Saturday, July 9, 2011

The end of the Space Age?

Author's Note: I read the Economist semi-regularly. Occasionally I really react to an article. The below is one of those occasions. Of course, my reaction could be incorrect. But I would not be writing it if I thought so.

The lack of imagination, or rather, the lack of faith in the market evinced by The Economist in its July 2nd edition is astounding. They seem to forget that the major inventions that changed our lives for the better were not the result of government spending (not all of them, and I am not convinced by those who argue that the Internet could only have come about because of government spending with DARPA, because in an alternative history, humans desiring to communicate better and better may have stumbled upon it themselves and commercialized it much sooner, perhaps having us enter into a dot com bubble in the 80s instead).

For example, the steam engine. The railroad. Oil and gasoline. Insulin (from Eli Lilly). The automobile. The telegraph. The telephone. The copier. I'm tempted to say the computer, but that may have been started because of the government, though again, in an alternative history, I see no reason why it couldn't have been privately innovated initially for private consumption. Actually, for every single innovation funded by the government, I pretty much see the potential that it could have been funded more serendipitously by a venture capital firm. More haphazard and uncertain, liberal central planners would say. More spontaneous, consumer driven, and sustainable, I say, as a believer in markets.

Or maybe the Economist believes we're now in an era that only big bucks, coerced from taxpayers, can fund space innovation and exploration. If so, then why the hell has NASA technology stayed so far in the past, running on 70s and 80s era computers? Why the hell have they not iterated in their space technology? Maybe because there was no real incentive for improvement (no profits on the horizon since they were not a company selling a product), they didn't really improve. And hence why the space program kept using such old technology. The Economist themselves point out the error of a lack of P&L incentives when they mention the "benighted International Space Station (ISS), surely the biggest waste of money, at $100 billion and counting, that has ever been built in the name of science." If it had been conceived in the name of profits though, it might have been a different story.

So, in my opinion, it's high time to shut down any space program. The Economist itself points out in another article that people in the United States do not particularly care about it, which matters because right now it is their money the government, which runs deficits, is spending, or perhaps wasting from their point of view. Let private entrepreneurs risk their capital making something commercially viable, even if only for the rich, which is what Elon Musk and Sir Richard Branson are doing. If anyone has a chance of it, then it is the entrepreneurs. For if they make it a luxury good initially, proving the concept, would not the drive for efficiency and expanding one's market, as well as general technological improvement in other fields that may become applicable to space, end up causing a private entrepreneur to reinvest profits to make his product more and more available to the general market? That's what happened with cars and computers, after all (actually, nearly any market driven product, so far as I can tell, including phones, as shown in the video below). Why not let that happen with space? It just may take longer than the phone that was $4,000 (before adjusting for inflation) in the 80s when introduced, and now can be obtained for $39 with a contract, and maybe $100-200 without a contract. (Note: The prior example was a DVD player that sold for $300 and now sells for $50, or is unnecessary because you have a good laptop or just stream movies from Amazon, but I thought the cell phone example from the video was better. Also, note that the economy grew during this period when these products declined in nominal and real prices. So maybe, just maybe, price deflation is good, and does not necessarily lead to GDP deflation, unlike what central bankers seem to believe with their efforts to halt asset price deflation to what might be their equilibrium level.)

At the end of the day, maybe the Economist is too zero-sum. Or maybe they believe some problems just can't be solved by the market, by private entrepreneurs seeking to make a profit. (How many people really want to travel in space?). I, on the other hand, am more an optimist. And maybe many people don't care about space right now. But if the price becomes right, that market will probably expand, like other markets have. I am not ready to write off the end of the Space Age because indebted governments that have to borrow to pay their bills decide not to fund a space program any more. I believe that entrepreneurs have the best chance of delivering space to us, as has happened before. And while people may think the market is not there, that's why private people should risk their money - they're the only ones who lose if they're wrong, whereas everyone loses if it is the government spending the money.

NB: Ultimately, our society was not formed via central planning. The ships that navigated the Atlantic with colonists were privately chartered ships from England and the Netherlands (not sure about France and Spain). The colonies that arose that were successful were the ones with more freedom to do as they would. So it could be with space. Central planning is probably not going to create a vital, vibrant frontier that people want to explore. Private entrepreneurs who create the ships and make them cheap enough to charter ultimately will, and then those pioneering people with capital who always seem to emerge in a society allowing some freedom go ahead and create a life on that vibrant, dangerous frontier where a world of opportunity exists. They existed in the 17th and 18th century, why not now or in the future? It's happened before, after all. On Earth.

Also, I did not see this video until after I wrote this in an email to a friend, but I find that it eloquently expresses my point about markets and how they deliver valuable stuff we desire at incredibly cheap prices, given the chance. (H/T CafeHayek for the video)

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