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Session 1639

ECONOMICS FOR ENGINEERS: AN INTEGRATED APPROACH

Dr. Wayne E. Wells The University of Texas at Brownsville

ABSTRACT

Engineers are the principal decision-makers who influence the profitability of firms, whether they are involved in manufacturing, construction or service industries. However, most conventional courses in engineering economy do not deal with the breadth of issues engineers will face in practice. This paper describes a revised approach to teaching Economics for Engineers rather than the more limited Engineering Economy. Case studies are used to teach the language and concepts of costs and the relationships between engineering decisions and the economic performance of the firm.

WHO REALLY DETERMINES COSTS?

A fundamental issue we must address as engineering educators is the vital role played by engineers in the economic performance of the firm for which they are employed. For, after all, it is the engineers who determine, through the nature and quality of their decisions, whether the firm will make money and stay in business or lose money and eventually go out of business. I address this with the following parable, that I call the Parable of the X-Ray Vision.

Imagine that you and a friend are standing in the lobby of a manufacturing firm. Put on your Superman X-Ray vision glasses and look through the walls. As you examine all of the people at work in this firm, ask your friend “Who makes the decisions that determine whether this firm will stay in business, earning a profit and continuing to employ all of these people, or will lose money and go out of business, forcing these people into other jobs or into unemployment?” Your friend might answer “Well, clearly, it is the Finance Office. The people in the Finance, Accounting or Comptroller’s Office, whatever they call it here, must be the ones who make those decisions.” You would have to answer; “No, the Finance Office only keeps score. They are the ones who keep track of the firm’s performance and report it to the management, the owners and the government. Anything they do to influence profits could be illegal and send someone to jail!” Then your friend might respond; “Well, it must be the workers on the assembly line. Yes, they are the ones who really determine the future of the firm.” When you think for a minute, you have to say, “No, the workers do what they are trained to do, using the tools and procedures they are given within the time they are allotted

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Wells, W. E. (1998, June), Economics For Engineers: An Integrated Approach Paper presented at 1998 Annual Conference, Seattle, Washington. 10.18260/1-2--7064