Economics of Space Travel

Kristian Dolghier

Mr. McCorkle

Post AP Economics

1/31/2017

Economics of Space Travel

Humans have wanted to go into space as long as we have had the ability. Countries put in billions of dollars in order to get into space first which resulted in the space race between the USSR and America. These missions were not in themselves profitable, but allowed them to show their superiority over the competition. Now, it is possible to be profitable in space travel. Sending satellites, like Facebook's satellite which was destroyed, can be a profitable venture which paves the way for future deals. SpaceX is the first company to reliably send rockets into space without any government backing. They have proved that it is profitable, and possible to do it. Due to the extremely high hurdle cost, major governments have been able to hold a monopoly on it. However, SpaceX has the backing of a major company which helped to finance the research and development. In the future, there may be space tours, space settlements, and even space mining. A government is not interested in these goals because they do not care about the profit they get from a project. Only a independent company will be able to run these projects efficiently and even at all. Other methods of profit are tours into space which allow people to experience zero gravity. Also if we are to establish a colony on mars, only a company that has large profits will be able to establish a steady population. A government funded site will be based on research, and not on population.

Space Travel is a needed, but expensive service. For years America and Russia poured millions into their space programs to set up satellites, and space stations. Recently SpaceX has joined in a market which was ruled by a monopoly by Russia. Now the US government has given SpaceX money to send stuff up into space. A company has now joined a market which previously was dominated with nations who had no incentive of profit. This led to a stagnation and a lack of improvement. Due to a high cost of entry, no companies have gotten enough baking to enter the market. It takes hundreds of millions of dollars to develop a rocket; money that cannot be easily borrowed. In this project, I will analyze the fundamental differences between a government run and independent company. I will look at the cost, the profit, and the volatility of each.

The economics of space travel

At the present time there is not a viable purely economic argument in favor of space exploration. With the cost of sending just one kilogram into orbit at between $5,000 and $10,000 (US 2013), access to space remains within the realm of governmental control. The cost of launching an object into space has not decreased since Apollo 11 went to the moon in 1969, and the cost of launching the space shuttle was a whopping $400 million a flight. This effectively allows governments (along with their associated bureaucracy and political chains) to control the space agenda, completely shutting out the private interests of capable, forward-thinking individuals and organizations.

Part 1: Should humans fly in space?

We have a choice: Does it make sense to spend billions on space exploration when the resources could be better spent on Earth? What are the trade-offs between social and scientific goals? Should we instead invest in infrastructure, education and poverty programs? Can basic economic theory shed any light on these questions?

Part 2: Can humans fly in space?

Are launch cost simply too high to make space colonies a viable alternative? Is it a practical option to become a space-faring society? Or, is the gravity well of Earth simply too strong and deep to make space travel possible? Also, space travel subjects humans to risks they do not usually encounter on Earth. Are these risks worth it? As both the Challenger and Columbia disasters have shown, the human costs of space travel can be extraordinary.

Part 3: Must humans fly in space?

Are the limits to growth on Earth so severe that mankind has no alternative but to colonize space? Will we run out of petroleum resources for example and be forced to travel to Titan (a moon of Saturn) which has seas of hydrocarbons in order to survive? Will we be better off living in space colonies?

Part 4: What it the proper role for government in space exploration

The US space agency was born in 1958 in the crossfire of debates over public and private roles in space and the Cold War with the USSR. This was the golden age of industrial policy. NASA has evolved since and may now become largely irrelevant. Should the US have an industrial policy that supports space exploration? Should international cooperation be pursued? What then is the role of the private sector? How can can entrepreneurs make money in space?

Part 5: Will we go to the Moon, Mars and beyond?

There are serious plans in the making for this endeavor but it will be costly. Will the US space agency support it or is the sacrifice in terms of cheaper robotic missions not worth the cost?

Soyuz U: $48M

Soyuz ST: $61M

Proton: $68M

Proton/Block DM: $95M

Virgin Galactic

Virgin Group founder Richard Branson is about as much of a shrinking violet as Donald Trump, so it comes as little surprise that Virgin Galactic has established its brand as nearly synonymous with space tourism. But what will a ride aboard SpaceShipTwo (SS2) be like?

Here's a sneak peek: After prepping for 2-3 days, travelers will board SS2 -- a 60-foot (18-meter), six-person rocket glider slung below VirginMothership Eve. This dual-fuselage aircraft, which stretches 140 feet (43 meters) from wingtip to wingtip, will climb to 50,000 feet (15,240 meters) before releasing SS2. SS2 will then kick in its rockets and hurtle to the edge of space (around 62 miles, or 100 kilometers) on a parabolic flight. After five minutes of weightlessness, the space plane will "feather," using drag to slow its re-entry to 70,000 feet (21,336 meters); from there it will glide to Earth and land airplane-style [sources: Chang; Chang].

As of September 2013, SS2 had tested well, successfully detaching from its carrier plane and rocketing to Mach 1.2 twice. Billionaire Branson says its first spaceflights will take place by early next year. Travel agents are standing by to take your reservations. A mere $250,000 secures your place alongside the 600 passengers already booked as of September 2013 [sources: Chang; Virgin Galactic].

Blue Origin

Quiet as the company might be, its whispers made NASA sit up and take notice. The space agency ponied up $22 million in second-round Commercial Crew Development funding for the strut-legged craft, atop the $3.7 million in first-round funding it awarded Blue Origin earlier to support development of a Launch Escape System (LES) and a composite crew module pressure vessel for structural testing.

Lockheed Martin, Boeing and United Launch Alliance

In October 2011, Boeing signed a 15-year lease to use a space shuttle hangar at Kennedy Space Center to build and oversee its Crew Space Transportation-100 (CST-100) spacecraft. NASA funded the ship via its Commercial Crew Development program to the tune of $110 million. Also on Boeing's to-do list: the core stage for NASA's Space Launch System, which the company will begin testing in January 2014 [sources: Matthews; Roop].

Sierra Nevada Space Systems
Sierra Nevada must be doing something right: In 2010, the company netted $20 million out of an available $50 million in NASA funding for preliminary development. In 2011, NASA added another $80 million in second-round funding. Moreover, its hybrid rocket engines, which powered SpaceShipOne on its successful Ansari X Prize bid, also propelled SpaceShipTwo on its two successful supersonic test flights in 2013 [source: Norris].

Space Exploration Technologies Corp. (SpaceX)

Once viewed as a dark horse, SpaceX moved to the head of the pack in the years following Dragon's historical orbit. In fulfilling its $1.6 billion contract with NASA to haul cargo to the International Space Station (ISS), the company set another record, becoming the first private space enterprise to send an uncrewed spacecraft to the ISS [sources: Kramer; MSNBC].

Orbital Sciences Corp.

Open the space catalog of Virginia-based Orbital Science Corp. and you'll find small- and medium-class rockets, along with launch services covering orbiting satellites, deep space probes and payload deliveries to high altitudes. Its clientele encompasses the commercial, military and civil government sectors, including NASA, with whom it secured a $1.9-billion contract to fly eight cargo missions to the International Space Station (ISS).