Policymakers are looking to economic modelers to help them understand some of the implications of greenhouse gas cap-and-trade policies. And most of the models used for the purpose are of a class called “Comptuable General Equilibrium” models, or CGE models. Based largely on the thoughts of a couple of academic economists (Prof. Peter Dorman among them), we’ve been pretty skeptical of the predictive value of CGE modeling.
But our critiques have been tame: UCLA prof. Matthew Kahn really, really doesn’t like CGE models:
To be honest, these CGE models are crap. These black box models must take a strong stand on dozens of behavioral responses where in each of these cases we don’t really know what the elasticity is. Feed in 20 bad estimates and you won’t get back a great tasting meal…
The CGE crew’s model isn’t science, it is magic and it makes economists look bad.
Aw, quit being such a shrinking violet, Prof. Kahn!