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Wrap up: models are helpful if you know how to use them

In this article, Frank Krysiak and Hannes Weigt sum up what economic models are and why they are useful.
© University of Basel

This week we had our first glimpse at the world of economic modeling in the context of energy and environmental questions. We learned that models are simplified depictions of the real world. A good economic model does not aim to represent the whole complexity of the world but only includes those parts needed to tell consistent stories. Thus, a model is a simplified but credible description of our real world.

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Always keep in mind that modeling is more than just building a model. It always starts with a problem or question you want to analyze and ends with you interpreting your model results and relating it to your question.

We have seen that there are different types of models for different purposes: explanatory models focusing on theoretic aspects aimed to make an argument and simulation models used to describe plausible scenarios yielding quantitative insights; bottom-up models capturing technical details; and top-down models focusing on aggregated interactions.

Feel free to have a look at some of the references provided in this course or interesting papers and reports you find online and try to cluster them into which type of modeling they fall. You will see that all of them have their place when assessing the multiple energy and environmental related questions we face today. So if this course persuades you to go in one way or the other you will find yourself in good company.

Finally, we had our first own model examples. We will gradually extend the aspects of modeling using examples like those to visualize and explain the concepts and thereby dive deeper into the world of economic modeling.

© University of Basel
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Exploring Possible Futures: Modeling in Environmental and Energy Economics

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