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May 30, 2018

Economics (in space!)

The growing commercialization of space is an economic issue.

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Economic activity has expanded around the world, reaching nearly every part of the Earth. In a paper in the Spring issue of the Journal of Economic Perspectives, author Matthew Weinzierl discusses economics’ final frontier: space.

Weinzierl provides a framework for understanding the space economy and its development. He bases this framework on how economists study the role of government in market economies, which is surprisingly relevant. Like many economies, the space economy is transitioning from centralized control (under NASA) to a more diverse economic landscape today. In fact, NASA is turning over much of its control of the low-earth orbit to companies that aim to develop the space economy.

Throughout this transition, private-public partnerships have illustrated a promising way forward. The relatively new commercial space industry, which partners with and sells to NASA, has spurred a new era of nonsatellite-related commercial launches, as shown in the figure below.

Figure 3 from Weinzierl (2018)

This recent activity may signal that the space economy is about to take off. Of course, to continue this progress, new technologies must take advantage of their complementarities, such as low-cost launches and space habitats that rely on one another’s success.

The economic development of space is certain to face countless challenges, but this framework suggests it is more possible — and, to economists, more familiar — than many currently imagine.