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Economics, thermodynamics and process analysis (RV of 94/11/EPS)

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Economists are increasingly interested in forecasting future costs and benefits for dealing with materials/energy fluxes, polluting emissions and environmental impacts on various scales, from sectoral to global. Computable general equilibrium (CGE) models are currently popular because they project demand and industrial structure into the future, along an equilibrium path. But they are applicable only to the extent that structural changes are occur in or near equilibrium, independent of radical technological (or social) change. The alternative tool for analyzing economic implications of scenario assumptions is to use Leontief-type input-output (I-O) models. I-O models are unable to endogenize structural shifts (changing I-O coefficients). However, this can be a virtue when considering radical rather than incremental shifts. Postulated I-O tables can be used independently to check the internal consistency of scenarios. Or they can be used to generate scenarios by linking them to econometric "macro-drivers"

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