nitrogen is available to the grain, he said, if what’s short is phosphorus. It does no good to pour on more phosphorus, if the problem is low potassium.

Bread will not rise without yeast, no matter how much flour it has. Children will not thrive without protein, no matter how many carbohydrates they eat. Companies can’t keep going without energy, no matter how many customers they have—or without customers, no matter how much energy they have.

This concept of a limiting factor is simple and widely misunderstood. Agronomists assume, for example, that they know what to put in artificial fertilizer, because they have identified many of the major and minor nutrients in good soil. Are there any essential nutrients they have not identified? How do artificial fertilizers affect soil microbe communities? Do they interfere with, and therefore limit, any other functions of good soil? And what limits the production of artificial fertilizers?

At any given time, the input that is most important to a system is the one that is most limiting.

Rich countries transfer capital or technology to poor ones and wonder why the economies of the receiving countries still don’t develop, never thinking that capital or technology may not be the most limiting factors.

Economics evolved in a time when labor and capital were the most common limiting factors to production. Therefore, most economic production functions keep track only of these two factors (and sometimes technology). As the economy grows relative to the ecosystem, however, and the limiting factors shift to clean water, clean air, dump space, and acceptable forms of energy and raw materials, the traditional focus on only capital and labor becomes increasingly unhelpful.

One of the classic models taught to systems students at MIT is Jay Forrester’s corporate-growth model. It starts with a successful young company, growing rapidly. The problem for this company is to recognize and deal with its shifting limits—limits that change in response to the company’s own growth.

The company may hire salespeople, for example, who are so good that they generate orders faster than the factory can produce. Delivery delays increase and customers are lost, because production capacity is the most limiting factor. So the managers expand the capital stock of production plants. New people are hired in a hurry and trained too little. Quality suffers and customers are lost because labor skill is the most limiting factor. So management invests in worker training. Quality improves, new orders pour in, and the order-fulfillment and record-keeping system clogs. And so forth.

There are layers of limits around every growing plant, child, epidemic, new product, technological advance, company, city, economy, and population. Insight comes not only from recognizing which factor is limiting, but from seeing that growth itself depletes or enhances limits and therefore changes what is limiting. The interplay between a growing plant and the soil, a growing company and its market, a growing economy and its resource base, is dynamic. Whenever one factor ceases to be limiting, growth occurs, and the growth itself changes the relative scarcity of factors until another becomes limiting. To shift attention from the abundant factors to the next potential limiting factor is to gain real understanding of, and control over, the growth process.

Any physical entity with multiple inputs and outputs—a population, a production process, an economy—is surrounded by layers of limits. As the system develops, it interacts with and affects its own limits. The growing entity and its limited environment together form a coevolving dynamic system.

Any physical entity with multiple inputs and outputs is surrounded by layers of limits.

Understanding layers of limits and keeping an eye on the next upcoming limiting factor is not a recipe for perpetual growth, however. For any physical entity in a finite environment, perpetual growth is impossible. Ultimately, the choice is not to grow forever but to decide what limits to live within. If a company produces a perfect product or service at an affordable price, it will be swamped with orders until it grows to the point at which some limit decreases the perfection of the product or raises its price. If a city meets the needs of all its inhabitants better than any other city, people will flock there until some limit brings down the city’s ability to satisfy peoples’ needs.6

There always will be limits to growth. They can be self-imposed. If they aren’t, they will be system-imposed. No physical entity can grow forever. If company managers, city governments, the human population do not choose and enforce their own limits to keep growth within the capacity of the supporting environment, then the environment will choose and enforce limits.

There always will be limits to growth. They can be self-imposed. If they aren’t, they will be system-imposed.