Rockets and profits: How corporations will make us a permanent spacefaring civilization

NASA’s Space Launch System (SLS), its next generation rocket, is having an ignition trouble, and the issue is money. Concerns over the cost of SLS show the importance of letting for-profit companies lead the way to the final frontier.

“The new development baseline cost for SLS is $9.1 billion, and the commitment for the initial ground systems capability to support the mission is now $2.4 billion,” Kathy Lueders, head of NASA’s human spaceflight program, recently announced. Commenters immediately noticed these estimates are 33 percent higher than the 2017 figures. The increase was significant enough that NASA had to give official notice to Congress. 

SLS is intended to get humans back to the moon, to Mars and beyond. Cost overruns are not unexpected with public sector programs, especially ones that push the bounds of the possible. And corporations are heavily involved with SLS, too. Yet it’s hard not to make a comparison to how companies like SpaceX solve these problems, when given enough latitude. The results are promising: years of falling launch costs.

From 1970 to 2000, the price of accessing space remained nearly constant. Escaping Earth’s gravity well cost about $18,500 per kilogram. But led by SpaceX, the private sector has significantly driven down that number. SpaceX’s Falcon 9, its reusable two-stage rocket, can deliver payloads to space for about $2,720 per kilogram. Furthermore, industry experts believe a cost of less than $1,000 per kilogram is on the horizon.

Going to the moon and beyond is harder than putting satellites into orbit or sending humans to the International Space Station. But while it’s not a perfect apples-to-apples comparison, the situations of NASA and SpaceX reflect what economists have long known about the differences between the public and private sectors. For-profit companies have a much stronger incentive to cut costs. After all, the company’s owners personally profit when costs go down. What’s not often appreciated is that this is good for the rest of society, too. Cheaper orbital access means we use fewer valuable resources getting to space. Hence, we have more resources left over to do other things. The combination of market mechanisms and corporate governance is a powerful device for slashing opportunity cost, giving society more and more for less and less.

This gives us a paradigm for the future of U.S. space activities: We must increasingly rely on private sector dynamism. While the public sector still has an important role to play, it should focus on setting the vision for space exploration and development, while conducting oversight. Execution should be the responsibility of the private sector. In other words, for-profit companies should drive U.S. space efforts, from mitigating orbital debris to building lasting settlements in the final frontier.

Public international space law gives states significant flexibility in pursuing their space activities. The foundational document is the 1967 Outer Space Treaty and has been called the “Magna Carta of Space.” Written at the height of the Cold War, the treaty envisions states as the primary actors in space. For example, Article VI of the treaty reads, in part, “The activities of non-governmental entities in outer space . . . shall require authorization and continuing supervision by the appropriate State Party to the Treaty.” This implies that the world’s sovereign governments are ultimately responsible for what their nationals do in space. But this is no barrier to private efforts to carry out space exploration and development. As space lawyer Laura Montgomery notes, Article VI is not self-executing, “This means that it is not enforceable federal law unless Congress enacts domestic implementing legislation. Congress would have to identify what activities require authorization and assign regulatory authority in this area to a particular agency.”

Recent efforts by the U.S., to promote private activities in space, including a 2015 law guaranteeing citizens private property rights to certain celestial resources, as well as a recent executive order “encouraging international support for the recovery and use of space resources,” are expedient domestically and lawful internationally. We can even envision a system of private commercial law in space for settling disputes among for-profit companies engaged in, say, lunar mining. What all these activities have in common is that they are spearheaded by the entrepreneurial vigor of the private sector. This is how we turn the space economy into a permanent engine of economic growth.

Ever since the reinstatement of the National Space Council, the U.S. government has actively pursued ambitious space goals. This includes promoting commercial actors to extend humanity’s reach to the stars. These efforts should be heartily applauded. This doesn’t mean we should retreat on public programs like SLS. But we should change how we execute them. Government should be content with being a customer. The public can and should decide where the rocket goes. But delivering it should be as privatized as possible.

Alexander William Salter is an economics professor in the Rawls College of Business at Texas Tech University, the Comparative Economics Research Fellow at TTU’s Free Market Institute, and a Young Voices Contributor. Follow him on Twitter @alexwsalter.