Some Reservations about the Economic Case

The Dimming of Starlight

Chapter 2f

Some Reservations about the Economic Case

The enthusiasm for the economic case has waned since the Golden Age of exploration, in great part because the Space Shuttle makes it too expensive to place things in orbit. It has been said that if the alchemist dream of the “philosopher’s stone” (to turn lead into gold) could be realized simply by taking the lead aboard the Shuttle, it would cost more than just buying the gold!

To make matters worse, the Shuttle has not been exactly a model of reliability. After the Challenger blew up in 1986, the U.S. began to use rockets regularly again. The Russian, European, Japanese, and Chinese space agencies of course use rockets also[1], but although rockets are cheaper than the Shuttle, they are still expensive ($10,000 per kilogram, as of 1995).[2] One of the main disappointments of the Space Shuttle is that it had been billed as the inexpensive option because it was partially reusable. Eventually we might be able to build cheap and reliable space vehicles, but the gap between promise and performance during the last 25 years does not encourage much optimism, although perhaps the successful sub-orbital flights of inexpensive privately built craft will usher in a new era in space.

Even during the Golden Age, however, these economic studies might have been too optimistic. Some of them were based on assumptions about the general relationship between R&D and economic growth, with the expenditures for space technology plugged in – assumptions not universally accepted by economists. And studies that try to account for the specific influence of space technology on a wide collection of industries must surmount serious difficulties. The first difficulty is that knowledge is the most common byproduct of space exploration. It is difficult to quantify knowledge, and even more difficult to trace precisely how it affects the economy as a whole. A few examples of such effects can be given here and there, but a comprehensive account is a great challenge.^[3]

The second difficulty is that space hardware’s effects on the economy are hard to trace because there is often a considerable lag between invention and assimilation, as it happened in the cases of television and penicillin. Moreover, the invention may undergo a series of transformations that are influenced by many factors, including other inventions from completely different fields, or the presence of special social and economic conditions. Catalytic converters to reduce automobile pollution, for example, depended for their acceptance on strong environmental activism in North America. In response to this activism, governments came to support the development of unleaded gasoline and passed laws against engines that used leaded gasoline. It also made automobiles more expensive. In many poor countries of the Third World, where the economic conditions are harsher, catalytic converters are a rarity.

Separating all these factors and settling all these issues is necessary before one can offer truly solid numbers to support the contention that space is a better investment than others that society may contemplate. Thus, in spite of all the money figures thrown around, with a few important exceptions such as telecommunications and navigation, the economic case is mainly qualitative,^[iv] even if some find it very suggestive.

However faulty the econometric and comparative studies may be, the space enthusiasts can find solace in the realization that once an aspect of space exploration is commercialized, its economic impact may be considerable: in 2001 space commercial revenues worldwide reached about $83 billion.[v] This sum by itself, however, does not reveal the economic growth it spurs in many other industries. For example, the Consumer Electronics Association had projected that by 2009 the wireless technology market (computers, cell phones, etc.) will amount to $500 billion dollars. This technology, of course, would not exist without the Internet and other services provided by satellites. It seems that, after all, the onus is on the social critics to explain why the economic justification of space falls short of the mark.[vi]

---

[1] They are being joined by Brazil and several other countries.

[2] For a spirited discussion of these matters read R. Zubrin, Entering Space: Creating a Spacefaring Civilization, Tarcher/Putnam, 1999, Chapter 2. His source for the cost/kilogram is S. Isakowitz, Space Launch Systems, American Institute of Aeronautics and Astronautics, 1995.

[3]. Holman discusses this point in detail. NASA acknowledges it also, as can be appreciated in the agency's response to a critique of the Chase Econometrics study by the Government Accounting Office (GAO). In Holman and Suranyi-Unger's words, "NASA simply stated that the GAO results showed that because empirical measurements in economics is an inexact science, ranges rather than absolute magnitudes are important. (My emphasis.) That is how NASA justified its claim that the GAO findings [that the NASA R&D rate of return was about 25 to 28 percent, instead of the 43 percent claimed by the Chase Econometrics study] in fact, reinforced the results of the Chase Study." op. cit.

[iv]. A variety of authors have challenged the notion that space research stimulated the economy. A book of some fame in this respect was Amitai Etizioni's The Moon-Doggle, Domestic and International Implications of the Space Race, Garden City, 1964.

[v] G. Genta and M. Rycroft, Space, the Final Frontier? Op.cit., p. 26. The amount in question is about ten times the budget for NASA.

[vi] Reported by Caron Alarab, “Gotta Have It,” Detroit Free Press, August 25, 2005.