Some Pitfalls in Large Econometric Models: A Case Study

In this paper, I am going to discuss some of the difficulties in large-scale econometric modeling. As a stalking-horse, I will use the Regional Energy Activity and Demography (READ) model. This model was based on work by Harris and Hopkins (1972); development continued under the aegis of the Energy Information Administration, Department of Energy, Washington, D.C. By 1978, with development still incomplete, costs were estimated at over a million dollars, and a review was undertaken; this preceded any use of the model by the agency.' As a consequence of the review, work on the model was stopped.