CONCEPTS AND APPLICATIONS OF ENGINEERING ECONOMY

HIGHWAY ENGINEERS AND ADMINISTRATORS MUST REALIZE THAT ECONOMIC PROBLEMS SHOULD UNDERGO QUANTITATIVE ANALYSIS. HOWEVER, CERTAIN ASPECTS OF ECONOMY STUDIES FOR HIGHWAYS ARE INHERENTLY TROUBLESOME. THESE DIFFICULTIES MAY CONSTITUTE ONE OF THE REASONS WHY MOST DECISIONS TODAY ON HIGHWAY PROGRAMMING, LOCATION AND DESIGN ARE MADE WITHOUT BENEFIT OF ECONOMY STUDIES. A SET OF CONCEPTS ARE OUTLINED IN THE FIELD OF ENGINEERING ECONOMY THAT ARE APPLICABLE TO THE MAKING OF ALL KINDS OF DECISIONS: (1) IT IS DESIRABLE THAT ALTERNATIVES BE CLEARLY DEFINED AND THAT ALL REASONABLE ALTERNATIVES BE CONSIDERED, (2) DECISION-MAKING SHOULD BE BASED ON THE EXPECTED CONSEQUENCES OF THE VARIOUS ALTERNATIVES, (3) ONLY THE DIFFERENCES BETWEEN ALTERNATIVES ARE RELEVANT IN THEIR COMPARISON, (4) A CRITERION IS NECESSARY FOR DECISION-MAKING AND THE CRITERION FOR INVESTMENT DECISIONS SHOULD RECOGNIZE THE TIME VALUE AND RELATED PROBLEMS OF CAPITAL RATIONING, (5) IT IS ESSENTIAL TO DECIDE WHOSE VIEWPOINT IS TO BE ADOPTED, (6) SEPARABLE DECISIONS SHOULD BE MADE SEPARATELY, (7) IN ORGANIZING A PLAN OF ANALYSIS TO GUIDE DECISIONS, IT IS DESIRABLE TO GIVE WEIGHT TO THE RELATIVE DEGREES OF UNCERTAINTY ASSOCIATED WITH VARIOUS FORECASTS ABOUT CONSEQUENCES, (8) DECISIONS AMONG INVESTMENT ALTERNATIVES SHOULD GIVE WEIGHT TO ANY EXPECTED DIFFERENCES IN CONSEQUENCES THAT HAVE NOT BEEN REDUCED TO MONEY TERMS AS WELL AS TO THE CONSEQUENCES THAT HAVE BEEN EXPRESSED IN TERMS OF MONEY, AND (9) DECISIONS AMONG INVESTMENT ALTERNATIVES MUST BE MADE AT MANY DIFFERENT LEVELS IN AN ORGANIZATION. IN THE DISCUSSION, MR. BURCH MAKES THE POINT THAT A UNIFORM LEVEL OF TRAFFIC SERVICE MUST BE ESTABLISHED ON THE HIGHWAY SYSTEM. MR. LINDMAN DISCUSSES CONCEPTS OF ECONOMIC ANALYSIS. HE STATES THAT THE METHOD OF FINANCING WHICH IS MOST PREVALENT IN THE HIGHWAY FIELD CURRENTLY, IS THE PAY-AS-YOU-BUILD METHOD. MR. GRANT STATES THAT DECISIONS THAT ARE SEPARABLE SHOULD BE MADE SEPARATELY, AND FINANCING IS USUALLY SEPARABLE FROM DECISIONS ON PHYSICAL ALTERNATIVES, FOR EXAMPLE THE CHOICE AMONG SEVERAL POSSIBLE LOCATIONS. MR. GARDNER BELIEVES THAT THE FACT HAS BEEN OVERLOOKED THAT A STATE HIGHWAY DEPARTMENT IS RUN ON INCOME AND IT NEEDS TO SPEND THAT INCOME ON IMPROVEMENTS AND MAINTENANCE OF THE ROAD. MR. BERRY ASKS MR. GRANT ABOUT PROJECT JUSTIFICATION RELATED TO PROJECT FORMULATION. MR. GRANT REPLIES THAT MATTERS OF PRIORITY ARE DECIDED ON POLITICAL GROUNDS IN MANY INSTANCES. HE DISCUSSES CAPITAL ABOUT LOW VOLUME RADS. HE WISHES TO BE ABLE TO ARRIVE AT A JUDGMENT OF ECONOMIC VALUES WITH RESPECT TO ROAD IMPROVEMENTS THAT ARE NOT GOING TO PAY THEIR OWN WAY. MR. GRANT FEELS THAT ECONOMIC ANALYSIS IS RELEVANT EVEN ON MINOR ROADS. MR. MOSKOWITZ BRINGS UP THE QUESTION OF DECIDING WHAT ARE THE LIMITS TO THE PROJECTS TO WHICH ECONOMIC ANALYSIS IS TO BE APPLIED. MR. HOCK AND MR. GRANT DISCUSS THE IDENTIFICATION OF EXTRA MARKET CONSEQUENCES. IDENTIFICATION OF EXTRA MARKET CONSEQUENCES.

Media Info

  • Monograph Title: ECONOMIC ANALYSIS IN HIGHWAY PROGRAMMING, LOCATION AND DESIGN: WORKSHOP CONFERENCE PROCEEDINGS, SEPTEMBER 17, 1959
  • Serial:

Subject/Index Terms

Filing Info

  • Accession Number: 00201864
  • Record Type: Publication
  • Files: TRIS, TRB
  • Created Date: Aug 26 1970 12:00AM