On The Economics of the Space Industry

I knew very little about the space industry, let alone its economics, before reading the piece that I am going to speak about today. And that’s one reason I enjoyed reading this guest post in Not Boring so much, about the space economy.

The second reason I enjoyed reading this so much is because it is a rare combination of three things: it was in-depth, it was informal and it was informative. That takes skill, and reading it was therefore a pleasure.

I’d strongly urge you to take an hour ot two out of your week to read the whole thing at leisure. What follows are points that interest me, and that I have made notes of – but this is something I really do think you should do for yourself too.

Before we begin, I question that I have thought about after reading this article. What, I asked myself, is the chance that I will get to experience space tourism in my life? The question would have been hilarious in the 1990’s, when I was in school, and while it still seems fanciful right now, I’d go as high as even 10%. And for my daughter during her lifetime, I’d put the chances at above fifty percent. What a time to be alive.

  1. I’d memorized during my school quizzing days the name of the first dog to go into space (Laika). I learnt while reading this article that Sputnik-2 didn’t have any “Earth return capabilities”, and I felt very sad indeed.
  2. NASA had a predeccosr called NACA, and responding to the Russian advances in space in the late 1950’s necessitated the formation of a new organization. I found this to be very interesting.
  3. “Astronauts were living legends and international celebrities. They drove (or, more accurately, raced) Corvettes across town in Houston.” James May had a lovely segment on this in one of the episodes in The Grand Tour. The reverence in his voice as a he drove the very same Corvette that was once owned by Neil Armstrong (I think it was NA’s) was wonderful to behold.
  4. NASA’s budget in its heyday was 4% of all US federal government spend. It is now at 0.4%.
  5. COTS, or Commercial Orbits Transportation services, and the incentives offered by that program have resulted in Starliner’s $/kg in 2021 to be about the same as that of Mercury, in 1961!
  6. I learnt about flippening.
  7. The value in space exploration is mostly about driving benefits back to earth: GPS, transparency about what is happening back on earth, fighting climate change, and spillovers. Speaking of spillovers, here’s a useful list.
  8. Turns out you can see cow farts from space!
  9. The Russo-American conflict has not been good for space exploration, and the Chinese are doing some really advanced stuff. Speaking of which, I also learnt about hypersonic glide vehicles.
  10. The chart below this paragraph doesn’t show India’s budget separately. I wish this were not so.
  11. The economics of funding space startups is (surprise, surprise) very different. But that being said, read the section that comes next very carefully, and then take a look at this talk, and this book.
  12. The launch cost curve is encouraging, as is the satellite cost curve.
  13. Take a look at the market map below this paragraph to get a sense of the firms working in this (n.p.i) space.
  14. I had no clue space manufacturing was a thing!
  15. SpaceX will “not recognize international law” on Mars.

Again, I strongly encourage you to read the whole thing yourself, and take your own notes. If you are a student of finance, for example, the sections on funding, business models and risks deserve a deeper dive.

Links for 9th April, 2019

  1. “What is not useful is the sense that measuring GDP is the problem, and measuring gross national happiness is the solution. Few societies have ever really focused on either. We should all be happy about that.”
    Tim Harford reminds us that the truth lies somewhere in the middle. In this case, the article is worth reading for understanding how GDP can’t really be measured, and how that may not be a bad thing. In addition, please read the article to understand that Bhutan probably isn’t all that “happy” a country in the first place!
  2. “Given the pressure on all unions to negotiate higher-than-average wage increases, using monetary policy to reduce inflation would inevitably aggregate spending to fall short of the level needed to secure full employment, but without substantially moderating the rate of increase in wages and prices. As long as the unions were driven to negotiate increasing rates of wage increase for their members, increasing rates of wage inflation could be accommodated only by ever-increasing growth rates in the economy or by progressive declines in the profit share of business. But without accelerating real economic growth or a declining profit share, union demands for accelerating wage increases could be accommodated only by accelerating inflation and corresponding increases in total spending.”
    Monetary nerds only, it should go without saying! David Glasner runs a blog called Uneasy Money, which is well worth reading, but only if you want to find yourself steeped in all things monetary. This post takes a slightly critical view of Arthur Burns tenure as Fed Chairman.
  3. “Amazon’s economists game out real estate decisions, set the lowest prices that will deliver a profit, precisely determine what customers care about and whether advertisements are working — all using machine-learning algorithms that automate decision making on a massive scale. It’s the kind of asset that smaller companies can’t always pay for, allowing Amazon to pull further and further away from the competition.”
    Amazon has, in case you didn’t know, probably the world’s largest collection of PhD’s in economics. This article helps you understand what it is that they do once they’re in Amazon. A helpful read if you are considering building a career in economics.
  4. “The White House explains why it’s predicting such big growth: the TCJA will cause a surge in business investment by “substantially raising the target capital stock and attracting increased net capital inflows.” And this rise in the capital stock will cause a surge in productivity. Except that there’s no sign of a surge in business investment: the report cherry-picks a few numbers, but overall orders for capital goods, probably the best real-time indicator, are showing nothing much (that 2015-6 slump, by the way, was about fracking, which fell off for a while when world oil prices plunged)”
    Paul Krugman is less than impressed with the 2019 Economic Report of the President, and provides data to show why he is less than impressed. The chart that follows the excerpt is worth looking at too.
  5. “There’s one biosignature that Seager, Guyon, and just about everyone else agree would be as near a slam dunk for life as scientific caution allows. We already have a planet to prove it. On Earth, plants and certain bacteria produce oxygen as a by-product of photosynthesis. Oxygen is a flagrantly promiscuous molecule—it’ll react and bond with just about everything on a planet’s surface. So if we can find evidence of it accumulating in an atmosphere, it will raise some eyebrows. Even more telling would be a biosignature composed of oxygen and other compounds related to life on Earth. Most convincing of all would be to find oxygen along with methane, because those two gases from living organisms destroy each other. Finding them both would mean there must be constant replenishment.”
    That’s just one of many, many excerpt-able pieces from a very long, but also very rewarding article about the search for ET. Take your time with this one – about an hour or so, and pay particular attention to the infographics.