Civil Engineering Reference
In-Depth Information
THE ROLE OF GOVERNMENTS AND FINANCIAL INSTITUTIONS
The importance of the construction industry to the overall wellbeing of the
economy means that most governments are concerned that it becomes a
highly efficient sector. As a consequence, the government's role as a client,
regulator, policy-maker and a sponsor of change is raised at several points
throughout the text. Equally the role of the financial sector makes a significant
contribution to the effective management of the economy and the funding
of construction projects. Any self-respecting text on economics must make
some reference to the financial crisis sparked by the 2007 credit crunch that
has troubled economies around the world. This crisis is still not fully resolved
at the time of writing. In October 2010, Mervyn King, the Governor of the Bank
of England, predicted that the aftermath of this crisis would hang over markets for
many years to come. These themes are discussed throughout
Part C
of the text.
ENVIRONMENTAL ECONOMICS
Effective protection of the environment forms a key part of any text concerning
sustainability.
Environmental economics
is important for several reasons: first,
because the environment has an intrinsic value that must not be overlooked; second,
because the sustainability agenda extends the time horizon of any analysis to assure
equity between generations; and, third, demands must be viewed on a whole-
life basis and this is particularly important in the context of products that last for
more than 30 years. Any model of analysis that seeks to identify general principles
of sustainable development must include, at the very least, these three dimensions.
We explore these issues and related concepts in
Part B
and bring them all together
in
Chapter 15
where we review the possibility of achieving the government's
sustainable construction agenda.
Microeconomics and Macroeconomics
Economics is typically divided into two types of analysis:
microeconomics
and
macroeconomics
. Consider the definitions of the two terms.
Microeconomics is the study of individual decision-making by both
individuals and firms.
Macroeconomics is the study of economy-wide phenomena resulting from
group decision-making in entire markets. As such, it deals with the economy
as a whole.
One way to understand the distinction between these two approaches is to consider
some generalised examples. Microeconomics is concerned with determining how
prices emerge and change, and how firms respond. It involves the examination of
the effects of new taxes, the determination of a firm's profit-maximising level
of production, and so on. In other words, it concerns the economic behaviour
of individuals - such as clients, contractors, surveyors and engineers - in various
markets. We study this type of analysis in
Part A.
In contrast, questions relating to
the rate of inflation, the amount of national unemployment, the growth rate of the
whole economy and numerous other economy-wide subjects all fall in the realm of
