Why does an aircraft piston engine put out such low horsepower ?

Along with what richard b stated, there really has not been any new development of aircraft piston engines by american manufacturers in a very long time. there just is not the market for this product today that there used to be in the 60's and 70's. I think that Porche and Honda have developed more advanced engines than Continental and Lycoming, but you would need to look this up.