Freeman

ARTICLE

Aviation, People, and Incentives

Incentives and Competition Create Progress

DECEMBER 01, 2003 by RALPH HOOD

Ralph Hood is a pilot, a member of the Alabama Aviation Hall of Fame, and a writer in Huntsville, Alabama.

An economist once said that economics can be summed up in four words—“people react to incentives.” Yes, and competition speeds the process.

Incentives and competition working together generate money, effort, and progress. This has been particularly true during the last hundred years—which is also the first hundred years this month—of powered flight.

The entire world knows that Charles Lindbergh flew from New York to Paris in 1927. But how many can tell you what role Raymond Orteig played in Lindbergh’s flight?

Raymond Orteig was the New York hotelier who created the Orteig Prize in 1919, offering $25,000 to the first person to fly nonstop between New York and Paris. This prize—a fortune at the time—and the resultant competition created a frenzy of activity, investment, effort, and progress.

With the prize as a carrot, Charles Lindbergh attracted investors and had the Spirit of St. Louis (named after his St. Louis investors) built by Ryan Aircraft. (He first sought a Bellanca aircraft, but Giuseppe Bellanca said he would build it only if he himself could select the pilot. No way was he going to risk his reputation on an unknown pilot like Lindbergh. Lindbergh took his money to Ryan; they built the Spirit of St. Louis, and one wonders if Giuseppe cursed his decision for the remainder of his long life.)

The rest is history. Lindbergh made the flight, won the prize, and became more famous than Elvis ever got. My mother—a gaga-eyed 16 years old at the time—took a picture of Lindbergh and the Spirit later in 1927, and that picture hangs in my home today.

Other incentives brought money, effort, and progress to aviation. Anyone who has ever seen a floatplane or flying boat can tell you they tend to be bulky, heavy, and slow. A person setting out to build a racing airplane would not choose a floatplane. It is a fact, though, that from 1914 to 1931 some of the world’s fastest airplanes were floatplanes. In fact, the first airplane to go 400 miles per hour was a floatplane, and the great English fighter plane, the Spitfire, was derived from that floatplane.

How can this be explained? It all came about because of the Schneider Trophy for the winner of an annual floatplane race. The trophy came with cash, and competition quickly turned the race into a worldwide contest. No less a pilot than Jimmy Doolittle won in 1924. The Italians were strong competitors and winners, and the British—with that 400-mph floatplane—won the final race in 1931.

One of the greatest achievements of all time took place in 1986 when the Voyager flew around the world nonstop without refueling. Built by businessman Burt Rutan and flown by his brother Dick Rutan with Jeana Yeager, the Voyager was a private effort in successful pursuit of the prestigious Collier Trophy. (Dick Rutan is a friend, and he later went after the big prize for the first around-the-world balloon flight. He didn’t get out of the county before the balloon ripped and he parachuted into a cactus patch.)

Lest you think the day of the prize in aviation is over, the big one now is $10,000,000 for the first private spacecraft to launch into space, return, and do it again within two weeks. Burt Rutan, like Lindbergh in 1927, has found all the private investors he needs, and is shooting for the prize in an all-new aircraft. Will he make it? I wouldn’t bet against him even though, as is usual with big prizes, there is competition.

The Wright Brothers themselves were after the big prize of success in the marketplace. Anyone who doubts that should study the Wrights’ years of lawsuits to protect their patents.

True Free Enterprise

These big prizes—and we haven’t even touched on the annual American races for the Bendix and Thompson prizes—represent free enterprise in the truest form. The prize goes to the winner only. As in the marketplace, those who try and fail get nothing; thus effort and investment are generated far in excess of the cost of the prize. It has been estimated, for example, that more than $400,000 was spent in competing efforts to win the $25,000 Orteig Prize.

The best prizes dictate the goal, not the method. Orteig dictated neither the number of engines nor the number of pilots for the flight to Paris. Most competitors chose to fly with multiple engines and pilots. Lindbergh won with a simpler approach. The government today does it backward by dictating methods—such as the catalytic converter—thus in effect halting all development efforts on possibly superior alternatives.

People do react to incentives and competition in a free market. And it works.


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December 2003

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