Solar System Economics! But why?

The 17 miles high Olympus Mons volcano on the surface of Mars

On October the 18th I am giving a talk at the annual Mars Society conference held at the University of Southern California campus in Los Angeles on the perhaps slightly unusual topic of Solar System Economics. Here is a quick look at why this is an interesting, if only slowly emerging, field and why it offers an interesting and exciting opportunity to play around with economic models from your classroom that might just make your teaching even more inspiring.

Second space-race

We are currently at the start of something that has been dubbed the “second space-race”, in reference to the “first space race” between the superpowers from 1960-1970. The first space-race effectively ended when the United States achieved the goal of landing a human crew on the Moon and returning them safely to the Earth. Though space exploration did not stop and robotic probes went on to explore many of the other worlds in our Solar System, human spaceflight returned to the narrow confines of what is called LEO, Low-Earth Orbit. For all the technological prowess of the International Space Station, it orbits barely a few hundred miles above the Earth’s surface whilst Neil Armstrong’s footsteps on the Moon are at least a few hundred-thousand miles away.

The Solar System

The second space-race that is gaining momentum at the moment is one between private firms as well as between the private and the public sector. Probably the most visible and most ambitious of the private sector space industries is SpaceX, founded by Elon Musk also known of Tesla Motors. SpaceX was the first private firm that managed to send a satellite into orbit on a self-developed Falcon 1 launch vehicle just a little over a decade ago. Since then they have developed and are successfully exploiting the much more powerful Falcon 9 and Falcon Heavy vehicles and by now have a roughly 20% stake in the market for satellite launches. However currently under construction is their “Starship” launch vehicle which would be the first new vehicle to exceed any of the capabilities developed during the first space race. Not only that, it would also be the first fully reusable launch vehicle.

The Falcon 1 to Starship + Big Falcon family of SpaceX vehicles

Game changer & what is the new game

Launch vehicles like the Starship, and its ‘big Falcon’ booster, with their full reusability would be a game—changer. They would reduce the cost of satellite launches and journey’s into space to essentially fuel cost and maintenance. The already partially reusable Falcon 9 and Falcon Heavy have already slashed launch costs by a factor of 4 or 5. Full reusability would do so at least by another factor of 4 or 5 and likely even a factor 10. The cost of bringing 1 kg into LEO used to be around $10,000, now it is closer to $2500 with Falcon Heavy but before this decade is out we could see it drop to about $250. At that price it would be cheaper to send a human being into LEO then for a climber to climb Mount Everest.

These developments have led to a race between firms and state-actors like ESA and NASA in delivering these cheap, reusable launch vehicles and mission-vehicles. It opens up the genuine perspective of human settlement beyond the confines of the Earth coming in reach within the next decade. Given the vast amount of space and resources ‘out there’, opening this ‘door’ is likely to have a profound economic effect on Earth and on those who stay behind as well as on those who decide to go.

So what is there in this for economists?

The perspective that humanity could become a multi-planet species within the lifetime of our current undergraduates raises many questions of an economic nature that haven’t been asked in this form before. Should we do this? What are the costs & benefits of this? Those questions were there ever since the 1960’s. But now new questions emerge such as: what is the actual value of having humans live on the Moon, or on Mars? How would trade between planets work? Are planets even the most natural places to start new economies? How do legal institutions adapt when humanity is scattered across different planets? And many more.

At the conference I will talk about two of these; How do we calculate a net-present value of these new opportunities that might open up if we muster the courage to go? But also, What could a Solar System Economy look like? It is interesting to apply trade models, such as the Heckscher-Olin model and the Gravity Model to the trade between planets. It requires us to think about what defines the ‘distance between two economies’ when both of them are situated not at fixed locations but moving around in orbits.

The Mars-Moon-Earth deltaV map
A Solar System deltaV map

One relevant distance measurement between ‘orbits’ is that of the “deltaV”, the amount of speed-change necessary to move from one orbit to the other. If we look at a solar system map, or at the Mars-Moon-Earth map, of “deltaV” distances between these objects and the orbits connecting and surrounding them we get an inkling of where in the Solar System we might settle the capital intensive industries, where we might have the labour intensive productivity and what the future trade-routes might look like.

Educational and research fun

Thinking about these questions is not only possibly relevant for a not-too-distance future. It also allows you to look with very different eyes at some pieces of economics and even textbook economics and ask yourself all kinds of interesting, even when slightly weird, questions about the models we use, the assumptions that go into them and the degree to which these assumptions hold in the alien environment of a Solar System Economy.


1] The 17 miles high Olympus Mons volcano on the surface of Mars
2] The Solar System
3] The Falcon 1 to Starship + Big Falcon family of SpaceX vehicles
4] The Mars-Moon-Earth deltaV map
5] A Solar System deltaV map

Please contact Dr. Frank Witte

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