Escape from model-land
Erica L. Thompson and
Leonard A. Smith
Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), 2019, vol. 13, No 2019-40, 17 pages
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.
Keywords: uncertainty; Modelling and simulation; decision-making; model evaluation; uncertainty; structural model error; dynamical systems; radical (search for similar items in EconPapers)
JEL-codes: C52 C53 C6 D8 D81 (search for similar items in EconPapers)
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