Engineering economics instruction tends to fall within two approaches, a business-oriented approach similar to what might be taught in a business finance or cost accounting class, and an engineering-based approach which follows the solution methods and general pedagogy used with other engineering topics.&nbsp; These disparate approaches can lead to different learning and performance outcomes for the students of this important topic.&nbsp; This paper provides a background in the various methods for teaching the subject and contrasts these two general approaches.&nbsp; Detailed examples are provided for each approach.&nbsp; The various advantages and disadvantages of each approach are then discussed in terms of their respective instructional techniques and learning outcomes.&nbsp; These are then presented along with their respective implications for the instruction of the topic of engineering economics as well as the broader implications for the future of the engineering profession.&nbsp;As a form of applied economics, the topic of engineering economics has foundations outside of engineering.&nbsp; The fundamental principles of the topic relate to micro-economics, cost accounting, and finance.&nbsp; These topic areas certainly fall well outside of the core of most engineering disciplines.&nbsp; However, the mathematical analysis applied to engineering economics relates to higher levels of algebra, series analysis, limits, and calculus which are commonly found in many engineering classes.&nbsp; This combination of using established science and practice with complex mathematical analysis is directly analogous to many other engineering disciplines which have similar combinations.&nbsp; Just like solving real problems using the science of mechanics within mechanical engineering, chemistry within chemical engineering, or statics within civil engineering, engineering economics uses the science of economics coupled with advanced mathematical analysis to solve problems which are pertinent to the management and support of engineering projects.&nbsp;Contemporary engineering economics courses tend to be taught according to methodologies presented in the established textbooks available in the subject.&nbsp; Surveying these texts, two major approaches seem apparent.&nbsp; The first is a business-oriented approach similar to what is taught in most business schools.&nbsp; The focus of this approach tends to be on utilizing a financial calculator to obtain the answer as quickly and efficiently as possible.&nbsp; When spreadsheets are used, they generally make use of finance-specific commands rather than compound formulas.&nbsp; This method works well for training business professionals who might be tasked with making many calculations like these regularly throughout their career.&nbsp; Engineering economics textbooks which utilize this approach tend to have a recommended calculator or range of calculators which students are expected to use as part of the course.&nbsp; Problem examples are formulated to drive the solution toward a standard financial instrument so that the calculator’s preset functions can be utilized.&nbsp; In addition, examples using this methodology tend to not show the intermediate calculations necessary to achieve the result since the financial calculator combines these efforts into a predefined set of calculator specific keystrokes which students are expected to memorize.&nbsp;The alternative methodology toward solving engineering economic problems makes use of a more traditional engineering-oriented approach which is used throughout the engineering disciplines.&nbsp; In this more generalized engineering approach, the first step is usually to draw a picture of the financial aspects of the project or the financial transaction in question.&nbsp; This picture usually takes the form of a cash-flow diagram.&nbsp; From there, either a situation specific formula is derived, or a previously derived formula is algebraically adapted to fit the problem at hand.&nbsp; Once the algebra is complete and the solution variable is isolated, the function is then evaluated using the specific numeric parameters given in the problem.&nbsp; Each step of this process is shown in detail so that the approach can be verified and the intermediate calculations can be later checked.&nbsp; If possible, an alternate approach to the problem is then employed to validate the final answer.&nbsp; Although more time consuming and mathematically challenging, this more engineering-oriented approach offers many advantages over the business-oriented approach for engineering students who have the necessary quantitative background.

Contrasting the Traditional Engineering and Business Approaches to the Teaching of Engineering Economics

Paper Proceedings: https://asmedigitalcollection.asme.org/IMECE/IMECE2021/volume/85543

ASME 2021 International Mechanical Engineering Congress and Exposition (IMECE2021)

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