[pzone]

Economic models usually aren't used for precise, high-frequency decision-making. When you estimate an economic model, simply getting the right sign on your estimates is often enough to inform your decision. Choosing what to take as exogenous is a matter of judgment.

Would building high speed rail from NYC to Chicago be a net positive for consumer welfare? Well we can use estimates of how much people pay for various modes of transportation throughout the country, and how often they're used. We can also come up with an estimate of the cost of building the rail. The analogous effects to your feedback loop are equilibrium effects - for example if people start taking the new high speed rail then plane ticket prices will fall a bit. But it adds more uncertainty to the model, and we know that plenty of flights from NYC to Chicago are connecting flights, so probably the effects are pretty small, and we can just assume those prices stay fixed for the sake of tractability.

If you do this kind of calculation and find the rail project is a massive multi billion dollar money pit, you can confidently recommend against it despite the fact you've ignored some of the feedback effects.