Developments in Construction Economics
Some Recent Books
Issues around the measurement, structure and performance of the building and construction industry, and its relationship with the economy and manufacturing, professional services and materials industries, have become the focus of CE in a series of books published since 2008. The contributions developed topics identified within the scope of CE in previous work, but they ranged widely and have consolidated the boundaries of CE while continuing to introduce ideas from elsewhere in economics.
For example, the six books have contributions on the activities of large, international contractors that dominate the global construction industry, a topic that has been, and is, of continuing interest. However, the global perspective in these books, while not new, marked another expansion of the topics and issues addressed, to include developments in market analysis, contractor strategies and in particular international cost comparisons and construction data. The following summary of the topics covered in the books illustrates the scope of CE research and current areas of interest.
The first two books ranged across practical, empirical and theoretical topics. In Economics for the Modern Built Environment (Ruddock 2008) seven contributions were on macroeconomic topics such as the economic effects of capital formation and investment, using construction statistics. There were five studies of markets and contractors, with three contributors emphasising the increasing divergence between global firms and local markets and two country case studies. The book brought a great deal of data together, and updated previous work in empirical CE on measuring construction activity and the broad construction industry. Modern Construction Economics: Theory and application (de Valence 2011) took an industry economics/industrial organization approach with contributions on market structure and competition, auctions and innovation. There were two on production theory and three others on methodology and experimental methods. Three of the contributions directly attacked the model of perfectly competitive markets with price taking firms, arguing construction markets can be concentrated and oligopolistic.
Between them the two books covered many of the topics and techniques established in Period 2, and they carried on earlier debates over production theory and methodology. They included global and national research using macroeconomics, research based on industry economics, and case studies with managerial economics. Importantly, they consolidated the expansion of the focus of CE from the SIC construction industry and its activity and management, and made the case for CE being about the economics of the built environment. Bridging the gap between the urban scale of the built environment and new building and construction projects, which will typically only deliver a few percent of the total stock each year, has always been a fundamental challenge for CE.
In Measuring Construction: Prices, output and productivity, Best and Meikle (2015) put the focus on data quality and international comparisons of construction costs, raising issues in the collection and use of construction data. As their 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” (p. 1). The twelve contributions covered measurement of construction work, productivity and prices at the global, national, industry and project levels. 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.’ (p. 256). A multiple models approach is indeed required to tackle the ‘various problems’ with construction data.
In Accounting for Construction: Frameworks, productivity, cost and performance (Best and Meikle 2018), the dozen contributions looked at different ways of measuring construction. With chapters on construction statistics, productivity, costs and data, the book both reviewed and extended previous studies. An ‘important thread’ in the book was “the lack of consistency in the way construction industry data is collected and how it is aggregated and/or disaggregated” (p. xiii). This thread became the focus of the next book in the series, Global Construction Data (Gruneberg 2019). The ten contributions included three on construction statistics, four used cost data, and the other three covered innovation, architectural services and international contractors’ make-buy decisions. In the title the book made explicit this important agenda 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. Those shortcomings are also a major theme in Best and Meikle (2015, 2018).
The sixth book in the series is Gruneberg and Francis’ The Economics of Construction (2019). They provide “a game theory account of the behaviour of firms”, the approach typically taken in other branches of industry economics. They discuss aspects of firms’ business models, financing, contractual disputes and power relations at length. A feature is the use of case studies of the collapse of UK contractor Carillion in 2018, Grenfell Tower, construction for the London Olympics and manufactured housing, demonstrating how the business environment a construction firm faces has become significantly more complex over the decades. The profit maximizing firm has evolved into one primarily concerned with growth and survival.
This work continues. The ElgarCompanion to CE Research and volume 3 in the measuring construction series, again edited by Best and Meikle, are due in 2021.
References Best, R. and Meikle, J. (eds.) 2019. Accounting for Construction: Frameworks, productivity, cost and performance, London: Taylor & Francis. Best, R, and Meikle, J. (eds.) 2015. Measuring Construction: Prices, Output and Productivity Abingdon: Routledge. de Valence, G. 2011. (ed.). Modern Construction Economics, London, Taylor and Francis. Gruneberg, S. (ed.) 2019. Global Construction Data, London: Taylor & Francis, Gruneberg, S. and Francis, N. 2019. The Economics of Construction, Ruddock, L. (ed.) 2008. Economics for the Modern Built Environment, London: Taylor and Francis.