The Economics of Outerspace

Economics Schools Day

Dr. Ian A. MacKenzie

Why is outerspace so important?
Why is outerspace so important?
Why is outerspace so important?
Why is outerspace so important?

I satellites: google earth/maps, GPS,

Why is outerspace so important?
Why is outerspace so important?

I military
Why is outerspace so important?

I Weather forecasting
Why is outerspace so important?

I Scientific endeavor http://www.n2yo.com/

Why is outerspace so important?

I Scientific endeavor http://www.n2yo.com/

Why is outerspace so important?

I Scientific endeavor http://www.n2yo.com/

Classification of space debris
How much debris and where?
GEO
GEO polar
Problems of debris
What is the problem?

I costly damage to satellites

I Loss of services, e.g. weather forecasting, GPS, and so on.
The economics of space debris

Why is space debris a problem? Why has it occurred?

I Outerspace is a global commons: lack of property rights
I ‘Tragedy of the Commons’: overuse of outerspace
I The generation of satellites produces externalitites:
polluter does not take these into account in private choice

Resource Damage ‘polluter’

fisheries reduction in fish stock Fishermen
Air pollution worsening air quality Fossil fuel users
Outerspace reduction in ‘safe space’ space agencies
What are the goals to attain?

I What level of debris is ‘optimal’?

I Zero?
I Until there is an accident with debris?
I Somewhere in between?
I Given a target level, what is the ‘best’ way to achieve it?
I To ensure the target is met?
I To ensure political feasibility?
I Lowest possible cost?
I To provide incentives to incentivise debris mitigation prior
to launch?
I To raise revenue?
The optimal level of space debris

$
0 0
B (h) D (h)

0 h
h∗∗ Debris h∗
Solutions to the problem

I Aim: to reach target at the lowest possible cost

I Institutional governance structure limited
I International agreements
I Command-and-control
I Tax
I Coasean property rights
Tax

$
0 0
B (h) D (h)

0
B (h)

0 h
h∗N Debris h∗
property rights

$
0 0
B (h) D (h)

0 h
h∗N Debris h∗
Target debris at lowest cost

$
Marginal cost

p0

0 q0 abatement
Equi-marginal principle
MCb
$
MCa

t∗

0 e∗b e∗a e
Mitigation strategies

I Claws
I Nets Boosters
I Ion blasting
Conclusions
I Activity in space is vital
I Yet space debris is a big problem
I Economic is playing a vital role in organizing international
agreements and the control of space debris