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Essay text:
Models are an invaluable tool for exploring
alternative policy choices and for generating insights about how the economy is might respond to
different types and forms of regulation. They cannot, however, predict future events, nor can
they produce precise projections of the consequences of specific policy.
Every model uses its own set of assumptions, definitions, structure and data – its results
ultimately depend on these attributes and choices. A proper understanding of economic models,
their uses and limitations, is therefore critical in furthering a constructive debate about options
for climate policy...
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