INTEGRATING UNCERTAINTY CONSIDERATIONS IN LEARNING ENGINEERING ECONOMY

Abstract

The traditional approach to learning engineering economy in undergraduate curricula typically focuses on solving problems in a deterministic manner. Students generally have little exposure to the uncertain and stochastic nature of, as examples, project cash flows and interest rates. Unfortunately, this traditional approach does not provide students with the skills to deal with real world situations, which inherently involve uncertainty and thereby, risk. In general, engineering economy texts for undergraduate students deal with uncertainty and risk only in brief chapters, usually at the end of the book. The uncertain environment is introduced as a special case, rather than as the norm. In this paper, we propose an approach to learning engineering economy that is integrated with an understanding of uncertainty; in fact, it considers the deterministic case as a special case. The availability of computers today facilitates introducing this uncertainty approach. Computer spreadsheets and software can provide students with the ability to analyze entire probability distributions. Such a junior or senior level engineering economy course would build on an earlier course in probability and statistics, as well as courses in design and computing. A plausible new engineering economy text that incorporates stochastic considerations is outlined herein.