Mr, Semmens is an economist for the Arizona Department of Transportation, The views expressed here are those of the author and do not necessarily reflect Departmental policy.
Mr. Wolfe is co-author of Aviation Industry Regulation, a recently published text in the field of air transportation.
How the profit motive promotes safety.
More than 1900 people died in airline crashes in 1985. This “worst year” in civil aviation history has spawned strident demands for reregulation and more government involvement in the airline industry. The notion that government involvement assures safety should have been eliminated by the Challenger Space Shuttle tragedy. The Space Shuttle program is a totally government controlled, multi-billion dollar undertaking. If bureaucracy and big spending could guarantee safety, this tragedy would not have happened.
Contrary to much of the current discussion which hints at the modest reduction of government controls over the airline industry as the source of increased accidents, the history of aviation demonstrates that government has more frequently created problems than solved them. The rather sorry record of government’s role in aviation began before the first aircraft got off the ground.
As nearly everyone knows, the Wright brothers invented the first controllable airplane. Many people may be vaguely aware that this feat was accomplished without benefit of Federal aid. Few, however, are aware that government-funded efforts to develop a heavier-than-air flying machine prior to the Wright brothers’ venture were a total failure.
In the period preceding the December 17, 1903 Wright brothers’ triumph at Kitty Hawk, North Carolina, the U.S. government spent $70,000 on a grant to Dr. Samuel Langley to develop a heavier-than-air flying machine. The award of this grant followed standard bureaucratic procedures. Dr. Langley, director of the Smithsonian Institution, was one of the most renowned scientists of the time. When Dr. Langley became interested in investigating flight he was able to marshal tremendous technical and financial resources.
The selection of Langley as the recipient of government funding was technically unassailable. It was the type of decision that a well motivated government bureaucracy would make time and again. The credentials were impressive. The funding was more than adequate. Yet, despite the head start and more lavish budget enjoyed by Dr. Langley, it was the Wrights who succeeded.
On October 7, 1903, the aircraft developed by Dr. Langley’s team was deemed ready for a test flight. The aircraft was to be launched from a catapult on a houseboat in the Potomac River, with Charles Manly serving as pilot. Excitement filled the air as the houseboat reached the launch site. A large crowd gathered, fireworks were set off, and newspapermen jockeyed for position in the hope of witnessing the momentous occasion of man’s first flight.
Hopes were raised and hearts quickened as the aircraft’s engine roared to life. At full throttle the craft was released from restraint and lunged along the catapult track toward launch. A few seconds of glorious acceleration were followed by an unceremonious plunge into the Potomac by the would-be airplane.
The pilot and aircraft were salvaged and preparations were made for another flight. On December 8, 1903, with diminished fanfare, another test flight was attempted. Unfortunately the aircraft became entangled in the launching mechanism, was severely damaged, and toppled into the river.
Little more than a week later the Wright brothers successfully flew a heavier-than-air machine. Disappointed at being bested in the effort to develop an airplane, Dr. Langley, in a fashion that has come to characterize the persistent failure of government undertakings, laid much of the blame on “inadequate” Federal funding.
While Dr. Langley was engaged in epitomizing the typical government approach to problem solving, two young entrepreneurs were experimenting with their own airplane. The Wright brothers had no Federal money to support their research. Instead they used $2,000 of the money they earned from their bicycle business to develop their flyer. They worked on the flyer in their spare time while managing their bicycle shop. On numerous occasions the Wright brothers actually refused financial assistance from private contributors for fear that it would take them away from their business and make them complacent. Wilbur Wright told his father that the demands of his business forced him to be more cautious about the use of his time, and to carry out his experiments in the most expeditious manner possible.
Conserving Limited Resources
If lavish Federal subsidies had been unable to buy Dr. Langley success, what chance would the Wright brothers’ unfunded venture expect to have? Surprisingly, their chances were a lot better than might be imagined. Freed from the subsidy-induced waste and indolence that plagues government funded operations, the Wright brothers’ limited financial resources actually contributed to their success. Because they could not afford the costs associated with repeated flight tests of their airplane, they developed a wind tunnel to test aerodynamic designs. This saved them a great deal of time. The Wright brothers were the first men to compile data from which an airplane could be designed. With limited finances, it was far easier to correct errors on paper than to continually rebuild a test model that was improperly designed.
The Wright brothers’ use of the wind tunnel not only saved them time, but also their lives. Other airmen of the day were quick to flight-test inoperable aircraft, and lost their lives in the process. Orville and Wilbur Wright, on the other hand, did not believe in taking unnecessary risks. Wilbur Wright conducted his glider flights close to the ground in case an accident occurred. He didn’t want to get hurt since a fall would interrupt his experimenting.
On December 17, 1903, only nine days after Langley’s unsuccessful venture on the Potomac, the Wright brothers successfully launched their flyer from the dunes of Kitty Hawk, North Carolina. The longest flight lasted 59 seconds, traveled 852 feet, and ushered in the era of manned flight.
The contrast between the efforts of Dr. Samuel Langley and the Wright brothers is thought-provoking. Orville and Wilbur Wright spent $2,000 of their own funds and succeeded. Dr. Langley spent $70,000 in Federal funds and failed. Why were the Wright brothers successful, especially when they spent far less money than their government counterparts?
The Pursuit of Profit
The answer lies in part in the motivating force behind the Wright brothers’ and Langley’s efforts. The Wright brothers were motivated by the pursuit of profit. Langley was attempting to advance the “public welfare.” While the profit motive suffers much derision at the hands of the economically ignorant, it is mankind’s best known means of promoting productive use of resources. In contrast, the use of collective force in the name of altruistic goals has compiled a sorry record of waste, stagnation, and oppression.
The profit motive caused the Wright brothers to place a premium on minimizing the costs of their experiments, eliminating waste, and making the best use of their time. Langley, as a beneficiary of Federal largesse, had no real incentive to minimize his costs. In fact, the mark of success for a government research program is often measured in terms of the amount of money expended on the effort.
A few examples of the contrasting attitudes toward incurring expenses are indicative. No government undertaking can be expected to function without a staff of administrators. Dr. Langley, naturally, hired such a staff. The Wright brothers conducted their own research and hired no administrators. Dr. Langley spent a considerable sum on his houseboat launch facilities. The Wright brothers launched their airplane from a 60-foot track that cost $4 to construct.
It wasn’t only the profit motive that made the Wrights cautious about the expenditure of funds. It was the fact that they were using their own money. People will be more careful when they are spending or investing their own hard-earned wealth. Wasting the “free money” from government grants is a lot easier. Using their own funds inspired the Wright brothers to be much more systematic in their experiments. For example, the Wrights perfected their aircraft’s control system through hundreds of glider flights before they ever affixed a motor to the contrivance. Langley, on the other hand, attempted to master control over the machine and powered flight simultaneously.
Another reason that the Wright brothers’ decision to use their own money contributed to their success was that it enabled them to maintain their independence. When money is bestowed, there are generally conditions attached. Many times, scientific curiosity must be sacrificed to fulfill the expectations of the government bureaucracy. Many of the unconventional theories and experiments carried out by the Wright brothers might never have been tolerated if they had been conducted under the eye of government administrators.
The sorry results of its early attempt to promote aviation have not deterred government from subsequent meddling. Effective utilization of the technology of air travel is still retarded by government ownership and operation of the air traffic control network and the vast majority of airports. In addition to this direct interference, government imposes complicated regulations on air carrier operations.
These continued interventions of government in the aviation industry create red tape and divert scarce resources from more productive uses. Airlines, instead of being able to focus on efficiently providing air transportation, are forced to adhere to rigid bureaucratic rules.
Recent problems with airline safety, contrary to much of the media debate, have nothing to do with the 1978 deregulation of air routes and fare. Few media accounts accurately portray precisely what was and wasn’t deregulated. Safety regulation was not changed by the 1978 Act. Any deficiencies in the area of airline safety are deficiencies under the continued government regulation of safety.
Fares, Routes, Safety
Let us compare the relative performances of the airline industry in the categories that were deregulated vs. those that were not. The deregulation of fares brought lower prices for consumers. The deregulation of routes brought more frequent and convenient service. It is safety—the one key aspect of air service that was retained under governmental authority—that appears to be underperforming.
This comparison of relative performances of fares and convenience (both deregulated) vs. safety (regulated) supports a conclusion directly opposite to that which is currently touted in fashionable circles. Namely, it is clear that discarding the benefits of deregulation by reintroducing government controls over fares and routes would do nothing for airline safety. To the contrary, it is becoming more obvious that the 1978 deregulation did not go far enough. If safety were also de-regulated we would have the opportunity to enjoy the same kind of improved results that we’ve seen in fares and schedules.
Proponents of expanded government controls and coercion as the only reliable approach to improved safety scoff at the idea that a profit-hungry industry could monitor its own safety. But as we have seen from the earliest example contrasting public sector and private sector approaches, pursuit of profit is not in conflict with promotion of safety. After all, it was the non-profit motivated, government-funded Langley plane that crashed. It was the profit-seeking, privately funded Wright plane that safely achieved man’s first flight.
That the profit motive would be a more effective means of promoting safety than an army of bureaucrats should be self-evident. Crashes cost money and drive up operating expenses—either to pay for damage and its consequences or to pay insurance premiums that will rise with a poor safety record. Crashes also disrupt business and scare away passengers. Profits will be hurt by either rising expenses or falling passenger revenues. Obviously, then, profit-seeking airlines have very strong economic incentives to conduct safe operations.
If we are to learn a lesson from the “worst year” in aviation history, let it be the right lesson. The air disasters of 1985 are evidence for less, not more, government involvement in aviation.