an engineering production relation To achieve the desired level of the engineering variables requires the economic inputs (2) = Z=G7(w),...,wj). Take the level of the economic inputs X, Y, and Z as fixed. Then choose the engineering variables to make the best use of the economic inputs. Thus, maximize final output Q subject to the three input relationships with fixed input levels: maxH(w) subject to = GX(w), Y=GY(w), and G2(w). Networks in Telecommunications The solution is a vector of engineering variables that depends on the levels of the economic inputs, w* = w* (X, Y, Z). Now, substitute this solution into the engineering production relationship to obtain an economic production function: Q=H(w*(X,Y,Z))=F(X,Y,Z). The economic production function includes the necessary information about the underlying engineering production relationships. 8 The connection between the underlying network and the output of services depends on engineering relationships. Chenery long ago suggested that under- standing the engineer's problem was a useful guide to the use of engineering data in economics. Chenery observed that in order to use engineering data it was nec- essary to "go back to the intermediate stage in engineering calculations at which the possibilities of using various types of inputs are considered" (Chenery 1949, p. 510). The construction, operation, and maintenance of a transportation or transmis- sion network involve complex engineering processes. Telecommunications, electric power, and natural gas network systems require sophisticated designs, construc- tion methods, and operating procedures. These important and difficult aspects of creating network services are implicit in the economic production functions of networks. This does not mean policymakers can go straight to the production func- tions and ignore the engineering relationships. It is also not our contention that regulators should become engineers as well as economists (not to mention attor- neys). Rather, we suggest that regulations that change input-ou