The Current Free Market System - amazonia.fiocruz.br

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Systems and markets How to translate options into results? See Hannes Weigt explain the basic principles of obtaining model outcomes. View transcript. When we talk about economic modelling we naturally talk about markets. But you will often stumble upon models that do not really have a market setting or firms making choices. But those are equally important models in energy and environmental economics.

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Before we go into more detail on our model design, let us therefore first get an overview of those different model approaches. By now we have seen that there are a lot of potential options to design an energy system. You can satisfy energy demand by relying on a set of fossil plants, or you can go nuclear, or maybe green, or have a mix of all of those. The big question is, which of those combinations should we choose?

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And that is where modelling economics markets and incentives enter the stage. Here we can differentiate between a system, or a bottom up perspective, and a more market, or top down perspective. A model with a system perspective often accounts for a lot of technical detail of the underlying system, the bottom up aspect. But does not really model market structures.

It aims to identify the best option out of all the possible ones. In economics we also term this the social planner perspective, or benevolent dictator basically, a virtual entity deciding what the best solution for everyone would be.]