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Stocks and flows

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A simple dynamic stock and flow diagram in an economic context


Stocks and flows are the basic building blocks of system dynamics models. Jay Forrester originally referred to them as "levels" (for stocks) and "rates" (for flows). A stock variable is measured at one specific time, and represents a quantity existing at that point in time (say, December 31, 2004), which may have accumulated in the past. A flow variable is measured over an interval of time. Therefore a flow would be measured per unit of time (say a year).

A stock is accumulated over time by inflows and/or depleted by outflows. Stocks can only be changed via flows. Mathematically a stock can be seen as an accumulation or integration of flows over time – with outflows subtracting from the stock. Stocks typically have a certain value at each moment of time – e.g. the number of population at a certain moment.

A flow changes a stock over time. Usually we can clearly distinguish inflows (adding to the stock) and outflows (subtracting from the stock). Flows typically are measured over a certain interval of time – e.g., the number of births over a day or month.

Examples[edit]

Stockandflow2.png

"Stock" Possible units of stock "Inflow(s)" "Outflow(s)" Possible units of flow
water in bathtub liters water pouring in water draining out liters per second
CO2 in atmosphere tons tons emitted tons sequestered tons per day
bank balance euros deposits
interest
withdrawals euros per month
inventory of lumber board feet incoming lumber outgoing lumber board feet per week
guests in a hotel persons guests arriving guests leaving persons per day
population persons births
immigration
deaths
emigration
persons per year
waste in disposal site tons dumping waste decay of waste tons per week
fuel tank gallons refueling fuel consumption gallons per month
housing stock dollars housing investment housing depreciation dollars per year

Stocks and flows in accounting[edit]

Thus, a stock refers to the value of an asset at a balance date (or point in time), while a flow refers to the total value of transactions (sales or purchases, incomes or expenditures) during an accounting period. If the flow value of an economic activity is divided by the average stock value during an accounting period, we obtain a measure of the number of turnovers (or rotations) of a stock in that accounting period. Some accounting entries are normally always represented as a flow (e.g. profit or income), while others may be represented both as a stock or as a flow (e.g. capital).

A person or country might have stocks of money, financial assets, liabilities, wealth, real means of production, capital, inventories, and human capital (or labor power). Flow magnitudes include income, spending, saving, debt repayment, fixed investment, inventory investment, and labor utilization.These differ in their units of measurement. Capital is a stock concept which yields a periodic income which is a flow concept.

Wikipedia
This page or section includes content from Wikipedia. The original article was at Stock and flow. The list of authors can be seen in the history for that page. As with Appropedia, the text of Wikipedia is available under the CC-BY-SA.