Response to Thomas Boyle
By David Henderson
In 1947, the airplane [the Piper Cub] sold for $2,400, or about $25,000 adjusted for inflation to today. In 2010, the modern equivalent, built in America, sold for approx. $120,000. The engine alone (a mass-manufactured component) now costs approx. $18,000 today.
The (depressingly few) sport pilots of today wonder how this happened – and what can be done to fix it…
Good and, I agree, depressing counterexample, Mr. Boyle.
As it turns out, we do have a pretty good idea about how this happened and what can be done to fix it. Here’s what economist W. Kip Viscusi wrote about the issue in his opening paragraph of his article, “Liability,” in The Concise Encyclopedia of Economics, edited by yours truly.
Until the 1980s, property and liability insurance was a small cost of doing business. But the substantial expansion in what legally constitutes liability has greatly increased the cost of liability insurance for personal injuries. The plight of the U.S. private aircraft industry illustrates the extent of these liability costs. Although accident rates for general aviation and for small aircraft declined steadily, liability costs for the industry soared, so that by the 1990s the U.S. private aircraft industry had all but ceased production. These substantial costs arose because accident victims or their survivors began to sue aircraft companies in 90 percent of all crashes, even though pilot error is responsible for 85 percent of all accidents. Only after Congress exempted planes older than eighteen years from liability by passing the General Aviation Revitalization Act of 1994 did the industry begin to increase production. Still, output is well below its level before the rise in liability costs. In 1978, 17,811 new U.S.-manufactured general aviation airplanes were shipped, but by 1994 this amount had plummeted to 928. Though shipments have since rebounded to 2,137 airplanes in 2003, that amount is still well below the peak production years.