Brent Skorup is a senior research fellow at the Mercatus Center where he specializes in transportation technology, telecommunications, aviation, and wireless policy. Brent also serves on the FCC’s broadband deployment advisory committee and the Texas Department of Transportation’s autonomous vehicle task force, and he has recent spoke on the topic of airspace design at the Global Air Traffic Management Conference in Dubai. He joins the show today to talk about the future of transportation, including flying cars and highways in the sky. Brent and David also discuss the concept of auctioning airspace, the macroeconomic implications of technological innovation, and how to build or improve infrastructure for autonomous vehicles in the future.

David Beckworth: Our guest today is Brent Skorup. Brent is a senior research fellow at the Mercatus Center and specializes in transportation technologies, telecommunications, aviation and wireless policy. He also serves on the FCC's broadband deployment advisory committee and on the Texas Department of Transportation's autonomous vehicle task force. Brent recently spoke about airspace design at the Global Air Traffic Management Conference in Dubai. Brent joins us today to talk about the future of transportation, including flying cars and highways in the sky. Brent, welcome to the show.

Brent Skorup: Thank you for having me.

Beckworth: Great to have you on. And as I just mentioned,you are at Mercatus Center, so you're a colleague of mine, and it's great to know you, have these hallway conversations about technology, transportation, and all the things that I dreamed about as a kid, flying cars and such. You actually work on them and there’s a field looking at the prototypes, experimenting with flying cars. Now before we get into all that fun stuff, I want to hear about your program at the Mercatus Center. Tell us, what do you do and what does your staff work on here?

Skorup: Yeah. I've been at Mercatus for a little over six years now. And I'm on the fourth branch project, which is concerned with the fourth branch of government, the regulatory state. And so we look at many federal agencies. In my own bailiwick, it's typically the FCC, the FTC and the Department of Transportation, which includes the FAA. But we analyze regulations, regulatory institutions at the federal and the state level.

Beckworth: And your focus is on technology, transportation, the kind of futuristic stuff that we think may be coming, 5G networks, driverless cars, driverless air taxis, things like that. Is that correct?

Skorup: Yeah. That's right. Yeah. I started to become intrigued with telecom in law school. I went to George Mason Law School, which has a strong law and econ program. And my first year law and econ professor, he's a PhD economist named Tom Hazlett, he was chief economist at the FCC for years. And I just fell in love with his class. And in law school, I was a legal clerk for 10 months at the FCC and became hooked on telecom and technology after that.

Beckworth: So Brent, one of the topics you covered, as you mentioned earlier, is flying cars, air taxis, highways in the skies, very futuristic sounding. But you're working on these issues now. And many times when I'm driving, I get stuck in traffic, I often daydream about having my car vertically take off and just shooting over all the other cars and getting there quickly. And with my kids, I tell them about this daydream. And they say, "Well, Dad, if everyone could do that, it would be chaos." I'm like, "Yeah. But only me." But then I'm brought back down to reality because I'm stuck in traffic. And I'm reminded of Peter Thiel's kind of famous quip, where he said, "We all wanted flying cars. And instead, we got 140 characters," talking about Twitter when we only had 140 characters.

Beckworth: But when I read your pieces, Brent, I get optimistic again. I get the idea that maybe one day I will be able to take off in my car, in a much more structured environment than just me, of course. But I want to read a quote from some of your recent articles. You have a Wall Street Journal article, another magazine article I'm going to quote from. You have this great quote here from a Wall Street Journal article recently. And it says as follows, "Futurists have been promising us flying cars since the late 19th century. They may be about to arrive. City dwellers in the next decade could fly from Lower Manhattan at JFK International Airport in less than 10 minutes. Chicago families could escape the summer heat and shuttle above Lake Michigan to Indiana beaches in less than half an hour. These trips often take an hour or two on the ground, but electric air taxis will allow for speedy urban travel without the headaches of flying coach."

Beckworth: And then in another article for Air Traffic Magazine, you begin with this. You say, "There's an imminent[MD1] revolution in aviation and airspace policy. Urban air mobility is receiving mainstream attention and regulators around the globe are preparing for drones, electric aircraft, and flying taxis." So it all sounds very exciting. Also sounds very revolutionary. And I'm interested to hear. Where are we in this? What's the state of affairs in terms of flying cars, flying air taxis? Do they exist now? When will we expect to see them in wide scale use?

The Future of Flying Cars

Skorup: So as you read, we've been promised flying cars for a long time. When you're stuck in traffic, it sounds like a great idea. And why didn't someone invent this already? I think Peter Thiel, I think he just had to wait a few years. I mean, it's amazing how quickly this has advanced. I'll just say a little bit about drone technology, which I think many of your listeners would be surprised at how quickly this has moved. Drone technology is being used all around the world to do deliveries on a commercial basis. I think China's probably the farthest along. Jd.com is doing tens of thousands of deliveries. It's even starting in the US. Drone companies are starting to get approved for deliveries. There's a few companies doing it in North Carolina and Virginia on a limited basis.

Skorup: The country of Rwanda has had a stable government for a while. They want to bring technology companies into the country. And in Rwanda, there's an American drone company called Zipline that's been doing blood deliveries throughout the country for a couple years now.

Beckworth: Really?

Skorup: They've done I think 25,000 deliveries at this point of blood to rural hospitals throughout Rwanda. So all that to say, this technology quietly has advanced rapidly. Batteries, computation, obviously with passenger vehicles, there are more significant issues dealing with aircraft design and safety. But when you read what's going on in this area, it seems like the technology, that will be solved in the next 10 years or so. It's really the regulatory institutions and the infrastructure that really haven't gotten up to speed. And that's where the focus of my research has been.

Skorup: As far as the air taxi industry, I wrote, been writing about this for a couple years now. And a few weeks ago, a Chinese company called Ehang, and they've been working on this for years, but they started commercial pilots in Southern China this month. And you can see some videos of this on YouTube, but it's basically a big drone, two passenger drone that carries people several hundred feet in the air. And there are reasons this is happening in China and not the US dealing with infrastructure and law and other things. But we are close to having this as a commercial service. And there are US companies who believe this can be a commercial service within the next five or 10 years.

But we are close to having this as a commercial service. And there are US companies who believe this can be a commercial service within the next five or 10 years.

Beckworth: Yeah. So you're saying in China, they already have these driverless air taxis in place.

Skorup: Yeah. There are many companies testing it. And a few are carrying passengers already. There was a test flight in Singapore recently. But yeah, this company, Ehang, which is a big drone manufacturer in China, they've been flying employees in their passenger drones for a couple years now. And they've recently started flying tourists in Guangzhou, I believe. And they want to start commercial service in the next few months.

Beckworth: That's remarkable. You mentioned in your Wall Street Journal piece that China has a huge head start on this. Maybe not huge, but it has a head start over the US in terms of the technology. And you also mentioned places like Mexico, Latin America, where they have more helicopters, and so they're better equipped with infrastructure in terms of landing pads and the like for this type of technology to develop. So why is China ahead of us? What have they done? Or what have we done, I guess, that's kept us back?

Is China Winning the Technological Race?

Skorup: Yeah. There's a few issues. And it's not clear at the moment who will lead the way. The US has things going for it. China, what it has going for it, they have dense, much denser urban areas, which helps with commercial ability. They have a national government that has made autonomous aviation a national priority for China. They want to lead the West when it comes to autonomous aviation, which includes drones, but also autonomous passenger drones. And so they have these five year plans going out for many years. And they've made this a major priority, a major pillar of the future of their economy up there with AI and 5G, this autonomous aviation economy.

Skorup: They also have, and this you can't really blame the US for, we have a much more developed aviation sector. We have I think 15,000 municipal and major airports throughout the nation. We have a lot more people flying, a lot more recreational flying, a lot more helicopters than many other countries, and certainly more than China has. So they are kind of blessed with clean airspace, if you will. And they don't have quite the complexities, or frankly the political pushback that you would have in the US.

Skorup: What helps the US is our market economy. Most of the companies, drone companies and the companies making components in this industry are in the US. And that's to our benefit. But on the infrastructure side and on the airspace access side, we'll probably lag for a while.

What helps the US is our market economy. Most of the companies, drone companies and the companies making components in this industry are in the US. And that's to our benefit. But on the infrastructure side and on the airspace access side, we'll probably lag for a while.

Beckworth: That's interesting. So China has kind of like a clean slate when it comes to putting up the airspace, how it's going to work. And they have this kind of top down, you're going to make it work, whereas we have the innovation, the markets, the deep capital markets to fund the innovation. But we also have well developed airspace and might be some regulatory reasons it might be a little more challenging to move forward. But nonetheless, the idea here is, it's fascinating, it's great, it's amazing. I fly into Reagan National a lot. I can imagine myself flying in there, instead of catching an Uber to my hotel, I catch an air Uber, an airlift to my hotel. It would take less time, make it much more efficient. And when we talk about these air taxis, or these flying cars, we're talking about one to six passengers. Is that right?

Skorup: Typically one to six, yep.

Beckworth: Okay. Yeah. So you could get in with your family, maybe just yourself, and you could get to where you need to be. And you're talking about this in urban areas. And going back to China, I just kind of stepped back here. We've kind of run into this. But I want to emphasize the reason we're talking about this on the show is because transportation is a big part of cost. And getting that cost down can really add to long run economic growth. So I want to come back to this point later about the implications for long run economic growth and what it would mean for a kind of trend macro growth. Let's get back to this discussion on flying taxis, flying cars and the like.

Beckworth: So it's already happening. Some places are ahead of us in some ways, whereas we're ahead in other ways, in innovation in particular. So there are several challenges in moving forward with this technology coming online, going mainstream in the United States. One of them you address in your law review article. And that's: How do we manage the growth of aerial traffic and aerial corridors? But another one I want to touch on, we've had some hallway conversation about this, is what I would call maybe the cultural roadblocks or challenges. So for example, how do you get people to use this technology? So let's say it's here. Right? I wonder how many of our listeners out there would be the first person to volunteer to get in one of those flying taxis with no one else there, just a machine, and take him up several hundred feet, maybe 1000 feet, and take them to their destination. Do you think there'll be any kind of cultural barriers, or just kind of old habits have to die hard type of obstacles to these becoming widely adopted?

Cultural Barriers to Technological Innovation

Skorup: I think there will be a fair amount of reticence or resistance at first. Part of it, you see, when people are surveyed on this in America at least, you see a generational split. Kind of younger people tend to be more comfortable with, they're familiar with autonomous cars on the roads. And they tend to be more accepting of getting into one of these. And there's limited surveys about flying cars. But you see a similar generational breakdown. Part of it will just be education. I mean, I think a lot of people would be stunned to learn how automated aviation is already. And if you're in a plane, 98 percent, 99 percent of it is automated. Pilots, it goes on autopilot.

Skorup: Pilots are generally doing the takeoff and landing, the more difficult part. But planes, aviation is largely automated. I mean, it's very difficult to get that last couple percent. But people at least trust automated aviation to a large extent today. But obviously, it will be a little different when you're in a small passenger vehicle. Yeah, no, I expect there will be some resistance and some reticence and probably many people who will never step foot in one of these for a lot of reasons.

And if you're in a plane, 98 percent, 99 percent of it is automated. Pilots, it goes on autopilot. Pilots are generally doing the takeoff and landing, the more difficult part. But planes, aviation is largely automated. I mean, it's very difficult to get that last couple percent. But people at least trust automated aviation to a large extent today.

Beckworth: Yeah. That makes sense that generationally probably will be the dividing line on this issue. And airlines or airplanes are an interesting example you provide. So let me ask this question. Could airplanes today go completely pilotless if we wanted them to? What's holding us back from having planes with no pilots?

Skorup: I mean, I think it's a few things. I think just a legacy. This is how planes are built. They're built totally around having pilots in the aircraft. I mean, just comfort for passengers. They want passengers there, and certainly for ... Aviation is a very highly regulated field. I mean, it's very hard to allow fully automated flight. And frankly, takeoff and landing, it is a tricky thing. There's a reason pilots do that part. It's a very difficult job. But I'm told by aviation folks that they are working on automated takeoff and landing for commercial jets. And some planes do this already. But it's certainly not widespread.

Beckworth: Well, maybe if you get to the point where you do have widespread use of air taxis that are driverless, that's completely automated, it will bring that kind of shift in culture and expectations about flying that would open the door for pilotless planes. So maybe this is kind of like the bridge you need to get there. But it's also interesting, for me at least, the whole airplane example because I heard a podcast, I believe on Planet Money, it was really insightful. And it dealt with driverless cars coming back down to the ground. And they asked this question. This is several years ago when driverless cars were first coming out. And they said, "Will driverless cars go the way of elevators or airplanes?"

Beckworth: And the reason they brought this up is because elevators, when they first came out, had an elevator operator. There was a person inside that would operate it. And apparently, elevators were very dangerous. People could lose fingers, limbs. It was a big open platform. You go up and down, and sometimes people would fall off. And so it was comforting to people to see an operator in there. And then when they eventually did go to an elevator as we know it with no operator, it was a big move. It was scary. Do I step inside this box with no human? But eventually it became accepted, and we don't think twice about it now.

Beckworth: And that's one path for driverless cars that this show was making. The other path would be like airplanes. We still want someone there with us in the airplane. We want a pilot. And so the question is: Will driverless cars go one of those two paths? And the same question I guess would be then applied to these air taxis. But you say you see evidence in these surveys for driverless cars along generational lines. So maybe just a matter of time before we do see its adoption.

Skorup: Yeah. I think it will take time. I should say, at least the American companies work in this area, Uber, Boeing, Airbus. Well, Airbus is not American. But the companies in the West working in this area anticipate having pilots for the foreseeable future. And certainly regulators are not in any rush to remove pilots. But yeah, the companies who are looking to deploy in Europe and North America and South America, they anticipate having pilots, retraining helicopter pilots, or military pilots to fly these for a while. And I think part of that is trust. And slowly, this will become more and more automated over time.

Beckworth: Okay. One of the interesting things you bring out in your Wall Street Journal piece, Brent, is that this could really reduce costs if it was widely used. So you mentioned in the introduction that I read, catching a flight from Manhattan to JFK Airport could drop down to $36. And I believe you say also down to $6 if it really becomes autonomous and automatic. So you can imagine quick trips across town just really cheap, and time wise, much cheaper as well. So that's really great, lots of… many benefits, saving time, saving money.

Beckworth: Of course, you've got to get past that fear we just talked about. And let me bring up another roadblock, another what I call a cultural roadblock. And this comes from my dear wife, who may be listening. But I'll bring her up anyways. She brought up this concern when I was talking about this show and talking about your ideas and stuff, Brent. She brought up the concern about clutter in the airspace. Some people are bothered by all the billboards going down a highway. It's kind of eye pollution, I guess is another term for it. Have any folks talked about that issue? Do we want to see a world kind of like Star Wars, or some of these sci-fi movies, where there's just a stream of cars above cities? My reply to her was, "Look. There'll be costs and benefits. I'm willing to have a little more space clutter, albeit systematic and organized along a corridor, if I can get somewhere faster." But I'm curious to hear your thoughts on what you've seen said about this, Brent.

Skorup: Yeah. That's an interesting one. And my office, I have a window office and it kind of looks out over Arlington, DC. And there's not much clutter. And for me, this is a missed opportunity. We have all this airspace, the valuable urban airspace that no one is using. It's funny. Your wife's response was kind of the opposite of that, that's to be valued. And on that, I think, and often in these discussions you hear resistance certainly to the noise issues. I mean, this will be a major impediment to this industry and any aviation industry is they have to deal with noise issues. And it's got to be acceptable to neighborhoods and to politicians. And visual clutter, noise, just aesthetics. How do you have these heliports in downtown areas? What would zoning looking like? Yeah, there are a lot of kind of PR issues that these industries will have to deal with.

Skorup: Part of it I think will be, and you see similar discussions with drone delivery, if your average person sees a benefit, a personal benefit, economic benefit, I suspect, and these companies are betting that people will be much more accepting of them if this is not, and particularly with the air taxis, if this remains just glorified helicopter service for one percenters, that's a very serious problem for the industry. But if your average people can use this and it becomes a mass service, it affects property values in a good way and makes just getting around urban areas and to airports and to football stadiums much easier, then average people will tolerate it much more than they would if it remains this kind of one percent phenomenon, which is a risk. And time will tell, but the companies working in this area are very aware of that and want to avoid that problem of this being glorified helicopter service.

But if your average people can use this and it becomes a mass service, it affects property values in a good way and makes just getting around urban areas and to airports and to football stadiums much easier, then average people will tolerate it much more than they would if it remains this kind of one percent phenomenon, which is a risk.

Beckworth: I think part of it, Brent, is just having the vision to see how things could be very radically different. So if you get to this world where you have flying cars, flying air taxis on a wide scale and used by many people, it would just radically change our lives in urban areas. Right? We wouldn't need as many cars. As a parent, you wouldn't have to worry about driving all across town for extracurriculars for your children. You could put them in a driverless car or an air taxi. They get there automatically.

Beckworth: Like you mentioned, if you're going to go to a game, it's not a huge ordeal to go downtown to the game. You just get in the air taxi and you get there. You could go shopping somewhere across down. A lot of things would be made a whole lot simpler if we had such services available. And I think people would see the benefit and come to accept it very quickly.

Benefits of Technological Innovation

Skorup: Right. And I expect, especially in the US, I expect what you'll see is that these big drones, will first be used for cargo service in metropolitan areas. I mean, one for safety reasons, not having passengers in them, and two, just to iterate on the designs. Having heavy cargo, and some of the companies most excited about this, and I think some of the companies who are investing most in this are actually organ delivery services, delivering organs throughout regions is a very time sensitive task. So I think you'll see medical applications for this, just given the time sensitivity of this. And I expect and hope people will come to see that this is a safe technology, this is technology that improves people's lives. And eventually, we'll have piloted and then autonomous air taxis.

And I expect and hope people will come to see that this is a safe technology, this is technology that improves people's lives. And eventually, we'll have piloted and then autonomous air taxis.

Beckworth: Oh, it's a great vision of the future for sure. Well, let's move to the next big challenge getting from here to there. And that is: How do we manage the airspace, or the aerial corridors as you describe them? So you have an article in a law journal titled *Auctioning Airspace.* And the title kind of gives a hint where you want to go with this. But you're talking about airspace, as I read your article, 200 to 5000 feet above. And we're talking about these aircraft that take off vertically and go. But the challenge is that the airspace is scarce. It can lead to a tragedy of the commons. There's a collective action problem going on there. And there's different ways for it to work. So we currently have an air traffic management system that controls around 5000 flights, as I read in your paper. And it's very centralized, top down. So what would be the approach that could be taken with this? I think there's two main directions this could go in terms of how we deal with that scarce resource, the airspace. So what are the two options?

How to Approach Airspace as a Scarce Resource

Skorup: And this is the issue that really, really got me interested in this area, and frankly, because I think some of the policy makers and industry, I think they're heading towards a dead end. There's, as I say in my paper, there's kind of two models you could have for airspace access. You could have kind of nominally open access regime that we have for traditional aviation. There's serious problems with that. And you see some of it in traditional aviation when it comes to congestion. And on the other side, or towards the other end of the spectrum, and what I propose and my contribution to this area is: Why not draw, demarcate aerial corridors in the sky where we know these routes will be? And a way to allocate them would be to auction them as opposed to say, a first come, first served basis, which is how traditional aviation was done.

Skorup: Basically, the government in the 1930s drew corridors throughout the sky and gave them to airlines to use. And we've been dealing with that ever since, that you have incumbents with valuable routes that they don't want to share with newcomers. And so my paper describes an alternative way to de-congesting, de-conflicting the airspace, which would be having this aerial corridors in urban areas and assigning those via auction.

Beckworth: Now if you auctioned them off, I can just imagine some listeners objections, or some people's objection would be: Well, how do you prevent these autonomous flying vehicles from running into each other? Right? What mechanisms, what infrastructure would be in place that would help them coordinate their flights?

Skorup: So the main way would be simple segregation of airspace. I'm not sure exactly what it would look like today since we don't have these. But you can imagine, say, a 500 meter wide column of airspace going from downtown DC out to Dulles Airport, or to the Redskins stadium, and having, drawing a few of these routes, but they're separated by 1000 feet, 2000 feet. So you have competition, so you don't want a single route going to these kind of high trafficked areas. But you also have that physical separation, so that the operators must stay within their lanes.

Skorup: We have elements of this in traditional aviation. There are what's called airways, these are basically highways in the sky that commercial flight takes place in. Although, they are shared obviously amongst the various airlines. But there is a rough model for this. And the question is, and kind of the novel element I say is that these should be exclusively used by a single operator per airway so that they know there are not other companies sharing their airspace, and also so they can have their own kind of full stack operation of the air traffic management system of the terminals on the ground. I think some of the problems with traditional aviation is that terminals, ground terminals are shared. And when things are shared, there's no company that fully owns it, and these things tend to degrade.

Beckworth: Okay. So just to be clear, you would auction off each of these lanes. And each lane, whoever wins the auction for that particular lane would get full use of it. So they would be running all flights through that particular lane. Is that right?

Skorup: Yes. Right. It would be auctioned for a term of years. There are proposals out there. I think Rand, at least with drones, they envisioned real-time auctions for a lot of reasons. I don't think real-time auctions to airspace would work well. But yeah, I'm picturing multi year leases, much like Spectrum is auctioned in the US and around the world and much like off shore oil sites are auctioned by governments all around the world, and wind energy sites. So this would be licensed public property, yeah, much like Spectrum or off shore oil sites.

Beckworth: Okay. So you can imagine, I'm making this up, but air Uber has one of the lanes, maybe 500 feet. And maybe a ... I don't know what the next level up would be. But let's say 1000 feet, air Lyft would have that lane, and so forth. Is that kind of the idea?

Skorup: Yeah. That's right. Yeah. You have separation vertically or horizontally. Right.

Beckworth: Okay. Okay. It would be a pretty busy lane. Right? Or the corridor would ... So air Uber would have multiple vehicles flying through the air getting people there in an efficient manner. I mean, I guess you would have ... The point is they're auctioning, so they've invested some cost in this business model, so they're going to try to get as much volume as they can, recover those costs, hoping to make a profit.

Skorup: Exactly. Right. These companies then can optimize with their own operations within each lane. They're not worried about others. I mean, something you see in traditional aviation with kind of these shared terminals and shared airspace, you see hoarding of routes. Companies have these routes that they don't want to give up. And there are stories, you can read about this in the news, of them flying empty or near empty flights, just so that their route, it's called slots in aviation, their slot is not given to another competitor. And that's what we want to avoid, where they hoard, where they overuse or under-use the resource. If it's exclusive, then not only are there safety benefits, but they can optimize.

Skorup: And another element of this is that then this takes a lot of work off of the national aviation regulator, in this case, the FAA. They don't have to referee these fights over airspace access, and who's hoarding, who's hogging it, who's not. They can focus on the safety elements. And I expect they will have a role to play. In traditional aviation, they do have separations between air flights. You can't follow too closely to another plane for safety reasons. I expect they would have separation requirements, just so no one's flying too closely together. But that's another benefit that I write about, is that aviation regulators wouldn't be dragged into these fights over airspace access in urban areas, which would be near constant, if you take seriously that this is going to be a mass service.

Beckworth: So clarify for me. How does it currently work? So your vision is an auctioning process, so you have the right incentives for people to come and bid and match the business. In other words, they're not going to bid on a route that isn't very profitable. Like you mentioned, airlines right now will hoard routes. So how do airlines now get routes? What's the process they get from the FAA?

Skorup: So it varies depending on the airport. But generally speaking, there were routes given out decades ago. And the same airlines or their descendant airlines have had the same routes for decades. Now when new airports come along, federal regulators do try to preserve some slots for say, a low cost competitor. But it's a very political process and it's really time consuming. Beckworth: Is this why certain airlines have major hubs? They have all the slots at a major airport.

Skorup: Yeah. I would expect that most of those you could trace back to decades ago, that they were assigned these. I think it was the postmaster general who assigned in the 1930s, all these, the major urban routes.

Beckworth: Interesting.

Skorup: And so with the air taxis, with the kind of new generation, you have NASA and FAA. They've kind of taken the lead in the US. And I should say the FAA and NASA and other national aviation authorities are quite clear. They cannot handle and they have no, don't expect to be able to handle all these drones and air taxis that are coming to market. And so they're looking for alternative models. And no one knows what that model will be. I offer one proposal, which would be regulators draw these corridors and auction them off. What NASA and the FAA are considering right now is kind of this informal ... And this is how it's often done in aviation, this kind of informal round table.

Skorup: Basically, that big players get together and cooperate together on this. I don't think that's a very good way of doing it. Collaboration, that's the key word, collaborate on how to share airspace. I don't think that's a sustainable model. The NASA, in one of their documents, describing how they would manage this new drone and air taxi traffic, say that they hope collaboration will work, but if the airspace becomes too congested, at that point, they would step in and referee airspace access. And to me, that's a really alarming concession that they don't really have a plan for when it becomes congested except that it will be allocated by far off regulators and that they'll be called in to referee this. So I want to avoid getting to that point where we have conflicts and kind of preempt that. And this is a way to do it, would be these aerial corridors that are auctioned and transferred amongst companies.

Beckworth: Well, this sounds problematic for several reasons. One, you mentioned when a crisis emerges, then they would finally show up and try to referee, probably be too late to the game. But even before you get there, it sounds almost a little bit anti-competitive. You'd have the big airlines kind of do some horse trading and decide who gets what lanes, when, where, why, as opposed to auctioning it based on some kind of business model. Am I being a little too harsh, or is that fair?

Skorup: This collaboration can quickly devolve into anti-competitive market division. And I think there's some elements of that. You've certainly seen that in the past in aviation. You have regulatory capture issues in aviation and many other industries. And so what my paper and what I'm trying to do is get ahead of this so that we don't go too far along this path. And aside from some of the competition issues, you're already seeing documents and publications talk about what you might call route squatting. Basically, there's an understanding you need to get in this market now and get the profitable routes, and then you'll be able to hold onto those when there's much more competition for access.

Skorup: And so I think one way you're seeing this is helicopter routes. They're doing many of the routes today that will be done by electric air taxis in the future. And so that's something to watch. I mean, this route squatting I think would be competitiveness aside, there's no reason to believe that the companies in the market today are going to be the most innovative, or most efficient, or the safest companies 10, 20 years in the future. And this auction process gives later innovators some ... There's probably a middle schooler today who has a great air taxi company in his or her head. How do we enable that middle schooler to get into this market later? I'm very worried about this route squatting effect, which you've seen in traditional aviation, where once you have service on a route, it's nearly impossible to dislodge the incumbent.

Beckworth: Yeah. So that's an obstacle to get through. And again, I encourage our listeners to take a look at Brent's paper. It's called *Auctioning Airspace.* We'll provide a link to it on the webpage for the show. Alright, So another challenge getting from here to there, we've mentioned culture, auctioning airspace. What about the other infrastructure technology? Do you need 5G? What do you need to get this up and running? Let's say you've figured out the airspace issues. You've figured out cultural issues. What else is left?

Infrastructure Obstacles and Requirements

Skorup: So as I said, I think some of the design challenges, the aircraft, the batteries, the autonomy, I think that's coming along at a good clip. I'm more worried as you said, about the infrastructure and kind of the regulatory institutions. And a lot of this should've been done yesterday. It takes a long time to build infrastructure. And what I'm talking about are things like electrification. You're building vertiports, repurposing heliports. There was a NASA commission to study, I think it was for Booz Allen Hamilton a few months ago.

Skorup: And they were doing some market analysis of this air taxi market. And they were looking at things like emergency services, but also passenger services. And they anticipate, at least Booz Allen in this NASA study, that you might have 20 of these heliports, these vertiports as they're called, per major metropolitan area, 20 per metropolitan area, and possibly dozens in the bigger cities in America. And so when you think about the scale, what would have to happen to have 20 vertiports with parking, with curb access, with electrification, with the ability to have crew and people who can clean the vehicles and recharge the vehicles. And how do you get passengers at a high rate? I mean, the companies are talking about doing hundreds of flights per hour from each node in the network. How do you get passengers up to the tops of buildings at that rate?

Skorup: I mean, so a lot of this, as I said, should've been done yesterday. It's going to take time, and that's what I've been trying to do for the last year or so is for the lawmakers, for the policymakers and regulators who are interested in this, impress on them that some of this stuff needs to be thought about. I think one way of thinking about this and starting to get a grasp of this is creating at the state level and at the federal level, but at the state level, aviation, kind of emerging aviation task forces. And you're starting to see some of this pop up, particularly on the drone side. But I think air taxis should be part of that discussion as well because you are going to have issues that need to be dealt with, like electrification, like zoning, like noise regulations. And we're just a long way from that happening, and certainly not 20 per city.

Beckworth: That's an amazing picture you just painted. 20 ports, these vehicles could land, and I imagine if we're at that point where they're autonomous, maybe initially they have crews, as you mentioned. But imagine we're to the point where they're autonomous. Then it's likely on the ground you're going to have autonomous vehicles as well. So you can paint this picture of this queue of flying air taxis landing and people getting off, and the next ones comes in, and the people walk off. And then they go down stairs and catch an autonomous vehicle to their destination. So it's pretty amazing picture you've just painted there for us. And it'd be great when that does come around. But we have to get through all the challenges we've just talked about.

Beckworth: Let me switch gears now and go from the airspace with autonomous vehicles, go down to the ground level. We've touched on this earlier. But what do we need on the ground level to get to autonomous vehicles? I mentioned, again, earlier in the show about having your kids get in a flying autonomous vehicle. And maybe it's more practical, I would put them in a driving autonomous vehicle, send them off to soccer practice that way. You have a paper that kind of touches on this. We have a co-authored paper titled *Smart Cities, Dumb Infrastructure.* So what do we still need to do to make this vision of driverless cars a reality? Because, man, what's it been? Four or five years, we've heard a lot of talk, a lot of talk. And I know some places have them, some places even have driverless trucks. But I guess I haven't seen the reality on the ground match the hype? So what are we missing?

The (Near) Future of Autonomous Vehicles

Skorup: You're starting to see at least some people in this area, and part of this is just kind of discouragement over how slowly the autonomous vehicles and the drones… But you're starting to see some people think these air taxis could become mass service before autonomous vehicles. And there are some… We're a long way off from both of these being mass services, but you are seeing, as I said, you are seeing limited commercial deployments already today for both of these. Google Waymo has their service in the Phoenix area. And they recently started driving some passengers in their autonomous vans with no safety driver at all in the front two seats. And that's and exciting step, but obviously a long way away from dreams of one pulling up in front of your house and taking your kids to soccer practice.

Skorup: So on the ground, there's a lot that is happening and that needs to happen on the computation side. And that's really the difficulty with cars on the ground, that you don't have with aviation. On the ground, you've got to predict. What are pedestrians doing? Where are they looking? Where are they walking? Is this car parked on the side with the door open, are they standing there, or are they about to move? There's all this prediction and kind of this theory of mind that you have to build into the computers that you just don't need to do with aviation. On the ground, and thank you for mentioning the paper, I wrote it with Korok Ray, who's an econ professor at Texas A&M.

On the ground, you've got to predict. What are pedestrians doing? Where are they looking? Where are they walking? Is this car parked on the side with the door open, are they standing there, or are they about to move? There's all this prediction and kind of this theory of mind that you have to build into the computers that you just don't need to do with aviation.

Skorup: So we wrote this paper about ... It's called *Smart Cities, Dumb Infrastructure.* And the basic idea of this paper is that to bring more reliability to autonomous vehicles, say supplementing their mapping abilities, providing real-time information about what's happening at the street level, that cities should build and they are building this roadside infrastructure like utility poles and so-called street furniture that have cameras, that have sensors, that have radar, so that you kind of create this network of sensors that can be fed in real-time to autonomous vehicles. I should add, this infrastructure is not ... No autonomous vehicle company is waiting for this infrastructure to be built. They're building as if it's not there and it won't be there. But it could provide and will provide nice supplementary information about real-time information on the ground.

Skorup: And so our paper, we were kind of discouraged. At the federal level, you kind of have what you've seen in the last few years. For a long time, the federal government wanted to take the lead on what's called vehicle infrastructure communications. And they kind of designed it from the top down. But as you might expect from a top down government project, progress on this technology was very slow. And now you've seen, particularly with the Trump administration, which has more hands off approach to this, they've kind of backed away from designing all of this infrastructure, which I think in a lot of ways is a good thing.

Skorup: However, you still have all this funding available for roadside infrastructure. So what our paper attempts to do is say, so states and localities that are applying for and receiving this transportation funding, start thinking about these smart city applications and this autonomous vehicle applications and build this dumb infrastructure, this passive, long lasting infrastructure, on roadsides, but leave all the sensors, all the intelligence, all the computation, leave that to private companies and lease out pole access to the dumb infrastructure. And really, the local government's job to should be to construct this passive infrastructure, but leave all of the intelligence to the private companies working in this area.

Beckworth: So just to be clear, the dumb infrastructure would be like utility poles, right of way, real estate, what you call street furniture, and the stuff you'd leave with the marketplace would be roadside sensors, cameras, radar, 5G equipment. Is that right?

Skorup: Yeah, that's right. 5G sensors, lidar, radar. We don't see an appetite for cities to kind of take this over. This would be the biggest IT management project in every state if they were managing all this infrastructure on roadside. So we say leave that to the private companies, and really focus, narrow your view to this roadside infrastructure because that is where the monopoly lies. They're not building new roadsides any time soon, and certainly not hundreds of new utility poles. So that's really where the regulatory focus should be.

This would be the biggest IT management project in every state if they were managing all this infrastructure on roadside. So we say leave that to the private companies, and really focus, narrow your view to this roadside infrastructure because that is where the monopoly lies.

Beckworth: You had another little policy brief I found in preparing for the show, where you've recently looked at auto purchase trends, how much they cost and so forth. And you come to this conclusion that Florida might be a great place to really push the frontiers, test this infrastructure development. You mentioned on a number of levels why the state would be ideal. They have many students, retirees, tourists, uninsured drivers who need rides but don't have a car regularly. There's high insurance premiums there. There's no fault auto insurance, flat terrain, no snow. So the state of Florida would be like a fertile ground zero for experimenting with this. Is that right?

Florida as an Autonomous Sandbox

Skorup: Yeah, for autonomous vehicles and probably for air taxis as well. You have, as you said, there's kind of a favorable regulatory climate. They've got some policy entrepreneurs, I mean, some law makers in state government who are really forward thinking about this. Florida passed an autonomous vehicle law that really wants to see these vehicles and these autonomous vehicle jobs come to Florida. And I wrote the piece, we recently sold my wife's car. And I was doing the math about the annual costs of owning a car. I was stunned at how high it was for… she had a Corolla, a nine year old Corolla. And the costs add up. I can't remember exactly what I said it was in the piece, but it was a few grand a year. And for autonomous vehicle companies, in Florida if you have a teenager on your insurance, your costs increase several grand per year.

Skorup: And so what I wanted to do with the piece is explore. What would the cost of, say, a subscription to an autonomous vehicle for a year, what would it need to be for a family, say, with a 16 year old son or daughter? What would it take them to say, "No, we're not going to buy you a new car. We're going to buy you a subscription to an autonomous vehicle service instead"? I was surprised the breakeven point is not as extreme as you might think just because the cost of cars is expensive and it's getting higher. Cost of repairs is going up because cars have more sensors built into them. It requires more specialized labor, more specialized parts. So you see insurance rates going up across the country. Actually, I mention in the piece, it's gone up higher than hospital care in the last five years. It's one of the fastest rising costs.

Skorup: So you see these trends of increasing auto costs, insurance costs and repair costs, and also hopefully, autonomous vehicles, I'm hopeful some parents will do the math and say, "Let's get a subscription and not a new car." And some kids might be open to that. I mean, you see a declining number of high school seniors getting drivers licenses. Kids are… they're not into cars as much as they used to be. I know it kills my dad. I'm not a car guy. And I think for people younger than me, it's even more the case. They're just not really into cars.

Beckworth: Once again, you're painting a pretty amazing picture. So in addition to paying every month for Hulu and Netflix, I'd be paying for my autonomous vehicle subscription. And it might become second nature. And this would radically affect how we live. I mean, you can imagine homes being built without garages because you have a car that drives up to your house automatically when you need it. So it would be a nice change without having to worry about car maintenance, car bills, and all the like.

Beckworth: Which this leads me back to the bigger point I mentioned near the beginning, and that is the kind of the bigger macroeconomic consequences of all this. In the time we have left, I want to move in that direction and think about how this might affect how we operate, how we live. So what we've been talking about so far has been movement, people, and goods and services via these drone deliveries across urban areas and cities. But what about transportation costs in general, getting across the country, getting goods shipped from one state to another? And there's been many kind of out there pie in the sky suggestions, Elon Musk's Hyperloop, 600 miles per hour, high speed trains. There's talk of the Concorde coming back. Anything that can reduce transportation costs I think would be a boon to our economy. Any thoughts on that?

Macroeconomic Implications of Technological Innovation

Skorup: This might be where I'm somewhat of a pessimist. I think really it comes down to, the reason I'm attracted to this drone and autonomous air taxi area is because I think it's just so difficult to do anything on the ground, to build new things on the ground like Hyperloop, or even you look at the cost of subway lines to build in the United States. And it's massive and going up, if anything. So I'm hopeful that these things will open up new opportunities. But in my view, I think it's just so difficult in this age. There's a lot of reasons for it. I know a lot of scholars are working this area. Why is it so hard to upgrade infrastructure?

This might be where I'm somewhat of a pessimist. I think really it comes down to, the reason I'm attracted to this drone and autonomous air taxi area is because I think it's just so difficult to do anything on the ground, to build new things on the ground like Hyperloop, or even you look at the cost of subway lines to build in the United States. And it's massive and going up, if anything. So I'm hopeful that these things will open up new opportunities.

Skorup: You look at how hard it is for say, Acela, Amtrak, in the northeast corridor to upgrade their lines. You can't be… I can't be optimistic about Hyperloop, which would be a much more challenging endeavor. So in some ways, aviation, you kind of avoid all the NIMBY-ism, all the other obstacles you face on the ground, the kind of fragmented nature of going through localities. So I'm more optimistic on the aviation side. I think drones, air taxis, supersonic flight, you're seeing more interest in that. Concorde has been a dead letter for years now, but you're starting to see more interest in supersonic flight again because with aircraft design and just the growing wealth of the world, this could be economical and popular service between countries.

Skorup: Mercatus has done some work in supersonic. And I know Congress, and actually this administration has made supersonic a priority. So there's some interesting things going on. And on the aviation front, I'm a little more optimistic than on the ground.

Beckworth: Well, my question then is: How big of an effect will this have for trend growth in the United States? So on one hand, if we stick to the air taxi story, now you could throw Concorde in as well and that might make things a little bit more interesting. But we're talking about a service, a technology that works within the city, so it limits transportation across long distances. On the other hand, most of our economic growth takes place in cities. Right? So a lot of the country's GDP comes from busy places like New York City, San Francisco and so forth.

Beckworth: So let's say we get to the best case scenario for air taxis, for air highways. And it's highly utilized, it's auctioned off as you envision. So the best case scenario, do you see it making a noticeable bump in kind of trend economic growth?

Skorup: Yeah. I think this is a big attraction to higher speed aviation, whether it's air taxis or supersonic. When the world is networked, and I'll leave all of the empirical stuff to the economists, but it seems to me when you can reach more people more easily, when it becomes cheaper and more accessible to meet other people throughout the world, which would happen with autonomous air taxis, it seems like economic growth would substantially improve. If I can do more day trips, say, from my home in Arlington, Virginia, to Richmond and Baltimore and Philadelphia and New York, that would improve my productivity. And you just multiply that by all the people in all those cities.

It seems to me when you can reach more people more easily, when it becomes cheaper and more accessible to meet other people throughout the world, which would happen with autonomous air taxis, it seems like economic growth would substantially improve.

Skorup: And when you just make all these trips much more accessible, it seems like it's got to improve the economy. And just I think there's a lot [that] comes from face to face networking. And I expect you've seen that in traditional aviation. And I would hope that you would see that with urban air mobility, which is what they're calling this air taxi service.

Beckworth: Well, great. Well, on that positive note, our time is up. Our guest today has been Brent Skorup. Brent, thanks so much for coming on the show.

Skorup: Thank you for having me.

Photo by David McNew