The first launch of the Starlink broadband satellite constellation in May marks the beginning of what will soon be a multitrillion-dollar space economy. Following on its heels, NASA recently announced it will permit private companies and tourists to utilize the International Space Station. The space economy is here, and the opportunity is overwhelming: New markets, new systems, and new innovations have the potential to transform civilization, offering greater wealth for society, as well as potential solutions to climate, energy, and resource problems. The promise of the space economy is huge.
It is widely recognized among those who have studied space policy that for successful economic development, what is needed is an entrepreneurially driven, competitive market system, the decentralized model. But this requires the right “rules of the road,” the institutional framework that facilitates a competitive market system. To flourish, the space economy requires political reform to establish a legal framework that fosters imagination, entrepreneurial innovation, and a free market, not government direction and central planning.
The basics that need to be established are these:
- Rules that allow development of private property rights, including intellectual property rights, over space assets, such as installations on celestial bodies, positions within orbits, and spots on the electromagnetic spectrum.
- Title registries and rules for enforcement by courts of law.
- Markets for trading these assets to facilitate employing them where they’ll create the most value for humanity.
These are necessary for a sustainable space economy. Competitive markets direct resources to where they create the most value and curtail loss-making projects that consume resources more valuable than the output they create.
But private property rights and markets can also solve some of our current challenges in space development.
For example, consider the problem of space debris: defunct satellites and pieces of material that threaten to clog valuable orbits. The current Outer Space Treaty recognizes that space junk is the responsibility of the launching nation, and this principle can be extended to establish that national and private ownership and liability for satellites remains, even after they’ve been rendered inoperable. With liability and enforcement, owners of satellites will have incentive to address disposal of defunct satellites, either directly or by contracting with others to do so. Thus startup firms working on junk de-orbiting, reuse, and recycling are promoted by the institutions of private property rights to purchase or be paid for junk, and contract for its removal. The establishment of general law, property rights, and an enforcement mechanism are all that is required to incentivize entrepreneurs to keep “open skies” over Earth in a cost-effective way.
Further, consider crowding of low Earth orbits and geostationary orbits. Orbits and trajectories are subject to scarcity and are currently open access, but defining tradable rights over them solves the crowding problem. High-value orbits such as geostationary slots are already well on their way to being definable “land” that could be owned and exchanged. Tradability would ensure they’ll go to the highest valued uses. Conversely, allocation by a space regulator would direct them to those with political clout rather than value. Establishing property rights for these limited resources will drive growth and cooperation, while planning would only stunt and distort their utilization.
Similarly, private property and markets offer a solution to the issue of electromagnetic spectrum allocation. Once divided and allocated, the spectrum could be privately purchased and exchanged. This may be why FCC Chairman Ajit Pai has indicated his desire to accelerate spectrum auctions, including bandwidth for space and 5G.
Widespread auctions would open critical resources for development and allocate resources to the highest-valued uses through market transactions. Many astronomers currently object that commercial use of physical space and the electromagnetic spectrum will block scientific research. Tradable property rights would help solve this issue by permitting these scarce resources to be allocated to those who value them most by permitting positive-sum, mutually beneficial trading, rather than zero-sum political competitions. If researchers in basic science have insufficient wherewithal to compete in the market, it would make more sense to subsidize them and allow them to buy the assets most valuable for their activities, rather than impose a bureaucratic regulatory system that stifles the space economy in its infancy.
In the end, the expansion of space access and assets can benefit celestial observation, not harm it.
Market allocation might sound good, but why not use central planning and regulation instead? Instead of having the government establish rules of the road, why not have the government drive development?
While centralized planning might sound attractive to some, government planners have little incentive to get it right or improve their performance. They don’t bear the costs of poor decisions, nor do they reap the benefits of success. Without meaningful profit-loss signals, they can’t even distinguish between value-creating and wasteful activities. Moreover, regulators are susceptible to capture by special interests lobbying for privileges, slowing innovation by locking out startups and new competition. By comparison, free markets and creative destruction are results-oriented, and reward valuable research and innovation. Central planning would destroy the economic viability and sustainability of the nascent space economy. We need government to establish basic rules of the road for space, not drive.
The development of space resources certainly presents challenges, but property rights and free markets are superior to centralized decision-making. Entrepreneurs, disruptive innovators, and engineers, not central planners, are the ones who actually imagine and build economies, whether on Earth or in space. Politicians and regulators can never have more than an enabling role. So we say: extend basic laws and regulation minimally, humbly, and carefully, and let mankind boldly go.
Ross Hatley is a graduate of politics from Hillsdale College who writes on space policy. Charles N. Steele is an associate professor of economics at Hillsdale College.
