Space, once dismissed as mere science fiction, is now a vibrant marketplace driven by economic incentives, decreasing launch costs, and emerging new markets, warranting more attention from economists, write Alessio Terzi and Francesco Nicoli.
Abstract
For too long, space has been dismissed as a science endeavour at best, and a delusionary science fiction fantasy at worst. In this article, we make three fundamental points. First, with strong commercial activity taking place in Low Earth Orbit since the late 1980s, space already today is a marketplace and therefore responds predominantly to economic incentives. Second, launch costs have been on a very steep downward trend hitherto, even by historical comparison to other transport technologies. Under a set of credible quantitative scenarios, leveraging Wright’s Law, we show how these costs are likely to drop further in a significant way by the end of this decade, and more so in the 2030s. Looking at it through a trade economics framework, we argue that we are entering a period where (space) trade frictions are falling, and new markets will be created as a result. Third, we propose a taxonomy to help think about the creation of further value added in space going forward. For all these reasons, we maintain that space should be worth greater attention by the economics profession.
