An economist can go on a winter break to Hawaii, but they can’t shut their brain off. So here are some observations from an obsessive-compulsive econ prof.

Flying has gotten relatively cheaper

People note rising prices, as for eggs, but they tend not to note specific items for which prices have risen much less than average. Air travel is one. Round trip tickets from MSP to Hawaii now cost about $900. Compare that with May 1968, when the Army had sent me to the wrong language school. I was in Monterey, Calif., and needed to report to Washington, D.C., in 36 hours. A coach full-fare ticket to Dulles International from San Francisco cost $362. Adjust that by the Consumer Price Index and the December 2024 equivalent is $3,338.

Yet Expedia lists several direct flights at $449. In inflation-adjusted terms, the fare has fallen by over 85% from 1968 inflation-adjusted prices. Some of that is due to bigger, more fuel-efficient planes. Some is economies of scale and technology like on-line booking. Deregulation of transportation routes and fares by the Carter administration was the big change, making air travel accessible for most households.

Technology improves over time

Flying out to Hawaii, I spent much of the time window gazing at the intake end of an engine on our Airbus A-320. It was a CFM56-5B, one variation of a widely used engine manufactured as a joint venture between General Electric and a French firm. It was not surprising that it kept on droning flawlessly. Modern turbofan engines on commercial airliners are extremely reliable.

That was not always the case. In 1939, when Pan American Airways first started flying from the U.S. to Europe using four-engine Boeing Clipper flying boats, each of the 14-cylinder Wright piston engines was torn down and reassembled after every round trip. A total of 3,400 person-hours of total maintenance time on all systems of one plane was needed to move about 50 passengers plus much mail each way.

In contrast, the turbofans on jetliners today often operate from 8,000 to as much as 30,000 or more “flight cycles” between overhauls, each cycle being one takeoff and one landing. For the ones on our Delta plane, the average is about 20,000 and total hours, rather than cycles, can reach 50,000. This is a major reason why flying is so much cheaper.

Piston engines did improve. By the end World War II, the very ones overhauled so often for the Pan Am flying boats were good for 500 to 800 in U.S. bombers. Ones in the last generation of propeller airliners reached about 2,000. And jet engines had teething problems, with temperamental ones in U.S. bombers needing overhauls every 500 hours. But there was only 30 years between primitive British and German jet engines at the end of World War II and the introduction of the CFM56 and other turbofans that have become so reliable and powerful today.

Quality and usefulness often are not reflected in GDP

Just as modern jet engines lower costs of flying, GPS on smartphones lowers the cost of people getting around on the ground. But little of this actually gets measured in Gross Domestic Product, a measure of the value of output of goods and services produced in an economy.

Engines for Boeing’s flying boats cost about $25,000 each in 1941. Ones for an A-320 were about $5 million in 2024. Adjusted for inflation, the vastly more productive modern jet engine moves more people further and more safely per dollar spent. But actual dollars paid for each engine are what get tabulated in value of output.

Ditto for GPS. Reducing time and stress of getting out of unfamiliar airports and around new places like Hawaii is worth a lot. It saves gas as well. And it does the same for us in everyday life at home. Moreover, the development of more precise “differential GPS” is boosting productivity in farming, construction and mundane tasks like plowing snow.

Such resource savings and boosted productivity are worth hundreds of billions of dollars annually. Yet that value created is never entered into GDP, just the price paid for the GPS devices themselves.

Much new technology is produced by government funded research

Because of military needs, nearly all of the improvements in aircraft engines were paid for by government. Congress established the National Advisory Committee for Aeronautics way back in 1915 to improve both airframes and powerplants for civilian as well as military purposes. GPS was developed for military uses, not getting tourists out of airports faster, with federal money. The same was true for transistors, integrated circuits, lasers, and the physical communications infrastructure needed for the internet.

So while there are valid concerns about how much we spend on military hardware, there are large spillover benefits from some of it. Similarly, federal money has paid for agricultural research for 150 years. That is why food costs are such a small percentage of household budgets. And yes, there now is a great deal of private spending on biological sciences that improve health and food availability. But nearly all funding for the basic science came from taxes.

Spillover benefits of new technology are initially underestimated

When our military budget was funding the development of GPS, most of its contemporary uses were not even dreamed of. The same was true of rural electrification in the 1930s. In both cases, free markets were failing because of an “information problem.” Because no one dreamed of all the possible uses, and money making benefits, no private company was willing to invest billions to bring the technology to fruition.

These turned out to be “public goods” with large spillover benefits to society — and business — as a whole that would not be provided in a market economy without government action. GPS and much of the air navigation system are “pure” public goods in that they are “non-rival” and “non-excludable.” In other words, one person using the system does not diminish anyone else’s use of it, and it is difficult to keep anyone from using it.

Electrification differed in that people could be excluded from rural electric systems. And, to some extent, use by one farmer absorbs generation and transmission capacity, making it not available to others. Yet the mere existence of the system as a whole was of great benefit.

Private utility companies did not want to make the capital investment in miles of poles and wires to for a few lightbulbs in houses and barns and perhaps a water pump. So rural electrification was more of a New Deal social justice initiative than an investment in farm productivity. But once the system was in place, electricity was used for motors to replace human labor in all sorts of tasks. Human productivity leapt forward. Electrical usage far outpaced predictions. And electrified farms produced food and fiber cheaper to the benefit of all consumers.

Now, extrapolate that same cost-benefit analysis to rural broadband today. Could or should private investment in this area be forward-thinking enough to supplant the perhaps lost public investment funds of a now frugal taxpayer? Could or should taxpayers be forward-thinking enough to pay for something that doesn’t benefit them personally and directly?

Just as our government did not think about tourists driving rental cars, snowplows maneuvering along curbs or corn planters matching seed rates to soil fertility when designing GPS, New Dealers did not think about lower food prices. But in both cases, the results were great.

Meanwhile, the new administration of Donald Trump seems set on destroying much of what government has done to help make us prosperous. More on that next week.

St. Paul economist and writer Edward Lotterman can be reached at stpaul@edlotterman.com.