It's not about HP, it's about torque..
So many people are hopelessly confused by this because of all the marketing over the years about "it has 200hp" etc.
HP is just calculated as Torque*RPM anyway, so it's not "real" in any sense.
Torque is a direct measurement of how much turning force the engine is actually generating.
Without forced induction (turbo, supercharger) the only traditional way to increase torque was to make the explosions bigger i.e. more engine displacement, which is why American engines are so big.
For years, they just kept making them bigger (not better) to get more torque.
More recently, computer controlled values (VVT), inlet runners, exhaust runners, etc. have improved volumetric efficiencies a lot, meaning you can eek out torque increases without increasing the size of the engine. Not surprisingly, this results in changes like we've seen at Jeep from 4.0 -> 3.8 -> 3.6 liters. The writing is on the wall for engines to keep getting smaller and more efficient.
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I find the really interesting cases to examine are engines like the original 2.0 in the Honda S2000 - the highest specific power engine ever in a production car (power per liter of engine displacement).
It was difficult for average Joes to drive (like a sports motorbike) because the torque curve was a huge spike, which means constant gear shifting to stay in the power band.
Sure it had lots of power on paper, but that didn't translate to usable power at all.
The next model had a bigger engine (2.3 I believe) and actually made less power - because they flattened out the torque curve, making it way, way, way better to drive.
-Dan