A Reference Mode is a graph of a variable over time that shows the important characteristic of the variable for a problem statement being worked on. For example, if the problem statement is that the price of a commodity goes up and down in a cyclic manner the reference mode could simply be a graph of the price of the product. This could be the actual price over some historic time period, an approximation of that based on recollections, or an idealization of that behavior that is a sine wave. In addition to representing things that have happened, reference modes can be developed for things in the future. For example if you are creating a new product to bring to market you might have a reference mode of continued growth that is what you want to have happen and one of growth and collapse that is what you fear might happen.
Reference Modes can really help to clarify a problem statement. To draw a reference mode you need to specify the range of time over which things need to be investigated. As simple as this sounds, it is very helpful to deciding what to include and what to leave out of a model. Reference modes also help to identify which variables are the most important to include in a model. If there is no clear reference mode for a variable it may be possible to leave that variable out of the model.
Reference modes are also helpful in abstracting away elements of behavior that are not central to a problem. For example, if you are looking at the dynamics of the business cycle you might not want to have to include growth dynamics. This type of abstraction can be very helpful in keeping models simple and insightful. Care must be taken, however, if you want to compare model behavior to data that has been detrended or otherwise modified as the theoretical foundations for doing this are quite limited.
In this chapter we will work through how Vensim’s Reference Model tool can be used to add reference modes to model diagrams and compare the behavior of a simulation model with reference modes. We will also show how to enter an exogenous driving variable quickly using the Reference Mode tool. Because you can enter exogenous drivers, and show expected behavior the Reference Mode tool provides an excellent platform for doing mental simulation exercises and we will show an example of how to use it this way.