Purposeful Engineering Economics

Purposeful Engineering Economics stands as a unique and highly original complement to the traditional engineering economics curriculum. This primarily narrative text conveys the essence of an "Austrian" economic perspective on cash flow analysis and decision making in engineering without extensive tables and graphs and requires very little mathematics. The book’s objective is to add a new perspective to the usual study of cash flow analysis and solely econometric engineering decision making. The author draws on the methodology of the Austrian Economists—a school of economic thought that bases its study of economic phenomena on the interpretation and analysis of the purposeful actions of individuals. The book includes an array of illustrative case studies examined in detail by the author and emphasizes the importance of market processes and price signals to coordinate engineering plans. Preface 6 Contents 11 1 Introduction 14 1.1 The Basic Problem: “The Economics of Time and Ignorance” 15 1.2 Knowledge: How Much Do We Know; How Confident Should We Be? 16 1.3 Notes on the “Confusion” of the Language 18 References 20 2 The First Class: Subjective Value and Time Preference 22 2.1 The Meaning of Words 22 2.2 Economic Calculation and Action 23 2.3 An Economy Study Process 23 2.4 The Uncertainty of Predictions 24 References 25 3 A Few Basic Concepts: Setting the Stage 26 3.1 The Most Important Equation 26 3.2 The Components of the Course 26 3.3 Perspective of the Course 27 3.4 The Crucial Lesson 28 3.5 The Coordination Problem 28 References 29 4 Price and Cost 30 4.1 Human Action 30 4.2 Value Theory 31 4.3 Information Transfer 31 4.4 On the Origin of Money 32 4.5 Preference and Action 33 4.6 Some Categories of Cost 34 4.7 Interest and Interest Rates 35 4.8 An Introductory Investment Decision 36 4.9 A Brief Introduction to Banking, Money, and Credit 37 References 38 5 Equivalence 39 5.1 A Simple Decision Problem 40 5.2 An Example Application: Creating a Retirement Account 42 5.3 Equivalence with Working Capital 43 5.4 Summary of Principles of Equivalence 44 Reference 44 6 Inflation 45 6.1 Austrian Explanation 45 6.2 Introductory Examples 46 6.3 The Language of Inflation 47 6.4 Methods and Episodes of Devaluation 48 6.5 Estimating Devaluation Effects 50 6.6 Accounting for Inflation in Two Domains 52 References 52 7 Information: Interfering with Price Signals 54 7.1 Information Theory and the Market 54 7.2 The Evolution of Social Institutions 55 7.3 Interference by Inflation 55 7.4 Interference by Taxation 57 7.5 Interference by Price Control 57 7.5.1 Minimum Price Control 58 7.5.2 Maximum Price Control 58 7.6 Summary 59 References 59 8 Public Projects (Benefit–Cost Analysis) 61 8.1 “Philosophical” Introduction 61 8.2 Government Incentives and Functions 62 8.3 Limitations to Government Activities 63 8.4 The Method of BC Analysis 65 8.5 A Typical Five-Step Procedure for Incremental BC Analysis 65 8.6 Choice of Interest Rate for BC Analysis 66 8.7 A Numerical BC Example 67 8.8 Gaming the Basic Example 68 References 69 9 Effects of Taxation on Cash Flows 70 9.1 Why Consider Taxes? 70 9.2 Depreciation Accounting for Capital Preservation 71 9.3 Estimating the Effects of Taxation 72 9.4 Summary of Effects of Inflation 73 9.5 How Inflation and Taxes Affect Capital Values 74 9.6 Summary for Students 74 References 75 10 An Example “Retirement” Planning Calculation 76 10.1 Account for Devaluation of Money 76 10.2 Account for Taxation 78 10.3 Estimate Combined Effect of Devaluation and Taxation 78 10.4 Concluding Remarks 79 References 79 11 Costs of Regulation 80 11.1 Risk Evaluations and Perceptions 80 11.2 Wage Control and Lifespan 82 11.3 Examples of Regulatory Effects 83 11.3.1 Transcontinental Railroad Subsidies 84 11.3.2 Water Pollution Control 85 11.3.3 Land-Use Regulations 88 References 88 12 Sustainability Concerns 91 12.1 Defining Sustainability 91 12.2 What Is the Objective? 92 12.3 A Question of Prices and Uncertainty 92 12.4 A Dissenting View 93 12.5 Differing Perspectives: Environmental Science Vs. Civil Engineering Students 94 References 95 Appendix A Elements of Austrian School Economics 96 Appendix B Example Learning Objectives 101 Index 104 This textbook/course supplement stands as a unique and highly original complement to the traditional engineering economics curriculum. Its primarily narrative approach conveys the essence of an ĺlAustrian" economic perspective on cash flow analysis and decision making in engineering, without extensive tables and graphs, and requires very little mathematics. The bookĺls objective is to add a new perspective to the usual study of cash flow analysis and solely econometric engineering decision making. The author draws on the methodology of the Austrian Economistsĺla school of economic thought℗lthat bases its study of economic phenomena on the interpretation and analysis of the purposeful actions of individuals. The book includes an array of illustrative case studies examined in detail by the author and emphasizes the importance of market processes and price signals to coordinate engineering plans. Purposeful Engineering Economics is an ideal resource for students, teaching faculty, and practicing professional in a range of engineering disciplines that rely heavily on economic analysis This textbook/course supplement stands as a unique and highly original complement to the traditional engineering economics curriculum. Its primarily narrative approach conveys the essence of an "Austrian" economic perspective on cash flow analysis and decision making in engineering, without extensive tables and graphs, and requires very little mathematics. The book's objective is to add a new perspective to the usual study of cash flow analysis and solely econometric engineering decision making. The author draws on the methodology of the Austrian Economists -- a school of economic thoughtthat bases its study of economic phenomena on the interpretation and analysis of the purposeful actions of individuals. The book includes an array of illustrative case studies examined in detail by the author and emphasizes the importance of market processes and price signals to coordinate engineering plans. Purposeful Engineering Economics is an ideal resource for students, teaching faculty, and practicing professional in a range of engineering disciplines that rely heavily on economic analysis This textbook/course supplement stands as a unique and highly original complement to the traditional engineering economics curriculum. Its primarily narrative approach conveys the essence of an "Austrian" economic perspective on cash flow analysis and decision making in engineering, without extensive tables and graphs, and requires very little mathematics. The book's objective is to add a new perspective to the usual study of cash flow analysis and solely econometric engineering decision making. The author draws on the methodology of the Austrian Economists--a school of economic thought that bases its study of economic phenomena on the interpretation and analysis of the purposeful actions of individuals. The book includes an array of illustrative case studies examined in detail by the author and emphasizes the importance of market processes and price signals to coordinate engineering plans. Purposeful Engineering Economics is an ideal resource for students, teaching faculty, and practicing professional in a range of engineering disciplines that rely heavily on economic analysis Front Matter....Pages i-xv Introduction....Pages 1-8 The First Class: Subjective Value and Time Preference....Pages 9-12 A Few Basic Concepts: Setting the Stage....Pages 13-16 Price and Cost....Pages 17-25 Equivalence....Pages 27-32 Inflation....Pages 33-41 Information: Interfering with Price Signals....Pages 43-49 Public Projects (Benefit–Cost Analysis)....Pages 51-59 Effects of Taxation on Cash Flows....Pages 61-66 An Example “Retirement” Planning Calculation....Pages 67-70 Costs of Regulation....Pages 71-81 Sustainability Concerns....Pages 83-87 Back Matter....Pages 89-100