For-Profit Companies Must be the Backbone of the New Space Age
Not even outer space is free from cost overruns and red tape. Exploring the final frontier is notoriously expensive, and costs have a nasty habit of creeping upwards mid-project. But thanks to the private sector, this may finally change.
NASA recently announced that the Space Launch System (SLS), its next-generation rocket, will cost significantly more than originally anticipated. In a recent announcement, NASA confirmed that the rocket was expected to cost $9.1 billion, and the ground system for mission support $2.4 billion. That’s a 33% increase over estimated costs in 2017!
In contrast, the private sector has performed phenomenally in lowering launch costs. Between 1970 and 2000, the cost of getting to space was about $18,500 per kilogram. When SpaceX came onto the scene, however, things started to improve. The private launch provider has significantly reduced the costs of accessing space: By 2019, using its Falcon 9 rocket, costs had fallen to $2,720 per kilogram. Due to SpaceX’s innovations in reusable rockets, experts say launch costs might fall below $1,000 per kilogram in as little as five to ten years. The opportunity this presents for space exploration and development is exciting.
SpaceX’s successful launch of two NASA astronauts to the International Space Station in May and the astronauts’ safe return in August mark the dawn of a new space age. This shows that the private sector can and must play an increasingly prominent role in propelling mankind to the stars.
We need to reconsider the relationship between the public and private sectors in space exploration and development. Many observers contend that creating the scientific and engineering knowledge required for significant spacefaring activities is a public good. Once the knowledge is created, it is available for everyone to use. Also, it is hard to prevent anyone from using that knowledge, even if they don’t pay for the privilege. Because of this, goes the argument, governments have an advantage over markets.
But that reasoning betrays a misunderstanding of public goods. First, the public good argument suggests that, at most, the public sector should finance space exploration and development. But it doesn’t imply that the public sector should produce those things. Second, the arguments conflate knowledge with technology. The rocket equation is a public good. But the actual rocket is not. For-profit companies have a cost advantage at carrying out many of the tasks previously expected of governments.
The private sector is cost-conscious in a way the public sector will never be. The profit motive is a powerful mechanism for getting things done cheaply. In our space missions, we should redraw the boundary between government and private. At most, the government should set goals and conduct oversight. The private sector should execute. That way, we can get a robust and dynamic private sector that can bring humanity back to the moon, to Mars, and beyond, while respecting public international law.
Space remains the final frontier. Just as with the terrestrial frontier, private enterprise should be the driving force for exploration, development, and settlement. Existing international law requires governments to treat outer space as the “province of all mankind.” But given the massive strides made by for-profit space companies, the public sector should focus on refereeing and peacekeeping. The right combination of private entrepreneurialism and public vision will help us achieve things in space our grandparents only dreamed of. Our manifest destiny waits among the stars.
David R. Henderson
David R. Henderson is a Senior Fellow with the American Institute for Economic Research.
He is also a research fellow with the Hoover Institution at Stanford University and emeritus professor of economics with the Naval Postgraduate School, is editor of The Concise Encyclopedia of Economics.
David was previously the senior economist for health policy with President Reagan’s Council of Economic Advisers.
Alexander William Salter
Alexander William Salter is the Georgie G. Snyder Associate Professor of Economics in the Rawls College of Business and the Comparative Economics Research Fellow with the Free Market Institute, both at Texas Tech University. He is a co-author of Money and the Rule of Law: Generality and Predictability in Monetary Institutions, published by Cambridge University Press. In addition to his numerous scholarly articles, he has published nearly 300 opinion pieces in leading national outlets such as the Wall Street Journal, National Review, Fox News Opinion, and The Hill.
Salter earned his M.A. and Ph.D. in Economics at George Mason University and his B.A. in Economics at Occidental College. He was an AIER Summer Fellowship Program participant in 2011.
