In the last few years, ideas from a field of engineering instrumental to advances in radar, aircraft simulators, and defense systems have increasingly been applied to management problems. Both managers and consultants have used system dynamics and its principles of feedback and secondary effects to think through how a strategy might or might not work, depending on how competitors react, how organizational changes are received, and what kinds of consequences—intended and unintended—emerge. Many believe that system dynamics has helped them become skilled at inventing the future, either by sketching out causal loops on the back of an envelope, or by assembling equations of cause and effect in a computer model. Both approaches work.

Adapted from a speech given in 1989 by the inventor of system dynamics, Jay Forrester, the following article is both a short history and a helpful primer. Forrester describes how the ideas he used to uncover the real causes of cyclicality in industry could be adopted to explain why low-cost housing has failed to renew inner-city neighborhoods. At the end of the article, a postscript sums up developments that have taken place in system dynamics in the past six years.

Many managers who went to business...