(247a) Introducing Risk Analysis in a Design I Course

A major challenge that Chemical Engineering graduates will face at the modern workplace is the management and operation of plants under conditions of uncertainty. Developments in the field of industrial organization of microeconomics offer tools to address this challenge with rather well developed concepts, such as decision theory and financial risk analysis. In this work we will describe our efforts to integrate modern economics concepts and techniques in the teaching of Engineering Design.

The Chemical Engineering curriculum at the University of Oklahoma includes three courses in Design: Design Lab (2 credit hours), Design I (3 credit hours) and Design II (3 credit hours). The capstone projects are part of Design II, while Design I is the course that introduces engineering economics to students, as well as concepts such as profitability and cost analysis. The majority of the students who enroll in Design I have no background in Economics, since introductory Economics courses are part of the general education electives (as are several other courses in the social sciences). The type of engineering economics taught to them focused on cost analysis and profitability estimation with limited references to uncertainty and financial risk. For the past several years, we have included material on risk analysis and decision making in the Design I class. Lately, through collaboration between Chemical Engineering and the Department of Economics, we have been developing classroom material to introduce risk analysis in the class. In a presentation in the 2009 AIChE meeting [1] we discussed the development of illustrative classroom experiments and case studies that showcased concepts such as utility and decision making under uncertainty in Design I. The discussion in this presentation will include the development and implementation of assignments that utilize the concepts of risk and utility, and the use of software (Crystall Ball by Oracle) to incorporate financial risk in engineering economics.

References

1.Papavassiliou, D.V., Jog, C., Le, P., Freeman, M., and G. Kosmopoulou, ?Development of Classroom Experiments to Introduce Decision Making Under Uncertainty to Students in a Design I Course,? paper 329b, American Institute of Chemical Engineers Annual Conference, Nashville, November, 2009.