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Interpreting models

What can be learned from theoretical models. Insights are generalized to highlight potential pitfalls in interpreting theoretical models.

While interpreting results of a model we have to accomplish three things:

  • We have to phrase results that are usually contained in mathematical expressions in words that can be understood and remembered.
  • We have to provide a sound intuition of what happens in economic terms, and argue why the underlying mechanism is relevant for real world cases.
  • And we have to embed the results in the storyline of our analysis, and into the literature.

This helps to convince our audience that our results are not only consistent, but are interesting and relevant.

Pitfalls when interpreting results from a theoretical model are:

  • Staying too close to the formal derivation of the results
  • Overstate the generality and importance of the results

Often it takes more time to understand a result than to derive it.

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Exploring Possible Futures: Modeling in Environmental and Energy Economics

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