June 28, 1998
June 28, 1998
July 1, 1998
3.244.1 - 3.244.6
Engineering Economy: Suggestions to Update a Stagnant Course Curriculum
Joseph C. Hartman Industrial and Manufacturing Systems Engineering Lehigh University
Abstract Examining engineering economy textbooks from earlier this century and today reveals that the curriculum appears to be stagnant. This is supported by the fact that the material is virtually unchanged and in a variety of cases, the number of topics covered has actually declined. This may be attributed to an emphasis on economic equivalence and a de-emphasis on the decision process. Unfortunately, this is seen as a disservice to a student that will eventually perform engineering economy studies. This paper suggests ways in which to enhance the curriculum, including teaching engineering economy in the context of decision and design processes and integrating research advances into course material.
Introduction If one compares an engineering economy textbook from early in this century3,7,11 with a new 4,8,10 edition from today, they may be shocked to notice that the material has not really changed. Rather, in some cases, the amount of material has declined. It can be argued that the only innovation in engineering economy has been the utilization of spreadsheets to perform mundane calculations. Topics such as cost estimation have been virtually eliminated while relevant research breakthroughs from the past fifty years have not found their way into textbooks, and presumably, the classroom. The reduction in material may be attributable to an emphasis on time value of money fundamentals and a movement away from decision analysis.
For economic analysis, the decision process may be summarized in the following six steps: 1. Problem recognition and definition. 2. Generation of solution alternatives. 3. Development of feasible solution alternative cash flows. 4. Economic evaluation of alternative cash flows. 5. Selection and implementation of best solution alternative. 6. Post-implementation analysis and evaluation. Despite these six steps, engineering economy courses tend to narrowly focus on Steps 4 and part of 5. That is, students are provided with cash flows and are taught to perform an evaluation (present worth, internal rate of return, etc.), selecting the best alternative from the given choices. Some texts provide methods in which to develop cash flows, however, the estimation means are quite simplified.
It is argued here that engineering economy is a vital part of a decision process and thus should be taught in this context. The entire process of evaluating a project, from its inception (Step 1) to its completion (Step 6), should be emphasized. In this context, the principles of engineering
Hartman, J. C. (1998, June), Engineering Economy: Suggestions To Update A Stagnant Course Curriculum Paper presented at 1998 Annual Conference, Seattle, Washington. https://peer.asee.org/7084
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