2024-03-20 15:58:44
Models are central to economic science. Some economists even consider that it is the use of these which distinguishes economics from other social sciences and makes it a discipline in its own right. These models make it possible to propose explanations of observed economic phenomena, to reason as one would do in an ordinary discussion, but under the constraints of a mathematical formalism.
Such a formalism is supposed to ensure transparency and consistency in the reasoning, while avoiding having to think with a “scale 1 map”. In macroeconomics, the use of mathematical models also makes it possible to describe complex systems and to envisage the result of multiple contradictory effects, which would sometimes be impossible using thought experiments alone.
Models are therefore widely used in administrations, governments and central banks, where they are used at all stages of the development of public policies. As justified by European Central Bank blog (BCE) :
“Asking an economist to explain economic behavior or to make predictions without a model is like asking a meteorologist to predict the weather by looking at the sky. »
However, unlike climate models whose precision and predictive power no longer need to be demonstrated, macroeconomic models do not have the chance to be based on the universal laws of physics. They present significantly more mixed performances, to the point that Christine Lagarde, the president of the ECB, did not mince his words at the World Economic Forum in Davos last January by advising “to be wary of models [économiques] », whose quality of predictions she described as “abysmal”.
“Tribal clique”
The European Commission, like the ECB, mainly relies on so-called “general equilibrium” models to develop its macroeconomic analyses, such as the calculating the cost of decarbonization of the European economy. However, as we have analyzed in detail in a recent research workthese classes of models present a series of weaknesses, in particular due to their structure in the form of optimization.
This optimization locks down the dynamics of the model and makes it impossible to represent fluctuations endogenous to the economic system. Thus, business cycles and imbalances in the economy can only be represented in the form of external “shocks”, moving the model away from its “natural” balance – shocks whose existence is very often assumed ex post as an explanation. fluctuations, but without being really identified. These inadequacies appear all the more marked in the context of the European Green Deal, which constitutes a first step towards an in-depth transformation of the European economy, in response to ecological collapse.
We do not conclude from this that it would be better to do without models. Olivier Blanchard, chief economist of the International Monetary Fund (IMF) during the 2008 financial crisis, calls on general equilibrium models to be less “imperialist”. Christine Lagarde, in her speech in Davos, even went so far as to describe economists as a “tribal clique” (sic)…
We are, like them, convinced that using a greater diversity of models in European institutions would significantly improve their capacities for analysis, understanding and prediction. This has already been demonstrated in complexity sciences, as the researcher Scott Page sums it up : the precision of a set of models depends not only on the average precision of the models but also on their diversity.
New questions addressed
However, for decades, the perspective of ecological transition has guided the growth of a very dynamic community of researchers in the discipline known as“ecological economy”, with interdisciplinary influences. Several models in this field have now reached a sufficient level of maturity to be directly used by public actors.
These models present, in fact, advantages over the models currently used to address questions such as:
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What are the redistributive effects of transition policies? How can we integrate social inequalities into the design of ecological transition policies, in order to improve their acceptability?
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How can we include, in the design of these policies, the risks of financial and economic instability emerging from both environmental degradation and the transition?
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How can imbalances and inflation influence or result from ecological transition policies?
Currently, models from ecological economics are practically not used by European institutions. We therefore wrote a open letter [dont cet article reprend certains extraits, NDLR]signed by more than 200 economists and widely distributedurging the European Commission to take advantage of these new tools to diversify its modeling arsenal.
A complex and changing landscape
Relying on different models reflecting a plurality of points of view and methodologies is also a democratic question. Indeed, the choice of a particular model to inform decision-making is never neutral. Its theoretical foundations determine from the start some of the recommendations that will emanate from the results. Such a choice therefore actively influences public policies, including those of the European institutions.
The architecture and fundamental assumptions of certain models therefore naturally tend to favor market-based solutions rather than regulation-based solutions. Furthermore, certain categories of models pleadsystematically and by construction, once morest an expansionist European economic policy and once morest massive investments, yet necessary to achieve the objectives of the Green Dealincluding carbon neutrality by 2050.
We therefore strongly advocate for a diversification of the categories of models used and their underlying hypotheses, in order to benefit from the particularities and comparative advantages of each model. Good practices also exist in other disciplines, such as climate sciences, where the need to compare models and their results was felt very early.
Thus, since 1997, the global research program Coupled Model Intercomparison Project (CMIP) is responsible for the systematic and transparent comparison of models to enable continuous improvement of collective tools, always within the framework of a dialogue between research teams.
These issues of diversification of tools, transparency of hypotheses and dialogue between research communities and institutions are essential for the implementation of ecological transition policies that are economically realistic, ecologically desirable and socially just. It is by meeting this challenge that the European Union will acquire the capabilities necessary to navigate through the complex and changing landscape of the ecological transition in the 21st century.e century.
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