The Economics of Space

Is there an economic incentive for us to colonize Mars? This came across my social feeds by way of The Mars Society, so you can guess that, in general, the answer is going to “Yes.” Let’s dig in.

Mars or bust?

So this article is more or less what you’d expect to get from economic analysts (sorry, is my bias showing again?). That is, there’s not really a major punchline about the potential economic return for a major investment in the colonization of Mars. There is a general discussion about the decline in the relative fraction of the U.S. budget that corresponds to NASA’s spending (which I’ve also talked about before). And then a general statement that the capital availible to the world is at an all-time high and so we might expect reduced returns on investment because there’s simply too much capital. Which is a slightly oddball way to look at it since most of the global central banks routinely print money (i.e. inflate capital) as part of the monetary policies.

And that’s it. It seems to me that there’s an important part missing that someone who’s ostensibly a fincial analysis should have covered.

What kind of ROI can we get from space?

A two second Google search digs up a pretty awesome comparison article showing that for every $1 that’s invested in space exploration and space science we get a pretty decent return on investment. (Though I note that I can’t find the underlying studies that report the ROI, but the numbers quoted range from $7 to $14). I won’t settle on an actual number here since I can’t find any hard data, but you can get a general feel for how spending on getting us to space generates good spinoff technologies.

Why go now?

So the main takeaway from the article should have been: Why on earth are we leaving all of this money on the table? Every cent that we spend on advancing space exploration is actually invested here on Earth. Just because a probe costs $500M doesn’t mean we’ve loaded up $500M in currency onto a rocket and shot it into space. The materials cost for exploring space is generally pretty low; it’s the development and the labor that’s usually the major spending hurdle and all of that money gets reciculated into the local economies (fair warning: I’m someone who gets paid by investment like this, so…I’m biased).

There’s also plenty of arguments that moving into space makes sense. You can certainly start with this article that demonstrates how astronomy itself can move into the professionally applied sciences.

Should it be what’s next?

I’m not sure that we’ve ever been in a place where an infusion of cash into space exploration makes more sense. With the relatively paltry amount of money that we’re spending on space right now private companies like SpaceX have already shown what a new generation of aerospace engineers can do. This is not at all unlike how things were back in the Mecury/Gemini/Apollo days at NASA.

So why not make this the next thing that we (as a species) do? For the U.S. it seems like a no brainer to me: how is it that making rockets and space parts here is not something that we’re all excited about doing?

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