AN ARALYSIS
IF
ENERGY-ECONOMY INTERACTIONS
Lois Schertz Willett
Abstract
There is a growing interest in energy and energy policy analysis
because of the gap between the United States’ energy consumption and energy
production. Numerous policies for dealing with America's "energy crisis”
have been discussed and evaluated.
Underlying these policy investigations have been a variety of sim
lation models designed to analyze energy demand, energy supply, and the
interaction between the two. Several of the models used for energy policy
analysis do not couple the energy sector to the rest of the economy. ‘Some
rodeling efforts even assume that there is no casuality from energy to GNP.
The purpose of this study is to examine the structural relationships
that govern the interaction between the energy sector and the rest of the
ec s9 as to contribute to the development of more effective national
energy policies. A computer simulation model that illuminates the feedback
coupling between the energy sector and the rest of the U.S. economy is
used in the analysis. The model is used to analyze the effects of increasing
capital intensity of the energy sector on the level of economic output and
the efficiency of a general class of conservation initiatives in mitigating
these effects.
When conservation initiatives are introduced, cumulative energy
consutption is reduced and sales and profits of the producing sectors are
lower. Average GNP is lower and average general unemployment is higher when
conservation is introduced.
73
AN aia YSIS
ENERGY -ECO! \CTIONS
Lois Schertz Willett
’
1.0 _ Introduction
Domestic energy consumption increased 17 percent between 1970 and 1978.
In contrast, domestic energy production fell 2.4 percent during this same time
Period. Consumption in 1978 was 78 quadrillion BTU's while production was
only 61 quadriltion BTU's (Census 1979). This growing gap between energy pro-
duction and consumption made the United States increasingly dependent on
foreign sources of. energy; sources which have been increasingly subject to
political instability, as the Iran-Iraq conflict illustrates. The growing
gap between domestic energy consumption and production, rapidly escalating
energy prices, and the uncertainty associated with.foreign energy sources
fueled a great interest in energy and energy policy analysis. Numerous poli-
cies for dealing with America's "energy crisis" have been discussed and
evaluated.
Underlying the policy investigations have been a variety of analy-
tical models designed to analyze energy demand, energy supply, and their in-
teraction. Several of the models used for energy policy analysis do not
couple the energy sector to the rest of the economy. Some modeling efforts
even assume that there is no casuality from energy to GNP.
74
The purpose of the study reported in this paper was to examine the
interaction of the energy sector and the rest of the economy. For this pur-
pose a rodel--Eneconl--was developed. It includes a full feedback coupling
between the energy sector and the rest of the U.S. economy. The model is de-
signed to illuminate the structural relationships governing the interaction
between the energy sector and the other sectors of the U.S. economy so as to
contribute to the development of more effective national energy policies. The
behavior generated by the model is due solely to the interactions of the feed-
back relationships within the model. The model can be used by any senator,
representative, or menbers of their staffs to gain an understanding of the
impact of policies such as conservation initiatives, investment tax credits, a
windfall profits tax, or wage and price controls. Because the model was de-
veloped for the public sector its emphasis is on transparency of structural
relationships and user orientation in implementing policy alternatives. Be-
cause of the public sector's interest in increasing capital intensity of the
energy sector and conservation initiatives these items were addressed in
the first phase of effort.
This paper consists of six sections. The second section describes
eight key model characteristics necessary for a comprehensive evaluation of
energy policy initiatives. The third section contains a structural overview
of the model. A more detailed description can be found in (Schertz 1980) and
(Richeond 1980). Sections four and five describe the base run of the model
and the conservation initiative. Suggestions for extending the analysis are
contained in section six.
2.0 Key Energy-Economy Model Characteristics
Eight characteristics of the model are important in understanding its
adequacy for policy analysis. They are:
o Real-world representation of decision-making .
0 Disequilibrium focus
Endogenous GNP
o Inclusion of energy as a factor or production
0 Endogenous labor force and labor productivity
o Conservation of financial flows
o Conservation of physical flows
© Endogenous government
Realistic representation of decision processes were included within this model
in order to show how people will actually react to policy initiatives and
disequilibrating factors. An accurate representation contributes to a more
complete understanding of the implication of policy proposals and aids policy
makers in identifying specific policy intervention points. Only when an
accurate portrayal of real world decision processes is achieved can the model
be effective in anticipating the potential offsetting influences that will
actually arise from policy interventions.
ENECON] incorporates a disequilibrium orientation in order to consider
the adjustment processes inherent in the energy market. Thus, the model does
not force supply to equal demand and allows all transient responses to have
an effect. Because of controlled prices and time delays within the energy
system, transient responses may be quite significant. The disequilibrium
orientation permits the model to capture the imperfections in the energy
market due to price controls, taxes, information delays, and construction
delays. The model permits the assessment of the effects of delays, capital
turnover, and long lead times in life-style changes. Therefore, it simulates \
the short to intermediate term economic dislocations that occur after a
policy is implemented.
The model used in the analysis of energy policy proposals includes
feedback relationships that Tink energy to GNP and back again. Thus, GNP
growth is not an externally provided input to the model. Reverberations
that various energy policies have an overall economic activity can be deter- -
mined.
The model includes both the direct and indirect impact of energy on
production in order to evaluate policies designed to alleviate energy-related
problems. When energy is included as a factor of production, reduction
in energy supplies or increases in energy price exert a direct influence on
output. Realistically, cutbacks in energy supplies could cause output to
fall, especially in the short to intermediate term before factor substitution
is possible.
Because labor force and labor productivity are major determinants of
GNP and because energy availability and eriergy use impact both, they were
included as endogenous inputs to the model used to investigate eneray-econony
interactions. In this way, the labor force and labor productivity are affected
by energy prices, energy supply constraints, capital availability, and avail-
ability of wages, incomes, and unemployment.
The overall financial implications of energy policies is accurately
assessed if financial flows are physically conserved within the model. Only
by conserving money flows can the model capture the costs, as well as the 75
benefits, of various policies designed to influence financial well-being.
Conserving financial flows shows the longer term impacts of policies such
as tax increases or decreases, because of the assumption that if financial
resources are needed, they do not come from somewhere at no cost.
Similar to financial flow conservation, conservation of physical flows
(such as capital, labor, and energy) are important for effective policy anal~
ysis. khen physical flows are conserved within a model, it is not possible
to obtain benefits without paying the associated costs. In other words, it
is impossible to obtain "something for nothing." For example, if capital
flows are conserved within the model, there is an assumption that the capital
requirements of the energy sector can not be met without accelerated produc-
tion in the capital sector. Thus, "crowding out" investment in other sectors
and effects on the rest of the economy are taken into account.
The federal government has proposed many of the policies currently
discussed to alleviate the problems assaciated with energy scarcity: deregu-
lation of energy prices, imposition of an energy tax, investment tax credits,
and various tax reduction initiatives. When a government sector is endogenous
to the model being used for policy evaluation, the physical and financial
forces that influence its effectiveness are represented.
With the above characteristics, a model can assess a wide range
of benefits and costs of pdlicy alternatives. It is particularly likely that
models with these key features will not overstate the benefits ‘or understate
the costs of policies aimed at mitigating energy-related problems.
3.0 An Overview of the Model's Structure
ENECON], the model developed for this analysis, illuminates the re-
lationships between the energy sector and other sectors of the U.S. economy.
Because the model's structural relationships generate behavior, the model is
effective as a tool for policy analysis. The model gives an intuitive feeling
for the location and identity of effective policies. The model is effective
as a tool for ranking policy alternatives because its results can be compared
‘in a relative sense.
The model used in this analysis was developed using system dynamics.
Model behavior is generated through the dynamic interplay of the model's
feedback relationships, not by exogenous time series. The first version of
the model is focused onthe U.S. economy, International interactions, such
as foreign-exchange transactions, and OPEC decision-making, are endogenously
generated by the model. However, it is possible to investigate the impact
of international influences by treating them as exogenous disturbances.
Within the model boundary, the interactions between the producing
sectors of the economy and the household sector and between these sectors and
a simple government sector, are included. An overview of the major flows of
money, Tabor, and output between the sectors is presented in Figure 1. As
the figure indicates, there are five main sectors in the model: capital,
goods and services, energy, household, and government. Each of the producing
sectors in the model has the same basic structure. Each producing sector
uses capital, labor, and energy to produce its output. Each sector also
maintains an inventory of its output, a backlog of orders for its output, and
a money balance. Each sets a price for its output.
76
Figure 1:
Energy
Sector
Services
Sector
Major Exchanges of Money, Labor, and Output Between
Sectors
in ENECON1.
The capital sector represents the capital producing industries of the
economy. This sector supplies capital to the energy sector, to the household
sector, to the goods and services sector, and to itself. Self-supply is in-
dicated by the self-contained loop in Figure 1; i.e., the capital sector re-
quires capital to produce capital. In addition to capital, the capital sector
orders and pays for energy and labor used in production. The capital sector
also pays tax revenues to the government sector.
The energy sector represents the aggregate of all energy producers
in the economy. The energy sector supplies energy to the producing sectors
and to the household. Like the capital sector, the energy sector demands and
Pays for capital, labor, and energy and also pays tax revenues to the govern-
ment.
The goods and services sector encompasses all production that is not
generated by the capital or energy sector. The goods and services sector re-
quires energy, capital, and labor for production. It is assumed to sell its
output to the household sector only. Like the capital and energy sectors,
this sector pays tax revenues to the government.
The household sector represents al] consumers. Households pay for
capital, energy, and goods and services. Households provide labor to the pro-
ducing sectors in return for wages. The household pays tax revenues to the
Government and receives transfer payments from the government. In the diagram
the labor sector is illustrated as part of the household. Within the model
it is actually treated as a separate sector.
The govérnment sector's function is to re-allocate money from the
various production sectors to the household sector. It sets tax rates,
77
9
collects tax revenues from the three producing sectors and the household sec-
tor, and privides transfer payments to households when household liquidity so
dictates. The government sector as a producer of services, an employer of
labor, and a utilizer of capital and energy is included in the goods and ser-
vices sector.
The structure of the model's three producing sectors -- capital,
energy, and goods and services -- is generic. Each sector orders and pays
for capital, energy, and Tabor. Each generic producing sector-also pays tax
revenues to the goverment, manages an output inventory and order backlog.
maintains a money balance, and sets a price for its output. The production
sectors are distinguished by differences in parameter values. For example,
production in the goods and services sector is more labor-intensive than pro-
duction in the capital and energy sectors and the energy sector's production
is more ‘energy-intensive than the other sectors.
There are six major levels or stocks included in each production sec-
tor:
© Money balance
© Price of output
© Percent mark-up over unit cost
© Inventory of output
© Backlog of orders
% Capital stock
Each level in the production sector is increased and decreased by its associ-
ated rates of flow. Information which arises from each stock within the sys-
tem alters these rates of flow. Labor is also a stock variable within the
model. However, labor stocks are considered a part of the labor sector.
10
Enercy is included within the generic production sector, but it is not repre-
sented as a stock. It is assumed that energy is consumed as it becomes avail-
able to a sector, because rarely is energy actually stored for any period of
time within the sector.
One of the key variables within the generic production sector is
money adequacy, a measure of the producing sector's liquidity. In the model,
money adequacy is calculated as a measure of the sector's existing stock of
cash and near cash relative to its desired stock. The sector's desired stock
of liquid assets is determined by the product of desired payments and a de-
sired payment coverage, the latter measured in fraction of a year. If the
sector's liquid asset reserves, or money balance exceeds desired levels, it
has a high money adequacy. If the sector's money balance is Tess than what
is needed to service its desired payments, its money adequacy is low.
As Figure 2 illustrates, money adequacy affects several variables
within the producing sector. Each producing sector attmepts to maintain its
money adequacy by altering both its stream of payments and revenues. Thus,
for example, an increase in money adequacy, indicating excess cash; increases
desired capital thereby stimulating orders for capital which in turn increases
payments for capital (loop 1). When payments rise, other. things equal, money
balance declines, causing money adequacy to fall which then lowers orders for
capital. Money adequacy also affects the hiring and firing of labor within
the sector (loop 2). If money adequacy rises, other things equal, more people
are hired by the sector. But increased hiring means increased payments for
labor, and thus a decrease in money balance and money adequacy. In this way,
increases in money adequacy lead to higher spending, which lowers the money
balance and causes money adequacy to fall.
n
78 In addition to altering payments, the sector attempts to control its
liquidity by changing price to alter its revenue stream (loop 3). For ex-
ample, if money adequacy decreases, a pressure to increase the price of out-
put is generated. When the other sectors pay the higher price as they re-
ceive shipments of the sector's output, the producing sector's money adequacy
rises.
The tax rate assessed on each sector's income is also based on its
money adequacy (loop 4). If a sector has a high money adequacy its tax rate
rises and hence, its tax payments are increased. This, in turn, reduces the
sector's money balance, and the money adequacy of the sector falls.
All of these loops are negative, or goal-seeking, feedback loops be-
cause they Seek to maintain money adequacy at a desired level. Any departure
from desired liquidity is reversed by the action of the loop. These partic-
ular negative feedback loops act to maintain liquid asset reserves at desired
levels in each production sector. -
Payments
for
oxen a
copieat)
ry on
Joop 2
for
capitat Honey Adequacy
of Prodscing Sectors
tax Revenues Co Revenues
©
. rt +
Price of
Output,
tax nate
Aaseased
Income
Figure 2: FEEDBACK RELATIONSHIPS BETWEEN MONEY
ADEQUACY AND OTHER VARIABLES WITHIN
THE GENERIC PRODUCTION SECTOR
12
The energy sector contains assumptions reflecting fossil fuel depte-
tion in addition to the causal mechanisms of the generic production sector.
As fossil fuel reserves are accumulated this depletes fossil fuel reserves
remaining. With less reserves available, the model assumes that more capital
(and therefore more energy) is needed to extract each unit of remaining re-
serves. Thus, depletion causes a rise in the capital-output ratio in the
energy sector.
The labor sector of the model includes five levels: labor in the
goods and services sector, labor in the energy sector, labor in the capital
sector, general unemployment, and labor wage. The household sector represents
consumer's purchases and income stream and the consumer's stock of capital
and goods and services. Three levels are included within this sector: in-
ventory of goods, inventory of capital, and money balance. Each level is
increased and decreased by its associated rates. This sector is the only sec-
tor which orders goods and-services.
The government sector includes six levels: government money balance,
the tax rates assessed on each sector's income, and the transfer payment frac-
tion. The government's money balance is increased by the tax revenues paid
by each sector and decreased by the transfer payments paid to the household
sector.
4.0 Reference Run Behavior
The model used to investigate energy-economy interactions--ENECON]-~
is initialized in equilibrium using numerical data for the year 1950. His-
torical data were used to determine the labor and capital intensity of the
producing sectors, and to obtain the relative magnitudes of expenditures by
the household sector between goods and services, capital, and energy.
13
In the initial equilibrium, al] secular growth influences are assumed
to be zero. Population growth, technological advance, money supply growth,
and labor force expansion are al] neutralized in the model and remain neutra~
ized for all model runs. These influences are "frozen" to investigate the
interactions of the energy sector with the rest of the economy against a fixed
economic backdrop. Once the "fixed economy" dynamics are well understood,
each growth Influence can be systematically unfrozen revealing the contribu-
tion of each to overall macroeconomic behaviors.
In the model, the base run dynamics are precipitated by a ten percent
increase in the capital-output ratio in the energy sector in year 5. This
one-time, step increase proxies the increased capital requirements of the
energy sector that will result from the depletion of fossil fue? reserves. A
setp function is used because it is the simplest testing input that will call
forth the inherent dynamics within the model.
The model analysis was conducted under a progression of tests.
Throughout each step in the progression one simplifying assumption is re~
Taxed. This enables one to see the marginal contribution of each effect on
the model variables and model behavior. The first test in the progression
is conducted with wages and prices frozen and with government inactive. In
another test, wages and prices are both activated with government still in-
active. In the last test, the model is tested with wages and prices de-con-
trolled and government activated. In this section the significant impact of
the relaxation of each assumption is discussed. For a more detailed descrip-
tion of model behavior see (Schertz 1980).
In the first section of the base run description of model behavior
when wages and prices are controlled and government is inactive, it is quite
4
80
evident that there are mutually reinforcing relationships underlying the
expansion of the capital and energy sectors. In order to increase production
each sector requires output from the other sector in addition to its own
output, thus stimulating the self-ordering processes. This web of reinforcing
relationships is illustrated by a causal loop diagram in Figure 3.
Loop 1 depicts the expansion of the energy sector. An increase in
the capital-output ratio increases the orders for capital by the energy sec*
tor. The energy sector's capital stock expands thereby increasing energy
production. More energy is consumed as production of energy increases. In-
creased consumption depletes the output inventory of energy, which increases
the sector's orders for energy. The energy sector responds to the increased
orders by increasing desired production, leading to a further increase in the
orders for capital. This loop, initiated by an increase in the capital-output
ratio in the energy sector, is a reinforcing spiral which leads to further
jncreases in orders for capital by the energy sector.
Loop 2 illustrates another reinforcing loop active in the mutual ex-
pansion of the energy sector and the capital sector. As orders for capital
by the energy sector are increased, shipments of capital by the capital sec-
tor rise. An increase in shipments causes an increase in desired production
which, in turn, increases production. An increase in production requires more
energy. Thus, the orders for energy by the capital sector expand. This ex-
pansion draws down inventory in the energy sector and leads to an increase in
the energy sector's desired production, further stimulating the energy sec-
tor's orders for capital.
The third reinforcing loop deals with the expansion of the capital
sector. An increase in desired production in the capital sector stimulates
concuption of
Energy in the
Eneray a
Production
of Energy
+
(+)
Loop 1
praers for ‘i
nergy in the
Capital in the
Eneray Sector Energy Sector
+
+
Orders for Desired
Capital ina Production fn
the Energy Sector“. The Energy Sector
+
A
(+)
Loop 2
+ . Orders for
Energy by the
Shipments of
Capital Sector
Capital by the
Capital Sector +
fesives © Erodictiam
+ capitan ——
(+)
Loop 3
Production of ig
Capital Orders for
+ Capital by the
Pi Capital in the
Capital Sector.
Capital Sector ¢ —
+
Figure 3: Mutually Reinforcing Relationships Underlying Expansion
of the Capital and Energy Sectors
16
capital investment by the sector. The increase in orders for capital eventu-
ally leads to an expansion of the capital stock in the sector and thus an in-
crease in the production of capital. Increased production increases inventory
Jevels which enables shipment rates to rise. An increase in shipments expands
the desired production in the capital sector, completing the reinforcing loop.
These three reinforcing loops generate the expansion of capital and energy
sector output during the simulation.
In addition to the relationship between the capital and energy sec-
tors, there is a reinforcing relationship between the goods and services
sector and household sector. As illustrated in Figure 4, as more labor is
employed, the volume of wage payments to the househsld sector increases,
raising money adequacy in the sector. Increased household money adequacy
stinulates orders for goods and services, which raises desired production
in the goods and services sector. This increase leads to a further increase
in the labor employed by the goods and services sector and more expansion of
wage payments to the household sector.
When prices and wages are decontrolled in subsequent model runs a
vicious cycle leading to price increases in the capital and energy sector is
seen. As depicted in Figure 5, an increase in the price of output in the
energy sector because of inventory discrepancy increases payments for energy
by the capital sector. The capital sector raises its price to cover the
costs of production and to rebuild its money adequacy, depleted as a result
of rising costs. An increase in the price of capital means the energy sector
is paying more for capital when it expands production. Faced with increased
factor costs and low money adequacy the energy sector raises its price and
the reinforcing spiral continues.
Labor in Labor in
the Capital the Energy
Sector Sector
N Ae
Wage Payments to
\ ;
The Household Sector
Labor in Money
the Goods & Services Adequacy in the
‘+ Sector Household Sector
(+)
Desired orders
Production in the For Goods
Goods & Services and Services
oars Pe
Figure 4: Reinforcing Relationship Between Expansion of the
Goods and Services Sector and the Household Sector.
81
aa Price of
Honey Output in
Adequacy in + the Capital
the Capital Sector
Sector
+
Payments for Payments
Energy by the for Capital
Capital Sector w by the Energy
Sector
+
Price of
Output in +
the Energy
Sector Hy
Money
Adequacy in
the Energy Sector
Figure 5: Reinforcing Relationships Leading to Price Increases
in the Capital and Energy Sectors.
19
When government is activated within the model all the relationships
between the capital and energy sectors and the goods and services sector and
the household sector are quite evident. It should be noted that the household
sector has a slightly higher money adequacy because of the governments’ role
in reallocating financial resources within the model.
5.0 Conservation Initiative
This section summarizes a preliminary analysis of the impact of
conservation initiatives on the interaction between the energy sector and the
rest of the economy. Once again the model retains the economy in equilibrium
before conservation mechanisms are introduced. Conservation initiatives in
conjunction with a 10 percent increase in the capital-output ratio of the
energy sector are analyzed. Because of conservation the early expansion of
the economy is smaller than in the reference run without conservation.
The conservation initiatives dampened the effect of the increase
in the capital requirements as seen in the base run. The reason is that
other sectors are simultaneously reducing their consumption of energy. Thus,
for example, the energy sector has an incentive to increase its orders for
capital as a result of the change in the capital-output ratio, but the con-
servation initiative reduces demand for its output. Thus, the energy sector
does not increase its orders for capital as rapidly as in the base case.
Likewise, the capital sector no longer needs as much energy to produce, and
it has lower orders for energy than in the base case. Therefore, the mutually
reinforcing relationships underlying the expansion of the energy and capital
sectors (depicted in Figure 2) are not as powerful when conservation initia~
tives and an increase in the captial requirements of the energy sector are
simultaneously introduced.
20
The household sector absorbs some of the costs of conservation and
increased capital requirements because its wage payments and transfer pay-
ments are not enough to cover the price increases of the producing sectors.
The producing sectors also bear some of the costs because of reduced sales
and a fall in profits. The level of GNP is lower when conservation is intro-
duced, but there is a reduction in the total energy consumed over the length
of the simulation.
6.0 Continuation of Work
The study can and has been extended by the Resource Policy Center at
Dartmouth College. As a result of further testing of the model, additional
structural relationships have been modified. In addition to correcting
structural weaknesses, several existing structures can be expanded and dis-
aggregated.
Recent work on the model includes assessing the vulnerability of the
United States to energy supply shocks (Kern 1981). Additional policy and
scenario analyses can be conducted with the model. Many other types of policy
initiatives can be examined. These include such policies as a windfall prof-
its tax, investment tax credit, tax reductions, and wage and price controls.
In addition, for each type of policy initiative, a range of macroeconomic
scenarios can be examined. For example, the labor force can be allowed to
expand or contract, money supply can be increased, technological change can
be induced and/or continuous depletion of energy reserves can be activated.
Finally, policy impacts can be tested with the model in a growth, rather
than an equilibrium mode.
The model boundary can be extended to include further macroeconomic
interactions. Currently the model's focus is on domestic interactions. How-
83
21
However, model structure could be added to extend the boundary of the model
to include OPEC of] supply and pricing decisions in addition to an inter-
national money and trade market. This additional structure would enable the
user to analyze balance of payments and international trade issues.
Census 1979
Kern 1981
Richmond 1980
Schertz 1980
84
REFERENCES
U.S. Bureau of the Census, Department of Commerce.
Statistical Abstract of the United States, 1979.
Washington, D.C.: U.S. Government Printing Office,
1979, p. 601-602,
Kern, Rainer. Assessing the Vulnerability of the United States
to Energy Suppiy Shocks: A Systems Perspective. DSD #380,
Resource Policy Center, Thayer School of Engineering,
Dartmouth College, Hanover, NH, 1981.
Richmond, Barry. Technical Documentation for First-Version
Model_of Energy-fconomy Interactions. RP #321, Resource
Policy Center, Thayer school oF Engineering, Dartmouth
College, Hanover, NH, 1980.
Schertz, Lois, R. An Analysis of Energy-Economy Interactions:
A Systens Perspective. 080-4318. Resource Policy Centers
Thayer School of Engineering, Dartmouth CoTlege, Hanover, NH,
CLASS II DOCUMENTATION STANDARDS
FOR SIMULATION MODELS
ACCESS TO MODEL:
Name of Model: _ENECONI
Name and current address of the senior technical Barry Richmond, Thayer School
person responsible for the nodel's construction: “DartOuth College, lanever, RAO;
Who funded the model development? DOE Fossil Eneray
In what language is the program written? _DYNAMO.
On what computer system is the model currently
implemented? Dartmouth Time Sharing System
What is the maximum memory required to store and
execute the program? _ 10 K
What is the length of time required for one typical
run of the model? _ 2-3 min.
Is there a detailed user's manual for the model? No
PURPOSE OF THE MODEL:
For what individual or institution was the model
designed? Department of Energy
What were the basic variables included in the model?
4 Main Sectors: Capital Major Money Balance Energy
Goods & Services Variables: Inventory of Output Capital
Energy Price of Output Labor
Over what time pASPh2ld ne model supposed to prove Pe siemprayment o£ abhor, Hage
world behavior? 49 years
Was the model intended to serve as the basis of:
an academic exercise designed to test the implications of a set
of assumptions or to see if a specific theory would explain his-
torical behavior
communication with others about the nature and implications of an
important set of interactions
projecting the general behavioral tendencies of the real system x
predicting the value of some system element (s) at some future
point in time
MODEL SPECIFICATION AND THEORETICAL JUSTIFICATION:
Provide two diagrams illustrating the extreme behavior modes exhibited by the major
ono woe
ty
oa
637.5700
m6
aso nas
(wittion 450 512.5 975
(uithien
If they are not included in the body of the paper indicate where the reader
may find: Schertz, Lois, R
a model boundary diagram that indicates the important An Analysis of Energy-
conomy Interactions: A
endogenous, exogenous and excluded variables
; ° Systems Perspective. OSD#3I8
a causal influence diagram, a flow diagram, the com- Resources PoTicy Center
puter program and definitions of the program elements
‘Thayer School of Engineering
Is the model composed of: Dartmouth College
simultaneous equations
difference or differential equations
procedural instructions
Is the hodel deterministic x or stochastic
continuous x or discrete
4. DATA ACQUISITION
What were the primary sources for the data and theories incorporated in the model?
Data _Statisti bs tract of Ur 79.
Theory Expert Judgement and Analyst's Intuition
what percent of the coefficients of the model were obtained from:
measurements of physical systems
nce from social survey data 2/3
infers
econometric analyses s
expert judgment c U6
the analyst's intuition 6
What was the general quality of the data?_Excellent _
5. PARAMETER ESTIMATION
TE they are not given in the publication, where may the reader obtain detailed infor-
mation on the data transformations, statistical techniques, data acquisi*ion proce-
dures, and results of the tests of fit and significance used in building and analyzing
the medel? Schertz, Lois, 3, An Analysis of Energy-Economy Interacitons: A
Systems Perspective, DSD #318 Resource Policy Center, Thayer School of Engineering
Dartmouth College
€. MODEL PERFORMANCE AND TESTING
Over what period was the model's behavior compared with historical data?
1950 = 1980
what other tests were employed to gauge the confidence deserved by the model? ____
Reference testing, internal consistency testing, rohustness testing, palicy
testing.
Where may the reader obtain a detailed discussion of the prediction errors and the
dynamic properties of the model? Same as above
APPLICATIONS
What other reports are based upon the model? Schertz, lois R. A First Version Model
for Analyzing Energy-Economy Interactions, NSD #313, Dartmouth College
Name any analysts outside the parent group that heve implenented the model on another
computer system.
List any reports or publications that may have resulted from an evaluation of the
model by an outside source. :
Has any decision maker responded to the recommendations derived from the model?
Dave Beecy, Niles Greenbaum, DOE, Fossil Energy
Will there be any further modifications or documentation of the model? _Yes
Where may information on these be obtained?
Resource Policy Center
Thayer Schaol of Engineering
Dartmouth College
Hanover, N.H. 03755
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