Time to unleash the drones?

Published 11:09 am Thursday, January 8, 2015

Unmanned aerial vehicles (UAVs), commonly called drones, were developed for military use but offer potential contributions to commerce. Amazon is exploring package delivery using drones via Amazon Air Prime, and Google and Facebook are also interested in UAVs.

I have no idea if home drone delivery will prove economically valuable, but the Sutter household will definitely be excited the first time a drone delivers a package to us. Amazon’s drone trials are an example of the experiments which create value to the economy, through new products, better service, or lower costs. Successful breakthroughs improve our lives and yield profits for the experimenters. Yet even unsuccessful experiments benefit the economy, by showing what doesn’t work and often providing lessons to help the next experiment succeed.

But Amazon’s experimentation has been thwarted by the Federal Aviation Administration (FAA), the regulatory body with control over our airspace. The FAA classifies drones as aircraft, even though many are no larger than remote control planes, and thereby restricts their use for commercial purposes. The FAA has dragged its feet issuing regulations for UAVs, creating considerable uncertainty about what is now or will be permissible. Regulations have been promised before the end of 2015, but last month it was reported that the FAA may not finish until 2017 or later. And the eventual regulations may not be hospitable toward commercial use; reports hint that the FAA may require commercial pilot licenses for drone operators.

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As the FAA dawdles, the drone use proceeds elsewhere. Amazon has been testing delivery drones in Canada and England, while Google is working in Australia. The European delivery company DHL now use drones to deliver pharmaceuticals to the island of Juist in the North Sea. Producers of a Canadian version of The Amazing Race television show used drones to film the contestants.

While some of these might seem frivolous, UAVs offer more significant potential uses. Drones offer substantial advantages for surveying: greater accuracy at lower cost than planes or helicopters, and easier scheduling and lower cost than satellites. UAVs equipped with infrared and visible spectrum cameras can help farmers measure soil moisture and monitor for pests, helping to optimize water, fertilizer and pesticide use. Researchers are working on ambulance drones to deliver defibrillators, CPR assist devices, or medicine to patients whom paramedics could not reach quickly, with instructions for use provided over the phone. UAVs could even help locate victims trapped in rubble and provide supplies to isolated survivors after natural disasters.

Failure by the FAA to adopt reasonable regulations will deprive Americans of the potential benefits from commercial drones. UAV innovators will have to at least temporarily, if not permanently, operate in Canada, Europe or Asia, depriving the U.S. of jobs tied to an emerging industry creating value in our economy for decades to come. This is just one small example of how the decline in America’s economic freedom makes our economy less productive and ultimately our lives poorer.

This case also illustrates how regulatory bureaucracies too often respond to innovation: with caution and delay. Some caution is reasonable and prudent. The FAA oversees many uses of our airspace, and thus should be concerned about drones disrupting or compromising the safety of these other uses.

The incentives faced by government bureaucrats suggest, however, that safety regulation will exhibit excessive caution. FAA officials do not have money invested in drone development and will not share in the profits, and almost surely would face intense criticism if commercial UAVs caused a plane crash. When FAA employees balance these considerations, they might easily conclude that delaying regulations until 2017 makes their jobs and lives better. While some might accuse bureaucrats of laziness and incompetence, most are smart, competent people responding to incentives that make excessive caution their best option.

Entrepreneurs eager to unleash commercial UAVs are unlikely to believe or even conceive that their innovations could adversely affect safety. Clearly a dispassionate assessment of risks is called for, and today we turn to government for this balancing. Yet government regulators too often err on the side of excessive caution, due to the incentives they face. And we will pay the price if the FAA prevents drones from delivering improvements to our lives.


Daniel Sutter is the Charles G. Koch Professor of Economics with the Manuel H. Johnson Center for Political Economy at Troy University and host of Econversations on TrojanVision. Respond to him at dsutter@troy.edu and like the Johnson Center on Facebook.



About Dan Sutter

I am the Charles G. Koch Professor of Economics with the Manuel H. Johnson Center for Political Economy at Troy University.

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