What we see in both software development and military operations is a tendency for the pendulum to swing back and forth between extremes. Yet in most… - Barry Boehm

The dictionary defines "economics" as "a social science concerned chiefly with description and analysis of the production, distribution, and consumption of goods and services." Here is another definition of economics which I think is more helpful in explaining how economics relates to software engineering.

Agile development methodologies promise higher customer satisfaction, lower defect rates, faster development times and a solution to rapidly changing requirements. Plan-driven approaches promise predictability, stability, and high assurance. However, both approaches have shortcomings that, if left unaddressed, can lead to project failure. The challenge is to balance the two approaches to take advantage of their strengths and compensate for their weaknesses.

Success in all types of organization depends increasingly on the development of customized software solutions, yet more than half of software projects now in the works will exceed both their schedules and their budgets by more than 50%.