(c) Engineering Economics
Engineering economics is a subset of the whole subject of economics for the
application to engineering. Engineers have as main task to find technical solutions to problems and civil engineers are most likely to evaluate cost implications in the construction of a structure. Tools used in the engineering economy
are the Net Present Value (NPV), Internal Rate of Return (IRR) and Discounted
Cash Flows (DCF). They are used to assess alternatives for a project such that
the most effective, least costing alternative is then chosen.
(d) Welfare Economics
Welfare economics is also a subset of the whole subject of economics. It
studies how economic well-being is affected by the allocation of resources.
Welfare economics analyses the total welfare that is achieved in a country and
the distribution of this welfare. It involves the study of income and the distribution of the latter. Welfare economics focuses on the buyers’ profit as well as on
the sellers’ profit, hence aiming at market equilibrium which is driven by
“invisible hands”.
(e) Resource Economics
Resource economics is the branch that deals with the demand, the availability
and the allocation of natural resources in an effective way, aiming at a better
understanding of the role of resources in the economy and how we can manage
them so as to create a sustainable environment. This is important in order to keep
these resources available for future upcoming generations. Resource economics,
being part of the whole economics field, targets at developing a sustainable and
efficient economy.
(f) Behavioural Economics
While conventional economics (as described above) assumes rational decisions from the different players, behavioural economics examines carefully how
realistic the psychological, sociological, and institutional assumptions are when
introduced into economic models and decision making (Altman 2012, Angner
2012, Kahneman 2012). Very often, it is found that people (inter alia, decision
makers) are loss averse – people dislike losses more than they like commensurate gains. This loss aversion is reflected by the observation that most people are
more upset when they lose a Rs100 note than the pleasure they get when they
receive a Rs100 note unexpectedly. As a further difference from conventional
economics, this loss aversion effect is also affected by whether the monthly
income is Rs1,000 or Rs100,000.
2.2.2 Factor Endowments of the Country
There is a story about someone who is unqualified for a clerical job, but manages to
become rich through operating a small trade shop of selling tomatoes, the moral
being that many things are necessary or essential before earning plenty of money.
(see also The Verger by W. Somerset Maugham.)
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2 Infrastructure and Economic Growth
Engineering economics is a subset of the whole subject of economics for the
application to engineering. Engineers have as main task to find technical solutions to problems and civil engineers are most likely to evaluate cost implications in the construction of a structure. Tools used in the engineering economy
are the Net Present Value (NPV), Internal Rate of Return (IRR) and Discounted
Cash Flows (DCF). They are used to assess alternatives for a project such that
the most effective, least costing alternative is then chosen.
(d) Welfare Economics
Welfare economics is also a subset of the whole subject of economics. It
studies how economic well-being is affected by the allocation of resources.
Welfare economics analyses the total welfare that is achieved in a country and
the distribution of this welfare. It involves the study of income and the distribution of the latter. Welfare economics focuses on the buyers’ profit as well as on
the sellers’ profit, hence aiming at market equilibrium which is driven by
“invisible hands”.
(e) Resource Economics
Resource economics is the branch that deals with the demand, the availability
and the allocation of natural resources in an effective way, aiming at a better
understanding of the role of resources in the economy and how we can manage
them so as to create a sustainable environment. This is important in order to keep
these resources available for future upcoming generations. Resource economics,
being part of the whole economics field, targets at developing a sustainable and
efficient economy.
(f) Behavioural Economics
While conventional economics (as described above) assumes rational decisions from the different players, behavioural economics examines carefully how
realistic the psychological, sociological, and institutional assumptions are when
introduced into economic models and decision making (Altman 2012, Angner
2012, Kahneman 2012). Very often, it is found that people (inter alia, decision
makers) are loss averse – people dislike losses more than they like commensurate gains. This loss aversion is reflected by the observation that most people are
more upset when they lose a Rs100 note than the pleasure they get when they
receive a Rs100 note unexpectedly. As a further difference from conventional
economics, this loss aversion effect is also affected by whether the monthly
income is Rs1,000 or Rs100,000.
2.2.2 Factor Endowments of the Country
There is a story about someone who is unqualified for a clerical job, but manages to
become rich through operating a small trade shop of selling tomatoes, the moral
being that many things are necessary or essential before earning plenty of money.
(see also The Verger by W. Somerset Maugham.)
38
2 Infrastructure and Economic Growth