Macro-economic modelling


Macro-economic modelling methods address scaling up values from the individual to the societal level. A particular policy may result in a large segment of the population experiencing an economic benefit. The beneficiaries, however, will not simply keep this benefit to themselves, but may increase their consumption as a result, creating ripple effects throughout the economy, as their consumption leads others to experience an economic benefit as well. There are various methods for calculating the extent of these ripple effects. Partial or general equilibrium models allow one to estimate consumption levels, and hence total value, in the new equilibrium.

AP interactive decision tree - click any node to select it

Macro-economic modelling methods address scaling up values from the individual to the societal level. A particular policy may result in a large segment of the population experiencing an economic benefit. The beneficiaries, however, will not simply keep this benefit to themselves, but may increase their consumption as a result, creating ripple effects throughout the economy, as their consumption leads others to experience an economic benefit as well. There are various methods for calculating the extent of these ripple effects. The simplest takes an empirically derived multiplier. A multiplier of 3, for example, would mean that for every euro in direct benefits, the society as a whole will experience €2 additional in indirect benefits, through the increase in consumption. The more complicated method involves modelling the economy as a whole, and assuming that after the ripples are done rippling, it will settle into a new equilibrium, with a different overall level of consumption. Partial or general equilibrium models allow one to estimate consumption levels, and hence total value, in the new equilibrium.

MEDIATION Toolbox

Read more in the Toolbox under the following category:

Valuation


This section is based on the UNEP PROVIA guidance document


Criteria checklist

1. You want to appraise adaptation options.
2. The focus is either on collective actions and there are no conflicting interests of private actors, or the focus is on individual collective actions.
3. Decisions can be formalised.
4. Either the set of options includes only short term ones or residual impacts can not be projected.
5. There are risks are due to current climate variability and the relative costs of outcomes are high.
6. Public decision.
7. Either outcome attributes do have prices or contingent value has been addressed.
8. Indirect outcomes are important.