Importance of Economics in Engineering
There are few engineering projects undertaken that do not have the cost of the project as a major, if not the most important, factor in the decision to undertake the project. The cost of the project is weighed against the potential for profit or the benefits that the project may provide. While we could envision projects in our personal lives such as remodeling our houses, or deciding if its more economical to repair our car versus buying a replacement, the projects we undertake as engineers are often much larger in scope and cost. The scale of projects in engineering can be in the 100’s of millions of dollars for significant infrastructure projects; consider, for example, the electricity grid and modernization for renewable energy sources, the transportation network, and natural resource projects such as mines, mills, and petroleum facilities.
While it is true that a lot of the work done by engineers involves problem solving and designing solutions to problems; typically these solutions are constrained by completing the design in the most economical way. Economic decisions are different but not separate from design decisions. In design we are working with our knowledge of physics, material properties, chemistry, and design codes to formulate our solutions. In economics we are making decisions based on factors such as market demand for products or services, the price we can offer a product at in comparison to competitors, and changes in the inputs such as commodity prices. We may complete the economic analysis many times with different assumptions to determine how to proceed.
Often we concern ourselves with a comparison of the potential profit of a project relative to its cost to build and operate. Other factors are now becoming much more important in the evaluation of projects; social and environmental considerations are becoming as important as the economic considerations and need to be included in our overall analysis of projects.