Confusing Stocks with Flows: The Carbon Credit Fallacy

Christoph E. Mandl
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Christoph E. Mandl: University of Vienna, Mandl, Lüthi & Partner

Chapter 6 in Managing Complexity in Social Systems, 2019, pp 59-66 from Springer

Abstract: Abstract Stocks and their in- and outflows are causally related. Yet they may not be compared with each other for reasons explained in Chap. 5 . But the fact is—as Booth Sweeney (2000) and Sterman (2008) have empirically tested—stocks and their flows often are treated as being basically the same and, even worse, that the causal relationship between them is considered simple and straightforward: When inflow decreases then stock decreases; when inflow increases then stock increases. Unfortunately, this simple and often used rule of thumb is not even an approximation of reality. It is outright wrong, and any managerial decision based on blurring the fundamental difference between stock and flow will lead nowhere.

Date: 2019
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DOI: 10.1007/978-3-030-01645-6_6

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