I must admit that I had always thought that liquid cooling was preferable for internal combustions engines as it provided a more stable temperature and therefore allowed the engine to develop more power and reliability.
In all combustion engines, a great percentage of the heat generated (around 44%) escapes through the exhaust, not through either a liquid cooling system nor through the metal fins of an air-cooled engine (12%). About 8% of the heat energy finds its way into the oil, which although primarily meant for lubrication, also plays a role in heat dissipation via a cooler
Most liquid-cooled engines use a mixture of water and chemicals such as antifreeze and rust inhibitors. The industry term for the antifreeze mixture is engine coolant. Some antifreezes use no water at all, instead using a liquid with different properties, such as propylene glycol or a combination of propylene glycol and ethylene glycol. Most "air-cooled" engines use some liquid oil cooling, to maintain acceptable temperatures for both critical engine parts and the oil itself. Most "liquid-cooled" engines use some air cooling, with the intake stroke of air cooling the combustion chamber.
Comparing air and water, air has vastly lower heat capacity per gram and per volume (4000) and less than a tenth the conductivity, but also much lower viscosity (about 200 times lower: 17.4 × 10−6 Pa·s for air vs 8.94 × 10−4 Pa·s for water). Continuing the calculation from two paragraphs above, air cooling needs ten times of the surface area, therefore the fins, and air needs 2000 times the flow velocity and thus a recirculating air fan needs ten times the power of a recirculating water pump. Moving heat from the cylinder to a large surface area for air cooling can present problems such as difficulties manufacturing the shapes needed for good heat transfer and the space needed for free flow of a large volume of air. Water boils at about the same temperature desired for engine cooling. This has the advantage that it absorbs a great deal of energy with very little rise in temperature (called heat of vaporization), which is good for keeping things cool, especially for passing one stream of coolant over several hot objects and achieving uniform temperature. In contrast, passing air over several hot objects in series warms the air at each step, so the first may be over-cooled and the last under-cooled. However, once water boils, it is an insulator, leading to a sudden loss of cooling where steam bubbles form (for more, see heat transfer). Unfortunately, steam may return to water as it mixes with other coolant, so an engine temperature gauge can indicate an acceptable temperature even though local temperatures are high enough that damage is being done.
An engine needs different temperatures. The inlet including the compressor of a turbo and in the inlet trumpets and the inlet valves need to be as cold as possible. A countercurrent heat exchange with forced cooling air does the job. The cylinder-walls should not heat up the air before compression, but also not cool down the gas at the combustion. A compromise is a wall temperature of 90°C. The viscosity of the oil is optimized for just this temperature. Any cooling of the exhaust and the turbine of the turbocharger reduces the amount of power available to the turbine, so the exhaust system is often insulated between engine and turbocharger to keep the exhaust gases as hot as possible.
The temperature of the cooling air may range from well below freezing to 50°C. The cooling system is designed to vary cooling so the engine is neither too hot nor too cold. Cooling system regulation includes adjustable baffles in the air flow (sometimes called 'shutters' and commonly run by a pneumatic 'shutterstat); a fan which operates either independently of the engine, such as an electric fan, or which has an adjustable clutch; a thermostatic valve or just 'thermostat' that can block the coolant flow when too cool. In addition, the motor, coolant, and heat exchanger have some heat capacity which smooths out temperature increase in short sprints. Some engine controls shut down an engine or limit it to half throttle if it overheats. Modern electronic engine controls adjust cooling based on throttle to anticipate a temperature rise, and limit engine power output to compensate for finite cooling.
Finally, other concerns may dominate cooling system design. As example, air is a relatively poor coolant, but air cooling systems are simple, and failure rates typically rise as the square of the number of failure points. Also, cooling capacity is reduced only slightly by small air coolant leaks. Where reliability is of utmost importance, as in aircraft, it may be a good trade-off to give up efficiency, durability (interval between engine rebuilds), and quietness in order to achieve slightly higher reliability — the consequences of a broken airplane engine are so severe, even a slight increase in reliability is worth giving up other good properties to achieve it.
Cheers
John