Recent additions to the Construction Economics library
The construction industry is not like the typical industry found in economic textbooks, due to the physical nature of the product, the variability of demand, the method of price determination by auction, the contractual relationships between clients, contractors and suppliers. These characteristics require adjusting economic principles to adequately reflect the industry. Further, those four characteristics of construction vary between countries, as do the regulatory systems in different places.
So, given this diversity of industry participants, products and process, how should research into the structure and performance of the construction industry and the management of firms and projects be done? Obviously, a variety of perspectives and a multi-disciplinary approach are required, and this is where Construction Economics (CE) contributes.
CE is the application of economic principles to the construction industry. However, because of the distinctive characteristics of the organisation of construction processes, the structure of construction markets, and the management of construction firms, this is not a straightforward process. Therefore, CE research uses a broad range of approaches to research the construction industry, its firms and projects. These include industrial organization and other management studies, financial and behavioural economics, econometric analysis and modelling, cost modelling, legal and institutional research, and transaction cost economics.
The library of CE research has been growing recently. The nine books below share an economic perspective that focuses on firms and industries rather than individual projects, which differentiates them from other books on specific topics like procurement, estimating, cost management, and life cycle costs, although all these topics are included in the CE books. This combining of economic theory and techniques with industry specific knowledge is a distinctive characteristic of CE research, and although most of the authors are academics, many of them have industry experience.
In these recent publications the range of topics covered include the roles of participants and processes, productivity and value for money, environmental performance and sustainability, the delivery process and procurement, the financing, viability and competitiveness of construction firms and projects, technological and institutional development, construction statistics and measurement, international construction, regulation, decarbonisation, and government policies affecting the industry. Across the books there are differences in emphasis, sometimes marked.
These books should become standard references for researchers and people working on policy issues related to construction and the built environment. They cover an extremely wide range of topics, many of which overlap related areas like business and project management, industry development and policy, innovation, sustainability and data quality. Some of the topics and issues discussed are extremely difficult to nail down, and there are a few general themes that weave through all the books.
As these books show, when researching construction a variety of perspectives are required, some of which come from outside the neoclassical model of firms and markets, such as institutional or development economics. Therefore, CE has developed a distinctive research agenda on the production, delivery and management of the built environment in a wide range of conditions and countries. The five edited volumes have a total of 70 chapters, 10 of which are introductions and conclusions. The remaining 60 chapters demonstrate the current state of CE research and represent the range and diversity of that research.
There are eight books from academic publishers. The five edited volumes, and three textbooks. Included at the end are links to the publishers’ websites where the table of contents, authors and descriptions for their books can be found. As academic publications they are not cheap, which unfortunately limits the potential readership, and the books will therefore be read mainly by academics and researchers through their institution’s library. Perhaps future collections could republish some of this work as in cheaper ebook and paperback options.
Declaration of interest: I contributed one or more chapters to the edited volumes, two as co-author with Jim Meikle, and the Foreword to Christian Brockmann’s Construction Microeconomics. There is a ninth book, my one on technology and construction, at the end.
Ofori, G. (ed.) 2022. Research Companion to Construction Economics, Edward Elgar
The book has 24 chapters in a collection that ‘represents a relatively complete work on the field of construction economics.’ And that’s right, there is a bit of everything: costs, markets, history, data, procurement, ESG, developing countries and so on. The table of contents are well worth a look, with the multi-disciplinary nature of CE on full display. The book gathers several decades of research in an overview of CE in 2022.
It is thus a heavyweight academic publication, the chapters are comprehensive, dense and detailed and, as you would expect in a handbook, meticulously referenced. Intended as a library resource, it will be the starting point for researchers on many topics in CE and related fields for many years to come.
Edited by George Ofori, the book makes the case for CE as an alternative to other approaches to researching construction that focus on issues such as culture or project management. His Introduction on the development of CE and review of the chapter topics can be downloaded from the e-elgar site by going to the link for a sample chapter under the Add to basket button. He started with this definition:
‘Construction Economics applies economic theory, concepts and analytical tools to the construction industry, the companies and organisations comprising it, and the projects it undertakes. Over time, the field has been extended beyond the minimisation of capital cost on projects to include life-cycle cost considerations, the idea of value, sustainable construction and climate change, and applications of technology. Attention has also been extended to include consideration of companies and organisations; and the strategic, industry-level considerations involving the economy and construction markets, changing government policy, and international finance and economics.’
Not only is this an excellent definition of CE, it also makes clear the range of topics and issues CE can make a contribution to. The book is a significant milestone in the development of CE.
Gruneberg, S. (ed.) 2019. Global Construction Data, Taylor & Francis
In his Preface Stephen Gruneberg, the editor of Global Construction Data, says the ‘book covers several theoretical and practical aspects of global construction statistics and their use. It demonstrates the diversity of approaches and points in the direction of a need to co-ordinate the measurement of national construction industries’. The diversity of approaches is the great strength of the book, which demonstrate both the range of CE and its application.
The ten contributions include three with detailed discussion of construction statistics, two on international comparisons, two use residential cost data for life-cycle costing and energy use respectively. The other three cover innovation and BIM, the global market for architectural services, and international contractor’s make-buy decisions. Taken together these chapters cover construction data at the international, national and project levels.
The way we see and understand an industry starts with the data provided by national statistics agencies. How data on Construction is collected and how the categories within Construction are defined is clearly important. The former determines the quality and the latter the credibility of the statistics produced. In the title the book made explicit the importance of this as a specific topic in CE research. The reliability and quality of construction statistics is a well-known issue, going back to the 1960s, and the shortcomings of the SNA and SIC have not been overcome in the revisions since then.
Best, R. and Meikle, J. (eds.) 2023. Describing Construction: Industries, projects and firms, Taylor & Francis
The last in a series of three CE books edited by Rick Best and Jim Meikle, Describing Construction addresses the question ‘What exactly is the ‘construction industry’? Research on defining and measuring construction at many different scales is a distinctive characteristic of CE, as this is not done elsewhere. The scales range from firms to projects to the broad construction industry, which includes all participants in the supply chain. The book has contributions at the three scales of industry, project and firm.
The chapters on industry definitions and boundaries, which includes one on construction in developing countries, argue for a new perspective on construction and for better data. At the project level, there are chapters on estimating, procurement and contracting. The chapters on firms cover characteristics and financial failure, strategic planning, innovation and industry transformation. The book combines several chapters that are analytical and empirical (using or about data) with some more general chapters that provide an overview of their topics.
All the contributors to the 36 chapters in this series of books have extensive industry experience, which is apparent in the depth of discussion and awareness of the issues involved. The books will be used by researchers investigating construction and related industries for many years to come.
Best, R. and Meikle, J. (eds.) 2919. Accounting for Construction: Frameworks, productivity, cost and performance, Taylor & Francis
The second book from Rick Best and Jim Meikle was Accounting for Construction: Frameworks, productivity, cost and performance. The dozen contributions again look at different ways of measuring and comparing construction. With chapters on construction statistics, productivity, costs and data, the book both reviewed and extended previous studies. An ‘important thread’ was the lack of consistency in the way construction industry data is collected and how it is aggregated.
Several chapters look at national construction statistics and their many peculiar characteristics in detail, explaining how data is collected and processed in national statistics. Issues affecting productivity performance and measurement are also discussed in several chapters, such as the building cycle, capital stock, innovation and the relationship between input costs and the technology used.
The book is dense with information, with key topics that reappear across the chapters in different contexts with different perspectives. It is a starting point for construction economists and others who want to understand how industry data is compiled and can used, more about the nuts and bolts of construction data compared to the previous book on Measuring Construction, which was more of a toolkit.
Best, R. and Meikle, J. (eds.) 2015. Measuring Construction: Prices, Output and Productivity, Taylor & Francis
In Measuring Construction: Prices, output and productivity Rick Best and Jim Meikle put the focus on data sources and quality. As the introduction makes clear ‘there are standard methods for measurement of physical building work, but the same cannot be said for the characteristics of the construction industry’. The three broad topics addressed are costs and prices, activity and internationalisation, and construction productivity. Their conclusion was ‘there is no ‘correct’ answer to any of the questions this book explores … It is perhaps only by applying a variety of techniques to the various problems and comparing the results that we obtain that we will know if we are getting closer to developing an acceptable set of tools and methods.’
The chapters survey issues in the collection and use of construction data. The twelve contributions cover measurement of construction work, productivity measurement methods, and construction costs and prices at the global, national, industry and project levels. On each of these topics the research is detailed and focused, there are useful analytical and methodological insights, and a few chapters have models that could be applied and developed.
There is a great deal of data in the book, as you’d expect from the title, and good empirical work showing how comparisons can be made and data used. One of the chapters on productivity argued for the use of artificial neural networks (i.e. AI) for construction estimating and management, a particularly forward-looking contribution in 2015.
Brockmann, C. 2023. Construction Microeconomics, Wiley Blackwell
This is the first book to focus on microeconomic aspects of construction, and that focus allows an extended discussion of topics than found in previous CE books. Microeconomics studies the interaction of producers and consumers of goods and services in specific industries and markets, and the tools and techniques used are well-known. In a simple exchange market, where the transaction is complete, the analysis of demand and supply is relatively straightforward, but construction markets are not like that. Christian Brockmann introduces the idea of contract goods that are delivered over time and priced by bids from contractors, and the analysis of how those characteristic features of construction affect the behaviour of owners and contractors in Construction Microeconomics is both original and insightful.
Chapters 2 to 9 cover micro basics: principles, consumers, producers, perfect markets, imperfect markets, factor markets, information, and game theory/auctions. Part II contains the adaptation of microeconomics to construction, with chapters on the construction sector, owners, contractors, construction goods, construction markets, contracting, imperfections, government policy, and public goods.
This book discusses the behaviour of firms and the nature of construction products and processes in detail. In particular, bidding for work in auctions and contracting under uncertainty for owners and clients who are risk adverse raises complex issues around marginal costs and prices, incentives and behaviour, and information asymmetry and bargaining power. The analysis draws on developments in industry economics to support the points made and the approach taken.
This micro focus of the book provides a deeper understanding of the complex relationships between construction industry participants, and has been deeply informed by the author’s industry experience. It demonstrates how economic principles can be applied to a market that uses auctions and tenders to set prices, essential knowledge for regulators and management in industry.
Christian Brockmann has built on previous work and brings a new perspective to issues and topics that are fundamental to CE. The book will be of interest not just to academic researchers but also to industry, regulators and policy makers. His Construction Microeconomics focuses on the operation and organisation of construction from a micro perspective, and is an important addition to the CE library. A companion volume is in the works: Construction Macroeconomics, by Horst Brezinski, Christian Brockmann, Kira Coleman and Huojin Xiong.
Gruneberg, S. and Francis, N. 2019. Economics of Construction, Agenda Publishing
Stephen Gruneberg and Noble Francis’ The Economics of Construction provides ‘a game theory account of the behaviour of firms’, the approach typically taken in other branches of industry economics. The Gruneberg and Francis book does not have much discussion on macroeconomic matters, however they discuss innovation and productivity, aspects of firms’ business models and financing, and contractual disputes and power relations in construction.
There are case studies of the collapse of UK contractor Carillion in 2018, the Grenfell Tower fire, construction for the London Olympics, and manufactured housing in the UK. These are used to illustrate how the business environment a construction firm faces has become significantly more complex over the decades as the traditional turnover and profit maximizing contractor or supplier has evolved into one primarily concerned with growth and survival. While that may be a matter of degree, it is not insignificant.
Gruneberg and Francis argue contracting markets compete profits down to the point firms cannot invest in productivity improvements, the outcomes of a business model that tends to focus on the volatility of demand and managing risk at the expense of improving efficiency. Construction firms operate in an industry Gruneberg and Francis describe as ‘a highly fragmented project-based industry, with very low profit margins and a high risk of failure for the many firms operating in a very complex supply chain’. This is a widely held view, however many large construction firms are over 50 years old and there are significant barriers to entry for major projects. It is an industry with a majority of small firms and relatively few large multinational contractors and manufacturers, some of which have substantial bargaining power in the supply chain.
In the last two chapters they point to an emerging field of research on the economics of construction projects, combining project financial and feasibility studies with procurement strategies, using research applying transaction cost economics to construction. The book is an outstanding example of CE research as the application of economic principles to construction. It combines industry specific knowledge with insights from economic reasoning and shows how those insights improve our understanding of the industry.
Myers, D. 2022. Construction Economics: A new approach (5th ed.) Routledge
Danny Myers Construction Economics: A new approach is intended for undergraduate students in construction and other built environment courses who have a single economics subject included in the course. The new approach is sustainability. Although UK-centric, this is a readable and accessible introductory textbook that has a bit of everything.
It starts with the fundamentals of economic theory on firms and markets, and then analyses competition, demand, tendering, costs and prices. The main micro, macro and industry economics topics are covered, and the relevance to construction is maintained through breakout boxes with short examples and case studies from construction throughout the book, which are a feature.
Myers emphasises environmental issues and sustainability, and this is another one of the reasons for its success as these topics have become embedded in university curricula. The book is now in its fifth edition, which is I think another milestone in CE, and Danny Myers is to be congratulated on the achievement.
de Valence G. 2022. Creative Destruction and Constructing the Built Environment: From the first industrial revolution to the fourth, CER
This is my book about technological change, general purpose technologies (like steam power, IT and AI), and construction since 1800. Because I can set the price it is cheap, not expensive, and available from Amazon. The Introduction can be read here.
Creative destruction is the effect of technological progress on the economy as, over time, new technologies bring new industries and products to challenge established industries. Innovation and technology have restructured construction of the built environment in the past, and today powerful new technologies like digital twins, AI and 3D printing are leaving their development stage and finding their way into the design and delivery of buildings and structures. The book argues it might take a decade or more for these technologies to become central to construction of the built environment, but the development path taken will be distinct and different from the path taken in other industries. This path dependence varies from both industry to industry and between firms within industries.
Publishers’ Pages
Best, R. and Meikle, J. (eds.) 2023. Describing Construction: Industries, projects and firms, Taylor and Francis.
Best, R. and Meikle, J. (eds.) 2919. Accounting for Construction: Frameworks, productivity, cost and performance, Taylor & Francis.
Best, R. and Meikle, J. (eds.) 2015. Measuring Construction: Prices, Output and Productivity, Taylor & Francis.
Brockmann, C. 2023. Construction Microeconomics, Wiley Blackwell.
https://www.wiley.com/en-ie/Construction+Microeconomics-p-9781119831938
de Valence G. 2022. Creative Destruction and Constructing the Built Environment: From the first industrial revolution to the fourth, CER.
https://www.constructioneconomicsresearch.com/creative-destruction-book
Gruneberg, S. (ed.) 2019. Global Construction Data, Taylor & Francis.
https://www.routledge.com/Global-Construction-Data/Gruneberg/p/book/9781032177472
Gruneberg, S. and Francis, N. 2019. Economics of Construction, Agenda Publishing.
Myers, D. 2022. Construction Economics: A new approach (5th ed.) Routledge.
https://www.routledge.com/Construction-Economics-A-New-Approach/Myers/p/book/9781032262611
Ofori, G. (ed.) 2022. Research Companion to Construction Economics, Edward Elgar.
https://www.e-elgar.com/shop/gbp/research-companion-to-construction-economics-9781839108228.html
No comments:
Post a Comment
Thank you for your comment and for reading the blog. I hope you find it interesting and useful. If you would like to subscribe the best way is through Substack here:
https://gerarddevalence.substack.com
Thank you
Gerard