Toy Earth-Economy models

A video game for sustainability?

Content

TBD.

Transcript

Appendix

“A Toy Earth–Economy Model”

Learning objectives

After this chapter, you should be able to:

  • Explain what an integrated model is in the Earth–economy sense.
  • Identify the minimum components of an Earth–economy system.
  • Describe how stocks, flows, markets, and ecosystems can be linked.
  • Understand why even a tiny model can reveal counterintuitive dynamics.
  • Interpret model outputs as stories about systems, not predictions.
  • Recognize the difference between “realism” and “usefulness” in modeling.

Why build a toy model?

Real Earth–economy models are large:

  • hundreds of regions,
  • dozens of sectors,
  • spatial land grids,
  • climate modules,
  • ecosystem service models.

They are powerful—and opaque.

A toy model does the opposite:

  • it is small,
  • transparent,
  • and wrong in obvious ways.

Its purpose is not accuracy.
Its purpose is literacy.

A toy model lets you see:

  • how feedbacks work,
  • how policies ripple,
  • and how stocks evolve.

It teaches you how to think in systems.

The minimum Earth–economy

We can build a meaningful Earth–economy with just:

  1. People
    • population
    • labor
  2. Production
    • one “dirty” sector (emits carbon)
    • one “clean” sector
  3. Land
    • cropland
    • forest
  4. Environment
    • carbon stock
    • ecosystem services from forest
  5. Policy
    • a carbon price
    • a conservation rule

Even this skeleton contains:

  • markets,
  • tradeoffs,
  • stocks,
  • feedbacks,
  • and intertemporal dynamics.

The system in words

Each period:

  1. Households supply labor and earn income.
  2. Firms produce goods using labor and land.
  3. Production emits carbon.
  4. Forest land provides ecosystem services.
  5. Land shifts between crops and forest based on returns.
  6. Carbon accumulates in the atmosphere.
  7. Carbon damages reduce productivity.
  8. Policy changes prices and access.
  9. The next period begins with new stocks.

Nothing here is exotic.

What matters is that:

Every arrow points both ways.

A conceptual flow

People → Labor → Production → Income → Consumption ↓ ↑ Emissions Prices ↓ ↑ Carbon Stock → Damages → Productivity ↑ Land Use ← Returns ← Production ↓ Forest Area → Ecosystem Services → Productivity

This is already an Earth–economy.

What the toy model can show

Even with this structure, you can explore:

  • A carbon tax that:
    • raises prices,
    • shifts production,
    • changes land use,
    • slows emissions,
    • alters future productivity.
  • A conservation policy that:
    • preserves forest,
    • raises crop prices,
    • shifts labor,
    • changes income,
    • alters long-run growth.
  • A “delay” strategy that:
    • boosts short-run output,
    • accelerates stock degradation,
    • reduces future capacity.

The model will not tell you what will happen in Minnesota or Brazil.

It will show you:

Why direction-of-change thinking fails in coupled systems.

Why small models matter

Toy models teach three habits:

  1. State thinking
    Always ask: What are the stocks?

  2. Feedback thinking
    Always ask: What does this affect next?

  3. Path thinking
    Always ask: How does today’s choice shape tomorrow’s options?

These habits scale.

The same logic governs:

  • global CGE models,
  • land-use simulators,
  • climate–economy models,
  • and integrated assessment models.

From toy to tool

In this book, the toy model will be used to:

  • simulate simple policies,
  • visualize paths,
  • and interpret results.

Later, when you encounter:

  • real CGE outputs,
  • scenario ensembles,
  • or policy dashboards,

you will recognize the same bones:

  • stocks,
  • flows,
  • feedbacks,
  • and tradeoffs.

The complexity grows.
The logic does not.

The Doughnut perspective

The toy model has:

  • a social side: income, consumption, labor,
  • an ecological side: forest, carbon, services.

We can define:

  • a minimum consumption level,
  • a maximum carbon stock,
  • and ask:

Which policies keep the system inside that region?

The Doughnut becomes a constraint on trajectories.

Even a toy system can cross it.

Open resources you can remix for this chapter

All are compatible with a CC BY-NC-SA Quarto book.

  • InTeGrate teaching materials (many CC BY-NC-SA)
    Use for: systems modeling and feedback exercises.
    https://serc.carleton.edu/integrate/teaching_materials/index.html

  • Natural Resources Sustainability: An Introductory Synthesis (CC BY-NC-SA)
    Use for: systems and sustainability framing.
    https://uen.pressbooks.pub/naturalresourcessustainability/

  • Principles of Economics (UMN Libraries Publishing, CC BY-NC-SA)
    Use for: production, markets, and intertemporal logic.
    https://open.umn.edu/opentextbooks/textbooks/principles-of-economics

Exercises

  1. Stock inventory.
    List the stocks in the toy model.
    For each, identify what increases it and what decreases it.

  2. Policy path.
    Sketch how a carbon tax propagates through the toy system over two periods.

  3. Model critique.
    Name one thing the toy model leaves out that matters for real policy.
    Explain why it is still useful.

Chapter roadmap

  • Next, we move from structure to scenarios.
  • You will learn how futures are constructed, compared, and stress-tested.
  • Scenarios turn models from calculators into decision tools.