It would be amazing to build real world human behaviour into these models - but I guess would mean major redesign.
Very interesting question and some extremely thoughtful replies! Thanks! My view is it depends on the question - optimisation tools are designed for planning and can be very good for that. But use the same tools for what-if scenarios and you conflate optimisation with reality.
Structural economic change as dynamic resource creation – in their OxREP paper, Dimitri Zenghelis, Hector Pollitt, Jean-François Mercure, and Frank W. Geels illustrate how innovation, networks and behaviour are adopted in the global economy.
doi.org/10.1093/oxre...
Lots of different contributions to how macroeconomics needs to change. Our article in the final section on modelling.
For reference
@productivity.bsky.social @cisl.cam.ac.uk @cambridgezero.bsky.social @climatestrategies.bsky.social @carbonbrief.org @janrosenow.bsky.social @katemac.bsky.social
Finally, as always, it was a pleasure working with Dimitri Zenghelis, J-F Mercure and Frank Geels!
And we need as much sectoral detail as possible – this is where change happens.
But there are (heterodox) approaches out there that can do it. If we want to answer questions about industrial policy, this is where we need to look.
We need a complete rethink. Technology determines what we can produce and should be core to our models. But at best it’s an add-on and it’s still often assumed. Standard model assumptions like perfect knowledge/foresight and reversibility don’t cut it.
The return of industrial policy has shifted interest from resource allocation back to creation. The paper shows how economics can catch up, using examples from AI and energy transition.
The result was economics focused on allocation of existing resources, not the growth process. Models had little to say about technological change and how policies could influence it.
This is not new… Veblen was saying it in the 19th century and it formed the basis of the original institutional economics. But the evolutionary approach got lost and was only revived in the 1980s, remaining very much a heterodox approach.
The paper focuses on innovation and structural change. That is change that has irreversible effects. Technology is a good example: things don’t often get uninvented. But much social change is like this too.
New paper in the Oxford Review of Economic Policy.
Schumpeter once said "Once you think about economic growth, it becomes impossible to think about anything else”.
But our models don’t really do this.
bit.ly/48YR3Rf
Bill Gates… the point is we don’t know what will happen when the climate warms. Every 0.1C increases chance of disaster.
But he probably thought nothing could go wrong with every Microsoft product.
Necessary for meeting carbon targets and with potentially huge social benefits. It surely is time for the UK to address the gap between gas and electricity prices.
Ha! The old problem of how to interpret 'everyone optimizes except the energy sector'.
A lot can be fudged by assuming linearity and because models are mostly linear. But if we ever get to linking models where small differences get amplified over time/space we will really need to tighten.
I found Joel Mokyr's Culture of Growth interesting and well worth reading. It benefited from looking beyond standard economic issues. The bits trying to reconcile with textbook economics were painful... clearly appreciated by others though...
We're recruiting new associate editors at @climate-policy.bsky.social . Come and join our great team and contribute to our mission to advance an effective response to climate change
climatepolicyjournal.org/2025/08/11/c...
The Economist is going big on transformational scenarios at the moment. Three weeks ago it was AI, this week climate tipping points.
These are exactly the sorts of questions economists should be looking at - but often shy away from.
www.economist.com/leaders/2025...
Lack of productivity growth is a big deal in the UK. But there need not be a trade-off between productivity growth and net-zero. In fact the two may be complementary (and this can be modelled!). It’s time to change the story.
This drives productivity growth, almost by definition. We get more electricity, more mobility, more services, for lower cost. We can spend more on other things.
There is a critical difference between fossil fuels and new technologies.
We spend more on fossil fuels, we exhaust cheap supplies and prices go up. We spend more on new technologies, we learn and prices go down.
The paper focuses on two key assumptions that have dominated previous work: 1) green technologies are more expensive; 2) spending on green technologies means less spending on other things. Both are misguided.
Thread on this paper in @climate-policy.bsky.social last month. For so long we’ve heard about the ‘costs’ of reducing emissions. This paper adds to the growing evidence it doesn’t have to be like that.
www.tandfonline.com/doi/full/10....
Recent post on LinkedIn about the importance of interdisciplinary research - and not just for climate change.
It also introduces ICENS lab, which takes a broader perspective.
Thoughts and comments welcome!
www.linkedin.com/pulse/why-in...
Based on fossil fuel growth rates from the IEA Coal Mid-Year Update, July Oil Market Report, & Gas Market Report Q3, fossil CO2 emissions would grow around 0.8% in 2025, reaching another record high...
We are only half way through the year, but don't build too much expectation for peak emissions.
Thanks!
Glad to be finally setting up here! I will mostly be covering ways to improve economics and modelling, especially on climate and energy issues. But expect some previews from the forthcoming book with Jean-Francois Mercure. And my return to blogging...
