Thoughts of Using Economic Decision-Making to Systems Engineering and Systems Thinking

Abstract

System engineering is an art that tries to capture the requirements that are imposed by stakeholders. Economic decision-making is an essential tool for systems engineers to accomplish that goal. However, a decision as a whole in systems engineering can be summed up in the following three element process: utility analysis by 17 evaluation criteria, human behavioral analysis by 6 evaluation criteria, the calculation of Net Present Value, IRR, and other economic decision-making indicators. The author will further discuss the NPV and IRR methods to discover some hidden pitfalls. Also, this article will discuss some newer methods/techniques that avoid these pitfalls in economic decision-making by accounting for the risk associated with these methodologies.