Economics and Software Engineering:

Transdisciplinary Issues in Research and Education

Teresa Tharp
Valencia Community College
1800 Denn John Lane
Kissimmee, FL 34744, USA
teresatharp@hotmail.com

Janusz Zalewski
Computer Engineering
University of Central Florida
Orlando, FL 32816-2450, USA
jza@ece.engr.ucf.edu

Abstract when the method of research is shared by

multiple (two or more) disciplines. This is
This paper presents an approach to combine illustrated in Fig 1. Disciplines A and B conduct
efforts in Economics and Software Engineering, multidisciplinary research, and disciplines A and
in order to treat software development from the Z conduct interdisciplinary research. A similar
economics perspective. We define the term trans- model has been presented by Mahdjoubi, 2001.
disciplinary, in the context of multidisciplinary
and interdisciplinary research, and use it to derive
mutual relationships between Economics and
Software Engineering. Finally, we propose a
research agenda for connecting both disciplines
and enhancements in curricula to include topics of
mutual importance.

1. Introduction

In engineering disciplines, the concept of

transdisciplinary research and education has been
mostly explored in design and process science by
Ertas et al., 2000, in relation to their earlier work
on multidisciplinary (Jones et al., 1995) and
interdisciplinary (Tanik and Ertas, 1997) research.
The meaning of transdisciplinary research and
education, as used in the literature, is not
necessarily very clear. Multiple and sometimes
conflicting definitions do not contribute to good
understanding of the area. So, let us first define
the meaning of the basic terms as understood
throughout this paper.
Following Nicolescu, 1997, we understand
multidisciplinary research, as the situation when
the subject of research is shared by multiple
disciplines. Also following the same author, by
interdisciplinary research we mean the situation
Fig. 1. Illustration of multi- (sharing subjects) vs
interdisciplinary research (sharing methods).
Transdisciplinary research includes both concepts
mentioned above, but with a significant
extension. By transdisciplinary research, we
mean a situation when two or more methods are
mutually shared by relevant disciplines. For
example, method A from discipline A is adopted
by discipline Z, and at the same time (in the same
research) method Z from discipline Z is adopted
by discipline A, to study the same subject, as
illustrated in Fig. 2. This is mutual adoption or
exchange of methods and models. An essential
component of the meaning of the term
transdisciplinary research is "mutual".

More generally speaking, transdisciplinary
research pertains to the crossing of fields (for
example, those which are the subject of this
study: computing and economics; software
engineering and economics, etc.) in such a way
that both disciplines benefit from each other.
Once we have resolved the exact meaning of
"transdisciplinary research", then we'll be able to
talk about transdisciplinary education.
Fig. 2 Illustration of transdisciplinary reasearch.
The rest of this paper is organized as follows.
First, we present mutual relationships between
economics and software engineering, based on the
above understanding of transdisciplinary research.
Then we give a brief background of important
elements in both disciplines, and finally present
an agenda for joint research, involving both
disciplines, and their curriculum enhancement.
2. Software Engineering and Economics:
Transdisciplinary Relation
To study transdisciplinary relations between
Economics and Software Engineering, we have to
find common grounds between the two
disciplines. Sciences, whether natural or social
ones, always deal with discovery, but they spawn
applied disciplines, which deal with construction.
Every science has its own way of applying
discoveries into practice, for example, in the
technical fields:
- Chemistry, which deals with discovering
properties of matter, feeds Chemical
Engineering, which applies these principles
to construct chemical plants
- Mechanics, whose goal is discovering
principles of material objects, feeds
Mechanical Engineering, which applies these
principles to construct and build houses,
factories, roads, bridges, machinery, cars,
airplanes, ships and other vehicles
- Physics, which focuses on discovering
principles of matter at the submolecular level,
feeds Electrical Engineering, which applies
these principles to construct power plants,
appliances, radio stations, radio receivers,
telephones, TV sets, etc.
- Biology, which studies living organisms,
feeds Bioengineering, which applies these
discoveries to construct artificial organs, etc.
- Computer Science, which deals with
computations, feeds Computer Engineering,
which applies these discoveries to construct
computers, but also feeds Software
Engineering, which does apply respective
principles to construct software.
In this perspective, we may ask a question: what
would be the "extension" of Economics, so one
could say: Economics, a science which studies
production and distribution of goods feeds such
knowledge, which applies these principles in a
free market economy. We are looking for an
applied discipline, extending economics. If we
draw a simple diagram that illustrates the role of
applied disciplines growing out of basic research,
one could see Business as a discipline descendant
of Economics, where respective economic rules
are applied (Fig. 3).
Fig. 3. Relationship between basic disciplines and
their applied counterparts.
Every level of Fig. 3 needs some explanation.
The high-level relationship, depicted on this
diagram as a horizontal line between Computer
Science and Economics, involves sharing
scientific methods by both disciplines, one
example of which could be game theory. This
level of relation, however, is out of the scope of
this paper.
What we are mostly concerned about is direct
relations between Economics and Software
Engineering, which involve:
- those methods and models which are
transferred to and from Economics as a
science (depicted by a diagonal connection in
Fig. 3), and
- those techniques and tools, which are
transferred to Software Engineering from the
Business discipline as an applied Economics
(shown in Fig. 3 as a horizontal line
connecting both disciplines).
The former include principles and methods, such
as economic laws and equations. The latter
include subjects, such as job market, investments,
labor, etc. These relationships may occur at many
levels, for example:
- at a software company level, where software
engineers need to be prepared to deal with
economic and business issues
- at the software industry level, where there are
rules to be obeyed by companies from the
economics and business perspective.
In general, mutual relations between economics
and software engineering have been studied long
ago, beginning with the seminal work of B.
Boehm, 1981, and shortly following it the work
of W.L. Frank, 1983. Relevant issues are
summarized in Marciniak, 1994. This has not
been done, however, in the context of framework
of transdisciplinary research. To discover more
fundamental principles relating the two
disciplines, we present in the next section a brief
background on both.
3. Basic Issues
3.1 Economics. Economics is a social science
concerned with the study of how society chooses
to use and allocate scarce resources to satisfy its
unlimited wants. It analyzes the costs and
benefits of improving patterns of resource
allocation. Of interest to economics are topics
such as: production, distribution and exchange,
and consumption. This is briefly illustrated on a
block diagram in Fig. 4.
Focusing on production, there are three
fundamental questions economics, and every
society, must answer:
1. What products will be produced?
2. For whom will they be produced?
3. How will they be produced?
These questions lead us to the structural
components of a diagram as follows. By asking
the first question, we imply that there is a data
flow in the diagram. This could be, of course,
material flow, flow of ideas, etc., which is
represented by outcoming arrows. The second
question implies existence of other structural
elements (blocks), such as Consumption, that
interact with Production. Finally, the third
question implies that each block will have some
internal sequence of operations, which constitute
its overall activity. The latter is illustrated on a
diagram by an example of Distribution.
Fig. 4. Illustration of basic economic notions.
Having presented the basic diagram, let’s look at
each of these questions in some more details.
What to produce? If we are producing something,
for example, software, whoever is doing so must
take into consideration their available resources,
examples of which are: land, labor, capital (i.e.
physical plants, machinery, equipment),
entrepreneurial ability. Due to the limited
availability of resources, the best alternative
allocation of their use determines what is to be
produced; which in turn assist us on deciding
which product to make.
For whom to produce? Among all those desiring
the product, who actually receives it? This means
that in society there must be a method to decide
who will be able to afford the product and who
will not. It is in this area where the price system
comes into play. The price system is a
mechanism that uses the forces of supply and
demand to create an equilibrium through rising
and falling prices.

How to produce? In economics this question
refers to how to mix technology and scarce
resources in order to produce goods or services.
In this area a firm/industry must decide which
production technique to use in order to make their
products. They must answer the question whether
a production technique will be more or less
capital-intensive, labor-intensive, etc.
Understanding the basic activities and flow of
data, we can now concentrate on active elements,
participants in the economy. At the
microeconomics level, the individual units to
consider are represented by households and
businesses, possibly involving the government
activities, as illustrated in Fig. 5. From the
macroeconomics standpoint, we would have to
include definitely foreign markets, as well.
Fig. 5. Individual economic units.
A household consists of the occupants of a
housing (economic) unit such as an apartment or
a house. Their participation is important because
of the projection of consumer demand and
spending in goods and services (such as, software
programs).
A business or a firm is an organization designed
to purchase and bring together inputs in order to
produce goods and services. Includes sole
proprietorship, partnership, or corporation. A
meaningful number of privately owned
manufacturing or service businesses in a common
area are called an industry.
Microeconomics focuses on analyzing economic
variables such as the prices and outputs of
specific firms and industries, the expenditures of
consumers or households, wages, rates,
competition, and markets. Some of the questions
which could be addressed by microeconomics
include:
* What determines the price and output of
individual goods and services?
* What are the factors that determine supply and
demand of a particular good?
* How do government policies such as price
control, subsidies, and excise taxes affect the
price and output levels of individual markets?
The above is a generalization of microeconomics
for the purpose of this paper. Many more detailed
questions are addressed in textbooks, such as
Tucker, 2000.
3.2. Software Engineering. Software
Engineering is the application of a systematic,
disciplined, quantifiable approach to the
development, operation, and maintenance of
software (Marciniak, 1994). The development
process is usually described in terms of individual
activities or phases, the sequence of which leads
to the development of a final products.
Fig. 6 illustrates the software development
process in a simplified diagram. The core
activities involve requirements specification,
design, implementation, testing, and installation
and operation embraced by project management,
during the development process, and by
maintenance after the development. Multiple
other activities are conducted, not listed on the
diagram, such as: configuration management,
quality control, verification and validation,
training, etc.
The development process is usually conducted by
software engineers at the technical level only.
Questions asked are at best related to the precise
methods of specifying requirements, optimal
methods of designing software components which
meet these requirements, best programming
languages and operating systems, as well as
respective practices to code the designs, and
appropriate testing methods to prove that software
has as few defects as possible.
At the project management level, questions asked
are more general. For example, a manager is
always concerned about issues such as developing
software products on schedule, meeting the
budget, personnel qualifications and fluctuations,
tool support, etc.

Fig. 6. Simplified view of the software
development process.
However, even at the management level,
questions such as the following are hardly asked:
- What is the market demand for this software
product?
- Who are the potential customers and what is
their user profile?
- What is the current job market for specialists
fluent in this type of software development?
- What is the turnaround rate of employees in this
particular area?
Questions like this are addressed very rarely, if at
all, at the project management level. This does
not mean, however, that software engineers or
project managers should not be aware of
respective issues.
4. Where Do Software Engineering and
Economics Meet?
In a search for more specific mutual relations
between Software Engineering and Economics,
we have to take now a look back at Fig. 3 and ask
a question, how would we apply economics
methods to the production process of software?
From Fig. 3, it becomes clear that there are two
basic paths to Software Engineering: direct path
from Economics, and indirect path through
Business. Let’s first analyze the direct path,
which is defined by the research relationships
between Economics and Software Engineering.
The primary functions of economists are to
conduct research and analyze the economic
phenomena, and to formulate policies.
Economists apply statistics to be used to test the
validity of economic theory and to measure the
responsiveness of economic variables, which may
affect either positively and/or negatively the
demand for software. Thus, economists may
work hand-in-hand with software engineers on
software development by utilizing economic
theory regarding specifics of software
development.
Another mean in which software engineers and
economists could converge is in the use of
successful development of software using
econometrics. Econometrics is economic
measurement and deals with the quantitative
evaluation and analysis of actual economic and
business phenomena. Econometrics attempts to
quantify economic reality and bridge the gap
between the worlds of economic theory and actual
business activities, such as software development.
One other way of bringing the two disciplines
together is to use optimization, for example, to
determine optimal allocation of resources in
production processes to meet the prescribed goals
of consumption. This would be particularly useful
in the development of single quantities of
software, a case not rare in a real world,
especially in software development for the
government, but ignored thus far in economics.
Economic theories, such as the above, can be
applied to quantify various resources to deliver a
product: manpower, tools, budget, timescale, etc.
In particular, it could be assessed, what are the
potential risks related to developing a particular
product or using a particular development
process.
Issues mentioned above connect the two
disciplines at the research level. At the practical
level, related to the operation of Business,
Economics and Software Engineering can
mutually assist each other in studying issues such
as those:
- software as a product
- software production process
- job market for software engineers
- software industry.
As a sample framework for such studies, we can
consider placing the software development
process in the context of economic processes,
which is illustrated in Fig. 7. A box marked
Engineering embodies both Development and
Production of Software, which may be considered
separately. Economic processes, as sketched
roughly in Fig. 4, are split here into two,
Marketing and Distribution, while another
software process is added, called Maintenance.
Fig. 7. Software development process (shown as
engineering) as a part of an economic process.
With these processes in the picture (adding more,
if necessary, and connecting them properly), we
can define variables describing items exchanged
between the blocks representing various
activities/processes. Such variables should
include those, which correspond to basic
economic indicators, including: demand,
investment, staffing, tools, services, salaries,
spending, prices, etc. Having the variables, their
flow and ranges defined, we are able to apply
economic principles in modeling the software
development process by a computer.
5. Conclusion
We presented a framework for transdisciplinary
research in Economics and Software Engineering,
which can be applied in education for the benefit
of both disciplines. The primary relationships
between these disciplines involve:
- direct use of mutually complementary
research methods, such as assessment of
economic variables, use of econometric
measures, and optimization, applied to
software development at the company and at
the software industry level;
- indirect application of economic principles in
business practice, by modeling the software
development process in the context of
economic processes and activities.
Transdisciplinary education pertains to the
crossing of both fields and would involve
introducing, into the respective curricula, the
notions of mutual importance. Examples of those
would be a concept of markets and related issues
introduced to the Software Engineering
education, and a concept of software process
introduced into the Economics curriculum.
6. References
Boehm B.W., 1981, Software Engineering
Economics, Prentice Hall, Englewood Cliffs, NJ
Ertas A., Tanik M.M., Maxwell T.T, 2000,
“Transdisciplinary Engineering Education and
Research Model”, Transactions of the SDPS, Vol.
4, No. 4, pp. 1-11.
Frank W.L., 1983, Critical Issues in Software:
A Guide to Software Economics, Strategy and
Profitability, John Wiley and Sons, New York
Mahdjoubi D., “Interdisciplinary Study on
Knowledge and Innovation Strategy”, 2nd
Workshop on Global Transdisciplinary
Education, Research and Training, Pasadena,
Calif., June 11-13, 2001
Marciniak J.J. (Ed.), 1994, Encyclopedia of
Software Engineering, John Wiley and Sons, New
York
Nicolescu B., 1997, “The Transdisciplinary
Education of the University: Conditions for
Sustainable Development”, Int’l Congress on
Universities’ Responsibilities to Society,
Bangkok, Thailand, November 12-14, 1997, URL
http://perso.club-internet.fr/nicol/ciret
/bulletin/b12/b12c8.htm
Tanik M.M., Ertas A., 1997, “Inter-
disciplinary Design and Process Science: A
Discourse on Scientific Method for the
Information Age”, Transactions of the SDPS,
Vol. 1, No. 1, pp. 76-94
Tucker I.B., 2000, Economics for Today.
Second Edition, South-Western College
Publishing, Cincinnati, Ohio