The economics of space exploration

Deep space has a way of grasping the human imagination. Ever since the Sputnik satellite was launched by the USSR in 1957, the wonders of the universe have been a source of fascination to us mere earthlings, with every major discovery and achievement dominating headlines and making us feel both proud of mankind and in awe of how insignificant we are in the grand scheme of things.

But it all comes at a price. NASA has spent almost $1 trillion in today’s money since its creation in 1958, and many other countries such as Japan, China, Russia and India have space exploration programmes, as does the European Union. While lofty ideals of mankind’s quest to explore its place in the universe are frequently put forward as justification for the spending, historically the majority of the funds have been used on Cold War posturing and other military purposes. Destruction, not construction, has been the main beneficiary. More than $100bn was spent on the Apollo missions to explore the moon, with little of value to show for it – except for the fact that the US won the Space Race over the USSR. The space shuttles each cost $1.7 billion to build and $450 million to launch every time.

That is not to say that space exploration has produced nothing of value. Satellites have many commercial purposes, providing us with TV signals and GPS navigation. Water purification techniques that were developed for space exploration are saving lives in third-world countries. And it is true that whether exploration for the sake of exploration alone is worth it is a subjective question – not everyone agreed on the merits of sending Christopher Columbus off to eventually discover America either. So many will argue that the benefits are worth the cost, citing the things space exploration have indeed given, the scientific questions we may be able to answer or even the potential hedge planetary settlements would provide in case of a catastrophic event of the type that wiped out the dinosaurs. The question, however, is how do they know? As Ludwig von Mises showed us, without economic calculation; without a market to provide price signals, it is impossible for actors to determine whether what is produced is worth more than what is used to produce it. It is difficult to put a price on awe, pride and spiked curiosity. The experts, the academic community, are generally in favour of scientific projects with only potential benefits. But their judgement is clouded – wouldn’t we all love to be given billion dollar toys to play with as a job? George Mallory famously answered “because it is there” when asked why he kept trying to conquer Everest. Is it reasonable to let the public fund similar follies?

So the question is not whether humankind should explore space, but rather who should pay for it? Historically the public sector has funded the vast majority of space programmes, but that is slowly changing. Elon Musk, the founder of Tesla Motors, also set up Spacex, a rocket company with the ambition to found a colony on Mars. Amazon’s Jeff Bezos founded Blue Origin, which develops spacecraft. Richard Branson’s Virgin Galactic will send tourist into space. Facebook investor Yuri Miller is spending $100m of his own money in an attempt to find extra-terrestrial civilisations. All these ventures are commercial (or perhaps simply satisfying the wants of an eccentric billionaire), they are based on an understanding that accounts for risk and assesses the potential outcome vs. the actual market price of achieving the aims, and they put a value on those intangible concepts which you can only price when using your own money rather than that of someone else.

Indeed, private enterprise is very much capable of lifting the task of space exploration. Odds are that we would still have satellites today even in the absence of NASA and the Soviet space program, because the benefits would have been spotted by entrepreneurs. People with the risk appetite to undertake space exploration should be free to do so, and reap the benefits of it, whether economic or less tangible. But the public sector should stay away. That way no one is forced to fund a myriad of doubtful projects, when they would rather have kept the money and spent it on feeding their kids.

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