Building economics in the United States

Building economics is described in the narrow context of methods of capital investment analysis applied to building investments in the United States. The common characteristic of all the methods described is that they consider benefits (savings) and costs over the project's life cycle or study period. Eight steps involved in making an economic evaluation are presented. The process is illustrated with a problem in choosing the economically efficient thermal resistance level of attic insulation. Appropriate applications are described for the following methods: life-cycle cost; net benefits; benefit-to-cost and savings-to-investment ratios; and internal rate of return. Federal and state agencies that use these methods are identified. The role of standards societies and professional organizations in epcouraging the use of these methods is described. Three projects in which these methods have been used are examined briefly in terms of methodology to illustrate the use of building economics methods. A description of difficulties in applying the methods concludes the paper.