Tuesday, August 10, 2004

Never Underestimate the Power of the Market

Yesterday I posted an article questioning NASA’s role as a government entity as NASA recently released pictures it took of Saturn’s rings. I implied that NASA’s return on an investment of billions of dollars wasn’t worth it. My criticism of the Space Agency was met with a few comments, two of which challenged my conclusion, both of which were Anonymous.

The second Anonymous not only had the longer and more involving argument, s/he also built off the previous comment which was “the billions of dollars we spent on pure scientific endeavour probably would have gone to bloated defense programs, or something else you libertarian-types would have found equally objectionable.” It’s true that “us libertarian-types” do find a great deal of government spending objectionable for a very basic reason: governments have a hard time assessing value. I can illustrate why by exploring what really would happen if NASA was disbanded.

Let’s suppose that there’s a paradigm shift in the minds of the people and/or our congressional leaders. It’s decided that NASA just isn’t worth the money and is dicountinued, freeing up billions of dollars in the federal budget every year. Like what happened when the government ran a surplus four years ago, everyone has a different take on what they should spend the money on. Some groups will want tax cuts, some will want to pay back the deficit, some will want more public lands, some for education, some for health care, some for things we couldn’t possibly imagine and, yes, some for defense. Most likely the billions will be split between all these interest groups based on what is politically feasible. And that’s the point. Politicans make their descions based on politics, not economics. While the vast majority of them are good intentioned, they are ultimately misguided because the lack the knowledge, rationality, power and incentive to make decisions that help the most people. (I know, dear reader, that you might have a problem with me claiming what’s economic is also best for society as a whole but trust me, it’s true. Explaining why is a whole other article.) My favorite examples of politics over economics are farm subsidies, tariffs, immigration laws and, of course, NASA. All of these concentrate benefits to handful of citizens while punishing the rest of society.

The second Anonymous continues his/her argument with the three following assumptions: space has zero profit potential, pure knowledge has zero profit potential but is more valuable than knowledge for an applied purpose and private firms cannot do a better job at space exploration than governments. Let me address these one at a time.

According to Anonymous, “[i]t isn't the lack of relevance or lack of technology that keeps the private sector out of space science, it's the complete lack of revenue.” That’s flatly untrue. It really is the lack of technology that keeps the private sector out of space (until recently). The widespread interest in the X Prize and the attempt by former pop singer Lance Bass to travel into space demonstrates that traveling to space could be very profitable. True, right now regular travel to space is economically unfeasible but its feasiblity may be just around the corner. Traveling to space is a really cool idea and people will pay for it, as they pay to travel to the most isolated places on earth. Just as the Wright Brothers thought widespread airtravel was a fool’s fancy and IBM’s top brass thought no private person would want a computer (let alone be able to afford one), declaring that privatized space travel is impossible merely sets one up to be embarassed in twenty or thirty years. Even if we set aside tourism, there’s still several different possiblities for profitablity, most of which we can’t envision because we lack the knowledge and incentive to really sit down and be creative enough to think of them. But if you want an inkling, two possiblities are low-gravity manufacturing and asteriod mining (something environmentalists should be happy about).

Anonymous’s implication that pursuing knowledge for its own sake is somehow better than researching for profit lacks cohesion. Discovery is a wonderful, powerful thing and it doesn’t become less so if the scientist/explorer/engineer learns something that’s profitable. Those people aren’t worth less, either. Drawing the line between knowledge for knowledge’s sake and knowledge for profit’s sake is harder than one may think. Anonymous asks, “how would you plan to profit from uncovering the origins of the solar system?” S/he is not the only person that finds “unappliable” knowledge interesting. Millions of people visit musuems ranging from the Air and Space Museum to dinosaur parks to arecehological sites every year and they are willing to drop donations and/or pay for it, too. The success of the History and Discovery channels, as well as TLC turn so called knowledge for knowledge sake into profitable applications. Pure knowledge is really interesting, especially when we are discussing something as powerful and romantic as the origins of the universe.

Anonymous claims “a probe from a private company wouldn’t be able to get there any faster,” suggesting that government-funded space travel is the best people can do. But if there are incentives, like the incentives I suggest above, competeing firms can do amazing things. Individuals and private companies disproved the pessimitic claims of the Wright Brothers and IBM, giants in their respective fields. X Prize contenders created new, more powerful rocket fuels, self-learning software and a new rocket engine, as well as other creations. Because there are many autnomous groups pursuing the same goal, the full range of possiblities can be explored at the same time with no coersive costs to the average person.

While Anonymous was correct when s/he said that knowledge, not pictures, was the most important part of craft, assuming that knowledge is worth “billions and billions” illustrates my point. I think the knowledge is worth significantly less than that. Some one else might think it’s worth more. Who’s right? No one knows because value is determined through the collective action of millions of people, not by interest groups or governments. Only by setting the process to a market environment can society discover how much the data is worth. And when it comes to discovery, I’m sure everyone, especially Anonymous, can appreciate the process.


Chris said...

Well put, David. My thoughts exactly.

-Ron said...

Rings and Things: another endeavor proves the peripheral nature of NASA funding

Ahh, the rings of Saturn. They are breath-taking indeed. And I think that nearly everyone, even we libertarians, will concede the awe-inspiring nature of the universe – regardless of who took the picture. That said, I have been reading Mr. Youngberg’s posts about NASA, and they have made me think of corollary, and indeed, another acronym: SETI, or the Search for Extra-Terrestrial Intelligence.

Regardless of whether or not you, like Carl Sagan, think there is sentient life “out there” or not, there are without doubt those who do. And they believe this ardently. So ardently, in fact, that they invest millions of dollars each year to rent time on the world’s largest antennae arrays, in an effort to eavesdrop on little green men. Sine the mid-1990’s, when the government (thank God for small miracles) decided that this was a waste of taxpayer money, SETI has been a completely private and philanthropic endeavor. In other words, those who wish to donate their hard-earned cash to play peeping tom to the universe, do so at their own non-taxed, and non-coerced leisure - and to the tune of millions of dollars each year, at that.

What is the lesson here? That while pictures of ringed planets and planetary rovers certainly play well for NASA press releases and Washington budgetiers, this in no way proves that NASA is the only one who can accomplish such feats. Or, for that matter, that it is unlikely that some other entity would not be able to pick up the mantle. I believe that SETI proves that even a cash-hungry money-gobbling enterprise – as our first steps into space will inevitably be – can be absorbed by the private sector. For surely if a bunch of crazy Saganites can cough up millions through mail-order donations then surely someone like Microsoft, with its $35 billion dollar nest egg can do no less – if it’s in their interest to do so. Mr. Youngberg offers the mineral wealth of asteroids and planets, and space tourism as examples of where this market might meet a demand. I think he is right on target.

I would offer another, perhaps more simple one: human nature. Man is an explorer by nature. Anonymous says s/he prefers pure research – but research is but one expression of a larger impulse imbedded in the psyche of man to explore his universe. I have no doubt that man’s destiny lay in the stars. I tend to think that we aren’t quite there yet, and that NASA simply is forcing forward something that was coming down the pike anyway. But in that lays the clincher: that government is acting in such as way as to squeeze us quite artificially into something that, by and large, the human race hasn’t decided it’s ready for. The proof is that we haven’t seen it fit to ante-up on of our own volition. Why not let the market – which is really just another way of saying man – why not let man, human kind, get there when ‘we’ are ready.

Plenty of writers and visionaries have been ahead of their time. They dream and envision, but frequently they are just simply born too soon on the time horizon to see those dreams realized. And yet, they are often the voice that sparks the world to move in that new and visionary direction. And the dream of the past becomes the reality of the future. I say let those few driven individuals of the world be content to sound the call to space. But must the rest of us have to pay their trillion-dollar price tag to bring them their dream, tomorrow’s dream, on a government-funded silver embossed tray? Perhaps more importantly, is that even wise?

Finally, a word to the aforementioned Anonymous 2 about NASA and bloated military spending. I am not entirely clear whether you are for or against military spending; but in the off-chance that you are, let me offer you this. There has been no greater friend to the military than NASA. In fact, the sole purpose of their creation was military in nature (the development of rocket technology for nuclear weapons) and remains largely militaristic even today. Half or better of all NASA shuttle payloads are military or government spy technology, weapons platforms, or other military support apparatus. Also of note: all shuttle mission leaders are military personnel. You will note that space missions have never been fully televised, despite that the technology to do so has existed for decades. Heck, we saw the moon landing didn’t we (didn’t we!?!?!). This is largely because NASA knows full well that their continued funding rests largely on the illusion that they act as a civilian branch of government. This, however, is not the case. So consider this: based on past performance, this stock’s future suggests that whatever it is we are doing on the moon, Mars, Saturn, or anywhere else under NASA’s purview will most certainly be military first, and civilian tenth. Just something to ponder.

- The Great Ron