Limits of Computer Modeling:  Implications for Government Decisionmaking.
“Those who conflate the science and policy roles of prediction and modeling trade short-term political or public gain with a substantial risk of a more lasting loss of legitimacy and political effectiveness” (Roger A. Pielke Jr / The Role of Models in Prediction for Decision  – Cary Conference IX: 28 February 2001)
Governments around the world have been responding to computer-generated models of climate change and global warming by commissioning economic models designed to support policy to address both the causes of the problems and likely human responses, in ways calculated to minimise adverse impacts in their respective societies.
While arguments over the realities of global warming have largely abated, others regarding its causes and what to do about it continue apace – when it gets down to confronting the costs of possible solutions, there are too many vested interests in play for consensus on action to be easily or swiftly attained. In the meantime a sense of urgency at ground-level resonates with the fear that “we sit around modelling while the planet burns.”  This edition of WWWTools for Education presents a webliography for readers who want to know more about the pros and cons of computer modeling as a tool for government policy-makers, with special reference to environmental and economic modeling.
The next edition of WWWTools for Education will consist of a webliography supporting understanding of the range of mitigation and adaptation strategies being proposed, with special reference to Emissions Trading Schemes.
Climate Change.
The problem begins here. This selection of resources is not comprehensive, but provides ample background:
Alaska: Climate-change Frontier  (Moises Velasquez-Manoff / The Christian Science Monitor: August 28, 2008)
Antarctica: Ice Under Fire  (World View of Global Warming, 2008)
Climate Change   (Bureau of Meteorology, Commonwealth of Australia: 2008)
Climate Change   (U.S. Environmental Protection Agency)
Climate Change   (BBC Weather Centre)
Climate Change and Energy   (Department for Environment, Food and Rural Affairs: UK)
Intergovernmental Panel on Climate Change   (World Meteorological Organization / United Nations Environment Programme)
 
Terminology and Ready Reference.
A few references to help fill the gaps:
Economics   (Wikipedia) – the social science that studies the production, distribution, and consumption of goods and services. 
Neoclassical economics   (Wikipedia) – focuses on the determination of prices, outputs, and income distributions in markets through supply and demand. See among Criticisms, a key assumption that individuals act rationally.
General equilibrium   (Wikipedia) –  a branch of theoretical microeconomics seeking to explain the behavior of supply, demand and prices in an economy with several or many markets.
Computable General Equilibrium   (Wikipedia) – CGE models are a class of economic model that use actual economic data to estimate how an economy might react to changes in policy, technology or other external factors.
Pareto Optimality   (Economy Professor) – a situation which exists when economic resources and output have been allocated in such a way that no-one can be made better off without sacrificing the well-being of at least one person. See also Pareto Efficiency   (Wikipedia)
  
Econometrics   (Answers.com) – the application of mathematical and statistical techniques to economics in the study of problems, the analysis of data, and the development and testing of theories and models.
Model – a small copy or imitation of an existing object (Webster’s New World Dictionary). Cited in The Promise and Limits of Computer Modeling  (Charles Blilie). From the same source: “a preliminary representation of something, serving as a plan from which the final, usually larger, object is to be constructed” or “a hypothetical or stylized representation
Mathematical Model  (Wikipedia) uses mathematical language to describe a system.
Model (economics)   (Wikipedia) – a theoretical construct that represents economic processes by a set of variables and a set of logical and quantitative relationships between them. See also Bill Parke’s caveat   , that “this process inherently ignores important aspects of real-world behavior, making the modeling process an art as well as a mathematical exercise.”
Stochastic   (The Free Dictionary):
1.  Involving or containing a random variable or variables.
2. Involving chance or probability.
Probability Distribution Function   (Jones Kalunga) – a mathematical function used to model the frequencies and probabilities of occurrences over time.
Environmental Economics Glossary   (sponsored by Environmental Damage Valuation & Cost Benefit News, The Cost Benefit Group & Damage Valuation Associates)
Glossary   (Climate Change North, 2005)
Stern Review Abbreviations & Acronyms   (Stern Review: The Economics of Climate Change / HM Treasury, UK)
Mitigation: reducing emissions to reduce future climate change,  and Adaptation: reacting to current changes and preparing society for both predictable and unforeseen changes (Mitigate and Adapt­—but Don’t Forget the Science!  (Richard Anthes / University Corporation for Atmospheric Science Quarterly: Spring 2008)
The Limits To Growth – the Iconic Modeling Exercise.
World3   (Wikipedia) – the computer simulation used by the Club of Rome study that produced Limits to Growth.
Fair Warning; the Club of Rome Revisited   (Keith Suter) – the warning from “Limits to Growth” remains valid.
Beyond The Limits to Growth (Donella H. Meadows, Dennis L. Meadows, and Jørgen Randers / Adapted from IN CONTEXT #32, Summer 1992) – an update. Is  sustainability still achievable?
Limits to Growth: Book Review to Mark the 35th Anniversary of Publication (rev. Michael H. Smith and ed. Karlson Hargroves / The Natural Edge Project:  September 2007) – considers three principal misunderstandings about the original Limits to Growth and how these were addressed in updates.
Computer Simulation in the Controversy over Limits to Growth   (Peter Imhof / Technische Universität Hamburg-Harburg: August 2000) – uses the Limits to Growth  debate to consider: 
  • whether human assumptions or computed calculations are responsible for simulation results
  • how much data is necessary to make a computer simulation a meaningful representation of reality.
The Nature, Purposes, Processes and Limitations of Modeling: Basic Readings. 
The Promise and Limits of Computer Modeling  (Charles Blilie / World Scientific Publishing Company,  2007) – an interesting and far-ranging overview defining “the model“, explaining aims and objectives, exploring the nature of modeling, processes, inherent limitations, and the role of models in creating knowledge. From the book:
Comprehensive understanding or prediction of global climate would be utterly impossible without computer models.
The model reduces a system to some idealized or abstract form. Although the model can and will represent details, it usually does not (or cannot) model things in their complete particularity
Models as actually implemented will always have limitations and take time to build 
Models …  are always based on imperfect data, and are thus in some way doubtful.
  Our necessary ignorance of all conditions affecting an actual system mean that any model… will necessarily fall short of complete accuracy and truth
The chapter Climates of Fact discusses approaches to global climate modeling, as well as the verification and limits of existing climate models.
The Role of Models in Prediction for Decision   (Roger A. Pielke Jr / Cary Conference IX: February 28, 2001) – explores the dangers inherent in confusing prediction in science with prediction for policy, and recommends strategies for overcoming them in environmental decisionmaking processes. Emphasises the importance of understanding  uncertainty and predictability. Lists attributes of a good model.
… alternatives to prediction have become increasingly visible. The prediction process can be judged successful if the goal of climate policy — to reduce the impacts of future climate changes on environment and society — is addressed, independent of whether century-scale climate forecasts prove to be accurate”
“The lesson for decisionmakers is that one is in most cases more likely to reduce uncertainties about the future through decision making rather than through prediction”
On Modeling and Interpreting the Economics of Catastrophic Climate Change  (Martin Weitzman / REStat: July 07, 2008) – addresses “deep structural uncertainty in the science coupled with an economic inability to evaluate meaningfully the catastrophic losses from disastrous temperature changes”.
Insights Not Numbers: The Appropriate Use of Economic Models   (Janet Peace and John Weyant / Pew Center on Global Climate Change, April 2008). Important points from the Executive Summary
  • the importance given Economic Modeling in the climate-change policy debate
  • the value of Models as tools for exploring policy choices and developing understandings of how economies may respond to different sorts of regulation.
  • the limits of Models as tools for precise prediction – results depend on a model’s unique set of assumptions, definitions, structure and data.
About using economic models:
  • forecasting the future remains inherently uncertain. The longer the time horizon, the larger the uncertainties.
  • model results depend on input assumptions and on the structure of the model itself. Critical assumptions and structural biases are not always apparent.
  • what is left out of a model can be as important as what goes in.
Categories of assumptions important in driving model results: 
(1) specific features of policies being analyzed (including the degree of flexibility allowed in meeting the emissions constraints)
(2) baseline assumptions about how the economy and environment are likely to perform in the absence of the policy
(3) the ease with which consumers/producers can adapt to emissions limits
(4) pace and magnitude of technological change/innovation
(5) what benefits from climate-change mitigation are included, and how.
Examples used are CGE models that simulate the effects of policies on all sectors of economies. Uncertainty is a recurrent theme.
Conclusions:
  • results dependent on underlying assumptions and model structure
  • results must be seen as approximations only
  • mitigation cost estimates are valuable – flexible mitigation options yield lower program costs
  • announcing a policy well in advance of implementation reduces overall costs
  • allowance allocation reduces costs for stakeholders
  • assumptions and limitations must be clearly identified and prominently stated in any report
As the climate policy debate evolves, it is increasingly important that stakeholders understand the strengths and limitations of economic models and look to them for broad insights, not absolute answers.”
Some of the References cited for this White Paper are also online:
Carbon Abatement Costs: Why the Wide Range of Estimates?  (Carolyn Fischer and Richard Morgenstern / Resources for the Future, 2005) – examines the importance of structural modeling choices in explaining differences in estimates.
Induced Technological Change and Climate Policy   (Lawrence H. Goulder / Pew Center on Global Climate Change, 2000) – explores how climate policy may influence the rate and direction of technological change, examines the implications of “Induced Technological Change” (ITC) for climate policy design. Main findings include:
1) ITC lowers the costs of reducing emissions.
2) ITC justifies more extensive emission reductions than would otherwise be called for.
3) ITC alters the optimal timing of emissions abatement.
4) In the presence of ITC, announcing climate policies in advance can reduce costs.
5) Economic analysis justifies the implementation of public policies to induce technological change.
6) To promote ITC and reduce GHG emissions most cost-effectively, policies to reduce emissions and incentives for technological innovation are both required
The Role of Substitution in Understanding the Costs of Climate Change Policy   (Dale W. Jorgenson et al / Pew Center on Global Climate Change, 2004) – with a wide range of substitution possibilities and low substitution costs, mitigation costs (damages to welfare, income and production) are likely to be low; narrow substitutability and high substitution costs will lead to higher mitigation costs.
  The Costs of Climate Protection: A Guide for the Perplexed   (Robert Repetto and Duncan Austin / World Resources Institute, 1997) explains why different economic models reach different conclusions; identifies key assumptions that account for over 80 percent of variations in predicted economic impacts; lists important questions to ask about assumptions underlying predictions.
Recent Examples of Modeling.
GLOBAL REFERENCES:
Kyoto Protocol   (Wikipedia) – adopted on December 11, 1997, entered into force on February 16, 2005: “A protocol to the International Framework Convention on Climate Change with the objective of reducing greenhouse gases in an effort to prevent anthropogenic climate change.”
What If We Burn Everything?  (Fraser Cain / Universe Today: November 02, 2005) – simulation results from Lawrence Livermore National Laboratory: if we use all available fossil fuels by 2300, the earth will warm by 8 degrees Celsius, with alarming consequences.
The MIT Integrated Global System Model: EPPA Component; Anthropogenic Emissions and Policy Analysis (EPPA) Model   – a computable general equilibrium model of economic growth, international trade, and greenhouse gas emissions from a set of trade-linked economic regions; used to analyse GHG-emitting processes, and to assess policy proposals for controlling emissions; provides estimates of the magnitude and distribution of the costs, and clarifies how changes are mediated through international trade. 
Other IGSM Components: Climate and Chemistry and Ecosystems & Natural Fluxes. See also Publications of the MIT Global Change Joint Program  e.g., A Forward Looking Version of the MIT Emissions Prediction and Policy Analysis (EPPA) Model (Mustafa Babiker, Angelo Gurgel, Sergey Paltsev and John Reilly /  Report No. 161 May 2008),  as well as Abstracts of MIT Global Change Joint Program Publications  
Climate Change 2007, the Fourth Assessment Report (AR4 )   (United Nations Intergovernmental Panel on Climate Change). See also Wikipedia‘s summary . 
The Copenhagen Consensus  project  (2008) proposes mixing adaptation and mitigation approaches with more research into greener technology. See for example the Copenhagen Consensus 2008 Challenge Paper: Global Warming   (Gary W. Yohe et al / April 03, 2008)
The Stern Review on the Economics of Climate Change  (HM Treasury, UK) – download chapter-by-chapter or in parts. The Executive Summary (short)   is recommended as a preliminary foray. Briefly, it estimates that no action will cost 5% – 20% of global GDP annually. Alternatively, the costs of action to reduce  emissions to avoid the worst impacts of climate change  can be about 1% of global GDP annually. See also Wikipedia‘s Stern Review  article.
In Insurance for Our Planet: Spending Money Now to Slow Global Warming Can Ensure That Ruinous Catastrophe Never Happens   (EcoEarth.Info News Archive / Source: Guardian: August 21, 2008), Oliver Tickell sees the Stern analysis as understating the case for action. 
A Question of Balance: Weighing the Options on Global Warming Policies (William Nordhaus / Yale University Press, 2008) – prepublication proof text. Describes the DICE Model; alternative policies for dealing with global warming; uncertainty analysis. Concludes that damages can be mitigated through good policy – favors gradual restraints on carbon emissions via internationally harmonised carbon taxes.
NORTH AMERICAN REFERENCES:
Climate Economic Modeling  (Environmental Protection Agency, USA) – types of models used by EPA: economy-wide models, mitigation models, integrated assessment models, and detailed sector models.
 (Margo Thorning / Before the U.S. Senate Committee on Commerce, Science and Transportation Subcommittee on Global Climate Change and Impacts: April 05, 2006) – pros and cons of mandatory approaches to GHG reduction.
The Economic Impacts of Climate Change and the Costs of Inaction   (Center for Integrative Environmental Research, University of Maryland) – series of reports, many state-by-state. See Also: Climate Change Report Also Offers Lessons  (Environmental Protection: August 01, 2008) 
AUSTRALIAN REFERENCES:
The MEGABARE model   (Australian Bureau of Agricultural and Resource Economics, 1996) – a general equilibrium economic model to assess the economic impact of reductions in Australia’s greenhouse gas emissions, “developed at ABARE to provide such a global perspective on major Australian policy issues.”
The politicisation of the process was the subject of an inquiry – see Ombudsman Releases ABARE Investigation Report   (Commonwealth Ombudsman / February 04, 1998). 
Paul Henman’s Producing Hot Air: Computer Modeling and the Politics of Greenhouse Gas Policy in Australia   (Macquarie University) explores how computer modeling can be used in politics to construct a partisan point of view, with special reference to MEGABARE; provides analysis of the nature and limits of economic models as tools for developing policy.
The Garnaut Climate Change Review – in April 2007, the Australian Government commissioned an independent study by Professor Ross Garnaut, to examine the impacts of climate change on the Australian economy, and recommend policies to improve prospects for sustainable prosperity. A good place to start is probably the Interim Report Executive Summary  (February 2008), or maybe go straight to the Draft Report  (July 04, 2008); or the Supplementary Draft Report  (September 05, 2008). The Final Report is due by 30 September 2008.
See also:
Garnaut Climate Change Review   (Wikipedia) – a good chance to see how well Wikipedia can keep up.
Many Questions Unanswered by Garnaut  (Samantha Maiden Blog : July 04, 2008)
Middle of the Road … Towards a Cliff (David Spratt / climate code red: August 30, 2008) – we face a climate emergency which requires actions at emergency speed far beyond “business as usual” and “politics as usual” to bring a rapid transition to a post-carbon, safe-climate future.
Modeling and Policy.
Models, Facts, and the Policy Process: The Political Ecology of Estimated Truth  (John Leslie King and Kenneth L. Kraeme, 1992) – a perspective on the role of modeling in policy making.
Computer-Based Model Validation Expectations  (Roland E. Smith / June 17, 2002) – to reduce the likelihood of erroneous model output or incorrect interpretation of results, implement a sound validation framework that includes a validation policy and independent review. 
 (Els van Daalen, Leen Dresenb and Marco A. Janssenc / Elsevier Science, 2002) – abstract only. 4 roles played by computer models in environmental policy-making: models as eye-openers, as arguments in dissent, as vehicles in creating consensus and as management tools.
Insights from Modeling Analyses of the Lieberman-Warner Climate Security Act (S. 2191)  (In Brief: Innovative Policy Solutions to Global Climate Change / May 2008) – importance of policies that provide flexibility and promote advanced low-carbon technologies and efficiency.
Serious Research Balances Costs and Environmental Benefits of Climate Policy  (Jeffrey Frankel / Seeking Alpha: August 24, 2008) – activities of the Energy Modeling Forum  
Problems.
ECONOMICS:
Wisdom on Catastrophic Risks — Benoit Mandelbrot, “The Misbehavior of Markets”  (Jim Peterson / Re:Balance — : August 13, 2008) – book review reiterates Benoit Mandelbrot’s contention that “the entire body of market learning, based on the concept of an efficient market, is elegant but fundamentally flawed”.
Problems With Modern Applied Economics, Applied Economic Analysis (History Of Economic Theory and Thought: July 2008) – is modern applied economics mostly data mining with some semblance of “scientific empirical testing” added to make it seem less ad hoc? “The simplicity of complex systems is to be found in the study of dynamics and iterative processes”
De Gustibus Non Computandum: Or, Economics Needs a Divorce (Mencius Moldbug / Unqualified Reservations: August 21, 2008) – is there something called “economics.” ?
Economics, The Inhuman Science?   (DarwinCatholic: August 18, 2008) – does economics assume that everyone is selfish?
Economics is Not a Value-Free Science (Oliver Tickell / Guardian: August 29, 2008) – economic methods systematically undervalue the priceless, and the future.
Thought Control In Economics (Tom Green / adbusters.org: August 18, 2008) – is there too much conformity in academic institutions?
MODELING:
Dr. Doom   (Stephen Mihm / New York Times: August 15, 2008) – Nouriel Roubini doesn’t seem to rely on computer modeling for his largely accurate predictions.
The Limits of Economic Modeling in the FTAA Environmental Review  (Frank Ackerman, Kevin Gallagher and Alejandro Nadal / Global Development and Environment Institute Tufts University: January 2001) – methodology relies too heavily on complex economic models.
Myths of Murder and Multiple Regression   (Ted Goertzel / The Skeptical Inquirer: January/February 2002) – mathematical models with no predictive capability may be used to make policy decisions.
Forecast Uncertainty in Economic Modeling  (Neil R. Ericsson / 2001) – defines forecast uncertainty, considers measures of forecast uncertainty; analyses sources and consequences, with examples.
Probabilities in Economic Modeling  (Itzhak Gilboa, Andrew Postlewaite, and David Schmeidler / 2007) – “The Bayesian paradigm is an elegant and coherent way to deal with uncertainty. Yet, it is not always clear how should probabilistic beliefs be formed”.
Climate Models ‘Inadequate’ for Farmers  (Sydney Morning Herald: September 04, 2008) – uncertain climate projections frustrate the agricultural sector.
Economic and Energy Impact Analysis for the Proposed Utility MACT Rulemaking (EPA, Clean Air Markets Division: January 28, 2004) – identifies limitations of a particular modeling analysis.
Please Models, Just Die   (The Stalwart: August 17, 2008) – “in finance and economics there has been far too much modeling going on and far too little thinking.” Special reference to Nouriel Roubini’s subjective, nontechnical approach to economic analysis and prediction.
POLICY / DECISIONMAKING:
Task Force Ignores the Cost of Reductions  (JS Online: August 02, 2008) – economic analysis may be excluded from decisionmaking processes.
Should California’s ARB Trust Computable General Equilibrium Models for Judging AB 32’s Likely Economic Effects?  (Matthew E. Kahn / Environmental and Urban Economics: June 02, 2008) – the need to to take technological change into account.
ABARE Ignores Inconvenient Truths  (Bernard Keane / Crikey: June 04, 2008) – the Australian Bureau of Agricultural and Resource Economics accused of modeling implausibly optimistic scenarios reflecting a business-as-usual approach.
CHANCES OF SUCCESS:
Light in the Fog   (John Garnaut / Sydney Morning Herald: July 19, 2008) – are mitigation efforts pointless unless the big emitters become part of the solution?
Ingredients for Another Failed Response (Guy Pearse / Crikey: July 04, 2008) – deplores the suggestion that deep cuts in Australian emissions should be conditional upon the actions of others.
Climate Change Will Probably Beat Us: Garnaut (Ross Garnaut’s HW Arndt Memorial Lecture at the Australian National University: June 05, 2008)
SCIENTIFIC RESEARCH:
Mitigate and Adapt­—but Don’t Forget the Science! (Richard Anthes / University Corporation for Atmospheric Science Quarterly: Spring 2008) – the need to continue to extend knowledge about climate change.
Digging Up the Dirt on Arctic Carbon   (Peter N. Spotts / Bright Green Blog: August 25: 2008) – unexpected news presents new challenges.
Beyond Carbon: Scientists Worry about Nitrogen’s Effects  (Richard Morgan / IHT: September 02, 2008)
In Science, Ignorance is Not Bliss   (Walter Cunningham / Launch Magazine: July 24, 2008) – call for NASA to collect scientific evidence of Anthropogenic Global Warming.
BOOKS:
A Question of Balance: Weighing the Options on Global Warming Policies   (William D. Nordhaus / Yale University Press: June 24, 2008)
Hardcover: $20.16
ISBN-10: 0300137486
ISBN-13: 978-0300137484
Hardcover: $109.00
# ISBN-10: 9051992327
# ISBN-13: 978-9051992328
The Promise and Limits of Computer Modeling   (Charles Blilie / World Scientific Publishing Company: July 26, 2007) 
Hardcover: $95.00
# ISBN-10: 9812707956
# ISBN-13: 978-9812707956
Economic Forecasting  (P. W. Abelson, Roselyne Joyeux / Allen & Unwin Academic:  September 28, 2000)
Paperback: $107.56
# ISBN-10: 186508171X
# ISBN-13: 978-1865081717
General Equilibrium Theory: An Introduction  (Ross M. Starr / Cambridge University Press: July 13, 1997)
Hardcover:$91.00 
# ISBN-10: 052156414X
# ISBN-13: 978-0521564144

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