Environmental Modeling Under Uncertainty: Monte Carlo Simulation

Fedra, K. (1982). Environmental Modeling Under Uncertainty: Monte Carlo Simulation. IIASA Working Paper. IIASA, Laxenburg, Austria: WP-82-042

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Abstract

The study of environmental systems as ecological, physico-chemical as well as socio-economic entities requires a high degree of simplifying formalism. However, a detailed understanding of a systems function and response to various changes for the explicit purpose of systems management and planning, still requires fairly complex hypotheses, or models. Such models can hardly be subjected to rigorous tests without the aid of computers. Systems simulation is a powerful tool when subjecting complex hypotheses to critical tests of their logical structure, and their performance over the range of plausible input conditions.

Based on a formalized trial-and-error approach, using Monte Carlo methods, this report presents and discusses an approach to simulation modeling under uncertainty. An introduction to the causes and implications of the problem, namely uncertainty, and a short formal presentation of the methodology proposed, is followed by some more technical remarks on Monte Carlo simulation. Using three different application examples, the role of uncertainty in the formal testing of model structures, in parameter estimation, and in prediction, is discussed. In the last example, the limits of estimation and with it prediction, are demonstrated. Comparing Monte Carlo simulation with alternative approaches to include and evaluate uncertainty in simulation modeling, the discussion section examines the implications of uncertainty for model application in a broader framework.

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