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Government Space InvaderSpaceX is a private company that was founded in 2002 by an entrepreneur called Elon Musk. If you are interested in this story, search SpaceX in Wikipedia (it's close enough).


What is SpaceX?

SpaceX is a private company set up for the exploration and exploitation of space, holding a mid-term goal of inhabiting Mars. As the company is driven by a savvy entrepreneur, it is strictly based on commercial principles. Its goal is to make space travel cheaper, faster and safer. So far its track record is impressive, to say the least:

  • First (private) liquid propellant rocket to reach orbit (Falcon 1)
  • First (private) and successful launch of a vehicle into orbit with subsequent recovery (Dragon).
  • First (private) company to send a spacecraft to the International Space Station -ISS- (Dragon).
  • Delivery of satellites into geostationary orbit.
    Delivery of company's first object beyond earth orbit.
  • Various contracts with NASA for resupplying ISS as well as to develop a space "taxi" to carry people to and from the ISS.
  • Development of engines, bodies and support systems for all their "vectors" and satellite construction.

The company is expanding its operations aggressively into space-based Internet provision, commercial satellite delivery (50+ contracts) and investors such as Google and Fidelity.


By any measure of success, SpaceX is indeed a very successful (private) company. However…


Many people argue that SpaceX would not have been possible without the many decades of government-sponsored space exploration and trillions of (… insert your preferred hard currency here…) that made and keep making this possible. They argue that SpaceX simply piggy-back on existing technology which would have made SpaceX economically non-viable should they had to start from scratch. Furthermore, a great deal of SpaceX's contracts are with government organizations such as NASA. At this early age of SpaceX's life, anything that ensures profitability is critical. Many argue that without government contracts, SpaceX would have never taken off and it would have failed as a company.


The government at work.

All those decades of research and invested trillions are finally paying off.


Governments had the foresight, the initiative and the guts to look into the distant future and invest in it. We are now reaping the benefits.

And you know what?

They are absolutely correct!


You heard it. They are correct. SpaceX would not exist today should all those decades of space research not have taken place. SpaceX would be a footnote in the book of failed companies, without all those government contracts that it is taking in.

It is absolutely true that sometimes initial investment losses create domino effects leading to major economic waves. Space exploration is one of those waves. But even before we get there (and ignoring military applications) we need to point out towards communication satellites which make our lives so much easier today. None of that technology would have existed without the previous intervention of governments.

Therefore, government good, right?

Not a chance!


By now, you should expect that we will contradict ourselves sooner or later. But we do so with a purpose. There is a difference between a successful economic entrepreneurial activity, its total price and its timing. These things are separate and unique and we must understand them in order to understand reality.


Human beings are not stupid, at least those human beings capable of being entrepreneurs. This people will take whatever they can and make a profit. If pre-existing information (such as in the case of SpaceX) will help them, they will accept is cheerfully! They will do so because this information is, essentially, free! This will lower their manufacturing costs thus being able to provide a cheap product. The Law of Demand roughly says that demand of a product increases with its drop in price. In other words, the cheaper something is, the more will people buy. This is true with ham sandwiches, Rolls-Roys and satellites.

Thus, if SpaceX is able to offer a cheap product (i.e. a space delivery service) at a price that many people can afford, many people will afford it.

This has nothing to do with the "necessity" to use space. Many people argue that government-sponsored space programs were delivered just in time to satisfy our "current needs" for cheap space delivery services. This is, of course, ludicrous!

The only reason why there are more companies placing satellites in orbit today is not because they have some sort of "inalienable need" to do so, but because they can. There is no global master plan dictating how many satellites we "need" to have in orbit by 2016. This kind of thinking is preposterous, yet, this is exactly how many people think. Thus -they reason in flaw-, that governments were justified in their space spending for all previous decades.


The second element that we must understand it the actual, total cost of space exploration and delivery service. In the same manner that ecologists speak about the "total ecological footprint" of an activity, we must consider the "total economical footprint" of space exploration. Fair is fair.

If those people who argue that governments were justified in their spending continue to do so, then we are absolutely in our right to add all those trillions over the last few decades to the cost of each space trip, whatever the reason. This is so because we, the people, pay for those costs but we are not reaping the benefits. If we try to estimate the actual cost of all government-sponsored space-related programs throughout the world, since the whole thing began circa 1800's, we would (conservatively) tally something in the order of 20 Trillion USD (that would be 30.000 billion USD) or about 30% of the world GDP (assuming that the GDP is an actual, meaningful number - which isn't).

With this number in hand, let's perform a simple calculation. We know that the total number of satellites launched so far is in the order of 8000. Thus, if we divide 30.000 billion USD into 8000 satellites, we get the cost of 3.75 USD billions / satellite. This is the real "economic footprint" per satellite. This is how much we, the people, are paying for each satellite that is placed into orbit.

Now let's compare to current launch prices:

  • Chinese satellite actual launch price: 70 million USD
  • SpaceX satellite actual launch: 55 million USD

See the difference?

From 3.75 Billion USD to 55 Million USD there is a factor of "only" 70 times. Yes, times, not percentages.

How many companies do you think that would be able to afford to launch satellites for a cheap, cheap price of only 3.75 USD billions a pop? Not too many… which is to say that probably none!

We, the people, have subsidized those companies to the tune of 3695 million USD per launch. Did anybody asked you if you are OK with spending about 3695 million USD of your money per launch for other companies? Didn't think so. Therefore the total "economic footprint" of space exploration and use is actually horrendous! However, people advocating for the benefits that "government action" provides always fail to perform the actual accounting of wealth spent. What a coincidence…


And lastly, we have an issue of timing. We showed you before that there is no inherent "need" to have a number of satellites in orbit. There is simply an opportunity to do so as price drops. We also showed you the actual price of each launch, from which it is clear that the cost is ridiculous! Now we are going to look at timing issues. Reality dictates that governments already spent that capital (there is money back guarantee) and that companies want to send more satellites into orbits precisely because they can because the spent money made launches cheap enough. This is clearly a chain of events. But now let's remove the arbitrary initiator of this chain; the government. Let's assume for a second and for argument purposes, governments never went into the space business. There were no space developments. There were no space agencies. There were no space flights. Whatever happens is space is up to private entrepreneurs to make it happen. The question that we pose now is this; what would have been our need for space access in those circumstances? In other words, would our needs have been the same, lower or higher? This is important because if our needs would have been lower, then the timing of this technology is wasteful. We don't need it just now. If it is the same, then the timing is just right. If it is more, then the timing is late.

Of course, there is no way to answer this question with accuracy because we don't know how people would have reacted in those cases. However, we can look at what humans have done when faced with problems: they solved them anyway they could. This is not a hiccup or an exception but the rule. As such, we can say with certainty that should government-sponsored space programs would not have existed, humans would have solved most of the problems we solve today from space in a different manner. Based on this, we can approximate our question and state that yes, our needs would have been smaller. This is so because we would have solved a great deal of problems without the need for satellites. Of course, not all problems can be solved without satellites, but a great deal of them can. Thus, the timing of government-sponsored space programs was off. Way off. We did not need those programs and it is doubtful that we need them today.

Let's take one example. One of the biggest SpaceX projects is to provide internet access to people from space, using approximately 4000 cheap satellites. Great! Global reach. Everybody on earth will be able to connect to the internet, regardless of where they are. But, and here comes the issue, most people are already doing do. Most people have internet through telecom companies. A small minority through phones and satellites and a few isolated placed don't have it.

This is a clear example as to how a market solves problems in any way it can as cheaply it can. The reality today is that most people on earth have internet without a massive amount of satellites. Period.


Yes. SpaceX is a direct derivative of Government action. Without it, SpaceX would not have existed. However, we have shown that the actual price of this success is ludicrous, its need doubtful to say the least and its timing awful. And these conclusions are typical of government actions. Yes, some programs are actually useful but they carry a price that nobody in their right mind would accept to pay if told up-front, they don't solve too many problems and they do so when we need the money for more pressing needs. Thus, we must ask. Yes, SpaceX exists because Governments Work, so what?

What did we get out of all of this? Not much.

We never said that governments do not work. Sometimes. The problem is that for those small (tiny actually) wins, we have to tolerate all the gigantic wastes. It is for this very reason that markets work. Because for each win we have to tolerate almost no waste, and even when there is waste, it is private waste; not waste coming out of your pocket.

But this is all history now and you may be exited with space travel and Mars inhabitation. Good for you! You should grow your dreams and imagine the un-imaginable because only in pushing boundaries is how human civilization advances. Good for you! Just one thing, do it on your dime because all our dimes are already allocated to our dreams!

Note: please see the Glossary if you are unfamiliar with certain words.

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