Escape from model-land

Thompson, Erica L. and Smith, Leonard A. (2019) Escape from model-land. Economics, 13. ISSN 1864-6042

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Abstract

Both mathematical modelling and simulation methods in general have contributed greatly to understanding, insight and forecasting in many fields including macroeconomics. Nevertheless, we must remain careful to distinguish model-land and model-land quantities from the real world. Decisions taken in the real world are more robust when informed by estimation of real-world quantities with transparent uncertainty quantification, than when based on “optimal” model-land quantities obtained from simulations of imperfect models optimized, perhaps optimal, in model-land. The authors present a short guide to some of the temptations and pitfalls of model-land, some directions towards the exit, and two ways to escape. Their aim is to improve decision support by providing relevant, adequate information regarding the real-world target of interest, or making it clear why today’s model models are not up to that task for the particular target of interest.

Item Type:	Article
Official URL:	http://www.economics-ejournal.org/
Additional Information:	© 2019 The Authors
Divisions:	Centre for Analysis of Time Series
Subjects:	H Social Sciences > HB Economic Theory Q Science > QA Mathematics
JEL classification:	C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C52 - Model Evaluation and Selection D - Microeconomics > D5 - General Equilibrium and Disequilibrium > D53 - Financial Markets
Date Deposited:	06 Feb 2020 14:48
Last Modified:	17 Oct 2024 16:35
URI:	http://eprints.lse.ac.uk/id/eprint/103310

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