Economic Systems Analysis and Assessment

This important book fills the need for a textbook on economic systems analysis and assessment, providing extensive coverage on various topics including microeconomic systems and assessment, cost effectiveness, cost estimation for software and systems, strategic investments, and valuation methods. It serves as an effective textbook for senior undergraduate and first-year graduate courses in economic systems analysis and assessment, as well as a valuable reference for engineers and managers involved in information technology intensive systems.

Andrew P. Sage, PhD, is University Professor and First American Bank Professor at George Mason University in Fairfax, Virginia. He is a Fellow of the IEEE, the American Association for the Advancement of Science, and international Council on Systems Engineering (INCOSE). The winner of numerous awards, Dr. Sage is the editor of the Wiley Series in Systems Engineering and Management and the founding editor of the INCOSE journal Systems Engineering. He is a member of the National Academy of Engineering. William B. Rouse, PhD, is the Executive Director of the Tennenbaum Institute at the Georgia Institute of Technology, and a faculty member in the School of Industrial and Systems Engineering and the College of Computing. A former CEO of two innovative software companies, he has four decades of experience in research, education, engineering, management, and marketing. Dr. Rouse has written hundreds of articles and book chapters and has authored many books. He is a member of the National Academy of Engineering and a fellow of several professional societies.

Preface	p. ix
Introduction to Economic Systems Analysis and Assessment: Cost, Value, and Competition in Information and Knowledge Intensive Systems, Organizations, and Enterprises	p. 1
Introduction	p. 1
A Framework for Systems Engineering and Management	p. 2
Theory of the Firm	p. 14
Theory of the Consumer	p. 17
The Interaction of the Theories of Firms and Consumers: Microeconomic Models of Economic Activity	p. 18
Welfare or Normative Economics	p. 26
Program and Project Management Economics	p. 29
Contemporary Issues Concerning Information and Information Technology Economics	p. 30
Economic Pitfalls in the Engineering of Systems	p. 35
Summary	p. 41
Production and the Theory of the Firm	p. 43
Introduction	p. 43
The Production Function	p. 44
Multiproduct Firms and Multiproduct Production Functions	p. 61
Classic Theory of the Firm	p. 62
Imperfect Competition	p. 81
Summary	p. 88
The Theory of the Consumer	p. 95
Introduction	p. 95
Economic Utility Theory and Its Axioms	p. 95
Properties of Utility Functions	p. 100
The Fundamental Problem of the Consumer	p. 102
Sensitivity and Substitution Effects	p. 120
Summary	p. 130
Supply-Demand Equilibria and Microeconomic Systems Analysis and Assessment Models	p. 137
Introduction	p. 137
Basic Supply-Demand Equilibrium for a Single Good	p. 139
General Supply-Demand Equilibrium Conditions	p. 170
Extensions to General Equilibrium to Include Market Interdependencies	p. 184
Microeconomic Models	p. 196
Summary	p. 198
Normative or Welfare Economics, Decisions and Games, and Behavioral Economics	p. 205
Introduction	p. 205
Pareto Optimality under Perfect Competition Conditions	p. 206
External Effects and Imperfect Competition: Public Goods	p. 218
External Effects and Imperfect Competition: Nonindependent Production and Consumption	p. 229
Welfare Maximization and Social Choice	p. 238
Summary	p. 241
Cost-Benefit and Cost-Effectiveness Analyses and Assessments	p. 251
Introduction	p. 251
The Time Value of Money	p. 253
Identification of Costs and Benefits	p. 274
The Identification and Quantification of Effectiveness	p. 283
Summary	p. 289
Cost Assessment	p. 297
Model-Based Parameters for Productivity	p. 301
Early Models for Estimation of Costs, Including Effort and Schedule	p. 303
The Constructive Cost Model	p. 310
Summary	p. 337
Approaches to Investment Valuation	p. 343
Microeconomics	p. 344
The Investment Problem	p. 348
Investment Valuation	p. 350
Summary	p. 359
Real Options for Investment Valuation	p. 361
Nature of Options	p. 361
Option Pricing Theory	p. 364
Option Calculator	p. 367
Strategic Metrics	p. 372
Investment Decision Making	p. 374
Value-Centered R&D	p. 378
Summary	p. 379
Contemporary Perspectives	p. 383
Introduction	p. 383
Evolutionary Economics	p. 383
Path Dependence and Network Effects	p. 384
Intellectual Capital	p. 385
Value of Information	p. 387
Investing in Humans	p. 388
Summary	p. 390
Index	p. 393
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Economic Systems Analysis and Assessment Intensive Systems, Organizations,and Enterprises

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