Economists measure utility. Engineers design for it. Yet so few people pay attention to it.
Measuring things is essential to both economics and engineering, and while engineers strive for both accuracy and repeatability, economists play by a different set of rules. Consider civil engineering. When Hurricane Katrina devastated the Gulf Coast in August 2005, it surpassed Hurricane Andrew in 1992 as the costliest hurricane ever hit the United States. When a civil engineer designs a structure, however, the design anticipates an expected lifetime that might be 30, 50 or 75 years. Some structures are designed with an indefinite lifetime, and the durability required to meet those targets comes at a cost, both in materials and labour to build the structures. When a natural disaster, or war for that matter, destroys a large number of structures, the economic loss is not just measured in what it cost to rebuild those buildings, but in the economic value lost in the remainder of the original structure’s design life.
Access all episodes of End of the Line on Engineering TV along with all of our other series.
* * *
Episode Transcript:
There is not much in common between economists and engineers. Both use some pretty high-level mathematics, and both are very concerned with metrology. Measuring things is essential to both endeavours, and while engineers strive for both accuracy and repeatability, economics—sometimes called the dismal science—in my opinion plays very fast and loose with numbers.
Unfortunately, this has real world applications.
Consider civil engineering. When Hurricane Katrina devastated the Gulf Coast in August 2005, it surpassed Hurricane Andrew in 1992 as the costliest hurricane to ever hit the United States. Damage estimates ran between $100 and $145 billion, yet the Congressional Budget Office, investment houses Goldman Sachs and Merrill Lynch, as well as then-President Bush’s economic advisors determined that the effect on the national economy would be limited and temporary, and that rebuilding would generate a substantial economic rebound.
Katrina, or more accurately the extensive investment in rebuilding the staggering damage, was a driver of faster economic growth in 2006. Now, it doesn’t take an engineer to see the irrationality of this kind of math. When a civil engineer designs a structure, the design anticipates an expected lifetime that might be 30, 50 or 75 years. Some structures are designed with an indefinite lifetime, and the durability required to meet those targets comes at a cost, both in materials and labour to build the structures. It costs more to build a stone bridge that lasts 500 years than a precast concrete one that will be expected to be rebuilt in 30 years.
When a natural disaster—or a war, for that matter—destroys a large number of structures, the economic loss is not just measured in what it costs to rebuild those buildings, but in the economic value lost in the remainder of the original structure’s design life. There are years or decades of service that are lost when a building is destroyed, or demolished before it reaches its design life expectancy.
The economists call this kind of thing opportunity cost. If you knock down a building and replace it with a new one, there is greater utility, meaning profits, in the new structure, but there were also profits to be made from retaining the old one, and the real economic value of the project is the net difference between the two.
The original Twin Towers in Manhattan contained about 10,000,000 ft.² of office space. The replacement, One World Trade Centre, has about 3 ½ million ft.2. It’s largely forgotten that the original Twin Towers were designed to kickstart what was expected to be a Renaissance in lower Manhattan, something which never happened, and the new structure more closely matches demand for commercial space at the tip of the island.
So, the economists would claim that its construction in the aftermath of the 9/11 attacks was stimulative to the tune of the $3.9 billion it cost to build it, and that it also addressed the glut of office space in lower Manhattan, more closely matching supply to demand in the commercial real estate market.
But the original Twin Towers were designed by the structural engineering firm Worthington, Skilling, Helle and Jackson to last 100 years. The terrorist attack effectively cost the economy 70 years of remaining life expectancy of the buildings, something which economists simply don’t count.
Of course, sometimes it goes the other way: This is a Bailey bridge, a quick-build World War II innovation designed for movement of material across rivers in a combat zone. Designed to last months rather than years, then be dismantled later, thousands of these things are still in use today, thanks to regular maintenance and modern coatings for corrosion control.
Engineers don’t design for terrorist attacks, or earthquakes, or hurricanes, but they do design for the probability of things like natural disasters. But when a once-in-a-lifetime storm devastates a city, that is not good for the economy—no matter what the economists say.
