Engineering Economics Revision Article Series
Engineers must decide if the benefits of a project exceed its costs, and must make this comparison in a unified framework. The framework within which to make this comparison is the field of engineering economics, which strives to answer exactly these questions, and perhaps more.
It seems peculiar and indeed very unfortunate that so many authors in their engineering books give no, or very little consideration to costs, in spite of the fact that the primary duty of the engineernig is to consider costs in order to obtain real economy- to get the most possible number of dollars and cents: to get the best financial efficiency.
O.B. Goldman, Financial Planning, John Wiley & Sons, New York, 1920.
It would be well if engineering were less generally thought of, and even defined, as the art of constructing. In a certain important sense it is rather the art of not constructing; or, to define it rudely but not ineptly, it is the art of doing that well with one dollar which any bungler can do with two after a fashion.
A.M. Wellington, The Economic Theory of the Location of Railways, John Wiley, New York, 1887
The subject confines of engineering economy were staked out in 1930 by Eugene L. Grant in his book 'Principles of Engineering Economy".
WHY DO ENGINEERS NEED TO LEARN ABOUT ECONOMICS?
Ages ago, the most significant barriers to engineers were technological. The things that engineers wanted to do, they simply did not yet know how to do, or hadn't yet developed the tools to do. There are certainly many more challenges like this which face present-day engineers.
But now, natural resources (from which we must build things) are becoming more scarce and more expensive. We are much more aware of negative side-effects of engineering innovations (such as air pollution from automobiles) than ever before.
For these reasons, engineers are asked more and more to place their project ideas within the larger framework of the environment within a specific planet, country, or region. Engineers must ask themselves if a particular project will offer some net benefit to the people who will be affected by the project, after considering its inherent benefits, plus any negative side-effects (externalities), plus the cost of consuming natural resources, both in the price that must be paid for them and the realization that once they are used for that project, they will no longer be available for any other project(s).
Simply put, engineers must decide if the benefits of a project exceed its costs, and must make this comparison in a unified framework. The framework within which to make this comparison is the field of engineering economics, which strives to answer exactly these questions, and perhaps more.
The Accreditation Board for Engineering and Technology (ABET) states that engineering "is the profession in which a knowledge of the mathematical and natural sciences gained by study, experience, and practice is applied with judgment to develop ways to utilize, economically, the materials and forces of nature for the benefit of mankind".
Engineering Economics, 4th Edition, James L. Riggs, David D. Bedworth, and Sabah U. Randhawa
McGraw Hill, New York, 1996
MIT Open Courseware
ESD.70J / 1.145J Engineering Economy Module, Fall 2008, Excel based course
A NEW FRAMEWORK FOR ENGINEERING ECONOMICS
Basic Engineering Economics - a PDH Online Course for Engineers
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