Ricochet is the best place on the internet to discuss the issues of the day, either through commenting on posts or writing your own for our active and dynamic community in a fully moderated environment. In addition, the Ricochet Audio Network offers over 50 original podcasts with new episodes released every day.
We’ve already seen how SCUBA diving developed an astonishing record of safety and success free of governmental involvement. But what if government had regulated the industry from the beginning? Let’s contrast it with one where the government took on the role of safety guarantor: the recreational aircraft industry.
In that industry, the government forced manufacturers of recreational aircraft to meet very high regulatory standards. Not only do the aircraft themselves have to go through millions of dollars in design reviews and tests, but the manufacturing lines they are built on must be documented and certified. This makes changes to production methods and aircraft designs extremely expensive. Aircraft that eventually meet these stringent requirements and pass the government tests are given “type certificates” — very rare and valuable things.
This regulatory lock-in of manufacturing processes and aircraft design killed innovation in light aircraft. It was too expensive to make wholesale changes to aircraft designs as new materials and better production processes were developed.
After a boom in private aircraft sales from the 1950s to the 1970s, stagnation set in. A 1970 Cessna 172 looked and flew pretty much like a 1960 Cessna 172. The engines in these planes remained almost entirely unchanged since their original designs in the first half of the 20th century. It was just too expensive to attempt to certify a new engine for marginal improvements. But over time, marginal improvements add up, and that’s what keeps other industries fresh and innovative. That didn’t happen in civil aviation. As a result, the market for new aircraft had to compete with the growing number of virtually identical used aircraft. As sales dropped, a death spiral set in; lower quantities of scale drove up the unit cost of new aircraft, making them even less competitive.
In the auto industry, the way to avoid competing against older models is to innovate and produce new models regularly. The aviation industry couldn’t do that because government regulations froze the designs in place.
To the left is a 1963 Cessna 172. The company made 1,146 of them that year. New, it cost $9,895, or $77,063 in 2015 dollars. Then, as now, it was about the price of a high-end luxury car, or perhaps a year’s salary for an average professional. Premium used models sell for less than that today.
The lower photo is a 2014 Cessna 172. It costs about $400,000. Only the very well-off can afford one, and Cessna only made 155 of them.
The performance specifications of both models are almost identical despite a half century of technological explosion between them. They both use Lycoming engines with only minor tweaks over the decades (by 1968, the 172 had virtually the same engine that’s in the modern 172). That engine was first used in an aircraft in 1955. Only a real enthusiast can spot the differences between the 1963 and 2015 models — they are virtually the same.
In contrast, here’s what the well-dressed SCUBA diver wore in 1963. The “Aquamaster” regulator he’s wearing cost $90, or the equivalent of $700 in 2015 dollars. (Note: Even if you’d swim a mile for a Camel, don’t smoke while doing it…)
Here’s what a modern diver looks like. This diver is wearing the standard setup – a single-hose regulator much superior to the original double-hose regulator Camel guy is wearing, plus an “octopus” rig (a backup regulator for safety), a BCD (Buoyancy Control Device), several dive computers (one is all you need), and other modern gear. All of it much, much better than what was available in 1963 – and much less expensive. A regulator can be had for under $200, and entire dive setups including regulator, mask, fins, BCD, and other accessories can be had for under $1000. And of course, there is a worldwide network of dive shops that will rent all of this to you for less than $100 per day.
Back to aviation for a moment. Surely all that regulation was necessary? Airplanes are just way too complicated and inherently dangerous to be allowed to fly without government regulating their quality, aren’t they?
As it turns out, we have another good comparison. At the same time government was killing the commercial manufacturers with regulations, they allowed for an “experimental” aircraft category for homebuilt aircraft which required that the owner build at least 51 percent of the aircraft himself. Such aircraft are exempt from type certification, production rules, and the like.
So we have two parallel aircraft development economies: one in which the design and production is rigidly controlled by the government, and one in which anyone can build an airplane of any type in their garage and attempt to fly it. Surely, such airplanes must be horribly dangerous! Well… Here’s what the data shows:
Studies by FAA and the National Transportation Safety Board (NTSB) show that Amateur-Built/Homebuilt aircraft have an accident rate less than one percentage point higher than the general aviation fleet. In fact, the accident rate for Amateur-Built/homebuilt aircraft is dropping. The total number of registered homebuilt aircraft is increasing by about 1,000 per year, while the total number of accidents has stayed virtually the same. Another good barometer of safety is insurance rates. Companies that insure both homebuilts and production aircraft charge about the same rates for owners of either type of airplane. That indicates a similar level of risk.
The regulated industry is stagnant and dying. The unregulated homebuilt industry is thriving and growing, and is the source of many innovations such as composite aircraft structures and ballistic parachutes. Belatedly, the government responded by creating new “recreational” certification categories for aircraft and pilot licenses, but it may be too late.
Remember that 2014 Cessna 172 with its 50-year-old airframe? Here’s what modern aircraft in the unregulated homebuilt industry look like:
Both of those are much faster than the Cessna, more fuel efficient, have longer ranges, and are a fraction of the Cessna’s cost. Burt Rutan took the experience from building composite homebuilt aircraft and created the first private spaceship. Other employees have gone on to build rocket planes and other space companies.
The SCUBA and homebuilt aircraft industries provide excellent examples of the difference between government regulation and the free market. One leads to stagnation and higher costs, while the other is driven by innovation which drives down prices, increases safety, and grows markets. Oh, and it leaves people free to make their own choices.