# What Economic Models Can Tell You

*Published:* 2008-04-30
*Author:* Nat Keohane

![Nat Keohane](https://blogs.edf.org/climate411/wp-content/blogs.dir/7/files/2008/02/nat_keohane.jpg)*This post is by [Nat Keohane, Ph.D.](http://environmentaldefense.org/page.cfm?tagID=12740), director of economic policy and analysis at Environmental Defense Fund.*

Last Friday, the U.S. Chamber of Commerce sponsored a [panel discussion on the economic impact of climate change legislation](http://www.uschamber.com/press/releases/2008/april/08-126.htm). I was on the panel, along with Bob Shackleton of Congressional Budget Office, Francisco de la Chesnaye of Environmental Protection Agency, Margo Thorning of American Council for Capital Formation, and Anne Smith of CRA International.

In responding to questions about my recent study of [how climate legislation will impact the economy](https://blogs.edf.org/climate411/2008/04/23/cost_of_capping_ghg/), I made two key points:

- It’s important to look at a range of numbers and modeling results, using averages and medians, and not rely on one number.
- Economic models are designed to compare different policies, not to predict the future. It’s the *difference* between model predictions that counts, not the absolute numbers.

This second point is very important, and often misunderstood. The predictions of a particular model for two different policies can tell you which is better, but cannot tell you the precise dollar impact of each policy. Beware the economic-model-as-crystal-ball fallacy!