Ronald A. Chadderton

Costs of Regulation

When engineers work in fields regulated by the general, federal government, they favor regulations for scientific or technical reasons. Since regulations are frequently derived from risk analyses, it would be valuable to society if engineers understood the total effect of regulatory costs on the general populace before lobbying for more regulation and public expenditures. The purpose of this section is to suggest within the context of engineering economics a broader perspective on the costs of regulation .

Information: Interfering with Price Signals

The subject of this section is primarily the transfer of information among economic actors. A closely related concern is distortion of the information caused by various interventions. We note that we are always trying to plan action into the future, while the future is always uncertain, or unknowable. Even prospective calculations are based on data from the immediate past.

A Few Basic Concepts: Setting the Stage

The purpose of this book is to present supplemental material that I have incorporated into my course called “Economy and Risk” built around an engineering economics textbook. These are materials that I believe every engineering graduate should appreciate.

Public Projects (Benefit–Cost Analysis)

The material in this section is by its nature political. The emphasis will be on benefit–cost (B/C) analysis of government activities, or more specifically of projects. Arnn (2012) is particularly relevant to this material. This section begins with a philosophical discussion and ends with a mathematical example.

Price and Cost

One of the most important points of misunderstanding that should be corrected is the confusion between the terms “price ” and “cost .” These terms are often associated with the concepts of “utility” and “value.” The term “utility” might be described as an estimate of the ability of a good to satisfy human wants. The related term “value” could be expressed as “an appraisal of utility in terms of a medium of exchange” (Thuesen and Fabrycky in Engineering economy, Prentice Hall, and Upper Saddle River 2001). Both utility and value are attributed to an object by an individual; they are not inherent in the object.

An Example “Retirement” Planning Calculation

Much current advertising asks “How much savings will you need for your retirement?” One personal benefit for our students from this course should be to learn how to estimate such a future need and to calculate a cash flow to reach that goal. It should be obvious that if savings grow 4 % while the CPI increases 5 %, value has been lost.

Effects of Taxation on Cash Flows

In this section, we will address the question of why we should include this topic in an engineering economy context. What uniquely Austrian considerations can be added to a more typical treatment of the problem?

The First Class: Subjective Value and Time Preference

Civil Engineers often claim to work for the public good. Their work between two environments, the physical and the economic, has been described in the following way: “[t]he function of engineering is to create utility in the economic environment by altering elements in the physical environment.” (Thuesen and Fabrycky in Engineering economy. Prentice Hall, Upper Saddle River, 2001)

Retrofit of hydropower capacity at Conemaugh Dam

A preliminary investigation is described of the hydropower potential at the existing Conemaugh Dam, U.S. Army Corps of Engineers project located in the Kiskiminetas River Basin, Pennsylvania. The objective of the study was to determine the most cost effective layout of power production facilities for each of four possible installed capacities. Based on preliminary cost estimates and monthly power production computations, a layout using standard tube turbines in a powerhouse constructed on the face of the emergency spillway would produce the cheapest energy at a capacity of 8 to 10 megawatts (MW).