Harrison

Definition

In the context of computable general equilibrium models, Harrison refers to an influential framework developed by the economist Gary Harrison for modeling economies with multiple sectors and agents. This framework emphasizes how different economic agents interact within an economy and the importance of considering both supply and demand when predicting market outcomes.

5 Must Know Facts For Your Next Test

1. Harrison's work is pivotal in creating detailed simulations of how economies respond to various shocks and policy changes.
2. The models based on Harrison's framework allow for the inclusion of heterogeneous agents, capturing diverse behaviors in economic decision-making.
3. Harrison's approach integrates input-output analysis, which examines how different sectors interact with one another in terms of production and consumption.
4. His models often require extensive computational resources due to their complexity and the large amount of data involved.
5. The insights gained from Harrison's models have been instrumental in understanding the impacts of trade policies, tax reforms, and other economic interventions.

Review Questions

• How does Harrison's framework contribute to our understanding of interactions between different economic agents?
  • Harrison's framework enhances our understanding by allowing for the modeling of multiple agents with varying behaviors and preferences. This complexity captures the dynamic interactions between consumers, producers, and other entities within the economy. By doing so, it provides insights into how these interactions can lead to different outcomes depending on changes in policies or external shocks.
• Evaluate the significance of computable general equilibrium models built upon Harrison's framework in contemporary economic analysis.
  • Computable general equilibrium models based on Harrison's framework are significant as they provide a structured way to analyze complex economic systems. They enable economists to simulate how economies might react to various scenarios such as policy changes or global events. This helps policymakers anticipate potential consequences, making these models crucial for informed decision-making in economic policy.
• Critique the limitations of using Harrison's computable general equilibrium models for real-world economic forecasting.
  • While Harrison's computable general equilibrium models offer valuable insights, they also face limitations such as reliance on simplifying assumptions about agent behavior and market conditions. The complexity of real-world economies may not always be captured fully, leading to inaccuracies in predictions. Additionally, the extensive data requirements and computational intensity can hinder their practical application, especially for smaller economies or less developed regions.

Related terms

General Equilibrium: A state in which all markets in an economy are in balance simultaneously, with supply equaling demand across all sectors.

Computable Models: Mathematical models that can be solved using numerical methods, allowing economists to simulate real-world scenarios and policy impacts.

Market Equilibrium: The point at which the quantity supplied equals the quantity demanded for a good or service, resulting in a stable market price.