Public Goods, Bads and NASA

In the comments section of this recent post, Steve mentions that governments do space better than the private sector (at least for now). The discussion also includes public goods problems, primarily defense. Since Kevin brings up space and others bring up public goods, I'm going to add public bads and unintended consequences.

Over the past 30 years or so NASA, the Air Force, and both of their prime contractors have been the only organizations doing any serious space work. But the idea that government must do this and is more capable is not a correct understanding of how it really is. The existence and inefficiencies of government space programs has hindered the market development of private space industry. NASA is to the entrepreneurial space community a public bad. Until very recently, when I or any of my friends or associates talked to investors about funding a space program we would get laughed at, nevermind that there is lots of solid market research indicating far better returns than most other technologies. We called it the giggle factor. We had to carefully hone our presentations to minimize this. And even then we would more often hear "what - you intend to compete against NASA?" or "Only governments can do space it's too difficult and too expensive." Followed by laughing. At us. If they were in a good mood. Government programs to provide some good do it badly, and in addition discourage private solutions from coming to market.

Last week that changed, by an event that had such a huge set of positive externalities that mainstream economics would predict that it was a "public good problem." Sure Burt Rutan and Paul Allen have profited from the excercise, even if only emotionally. But the real profit is accruing to Masten Space Systems, XCOR, JP Aerospace, TGV Rockets, and several others. I can talk to investors, and they are not laughing anymore. This is the real point, unlike homo economicus, real people calculate if a good is worth more than its cost and act accordingly, if there are free riders then they either don't care[1] or may even consider it an added benefit. That is if acquiring a good helps their neighbors, many people will value that good higher than if the good was neutral or bad for their neighbors. This is why in most companies "community goodwill" is considered a valid business justification.

There is another case of a good with such incredible positive externalities that many people, who know finance and economics, think it is a communist plot because the standard economic model of public goods predicts the opposite of reality. That good is Linux. Linus Torvalds got his profit in the form of knowlege and emotional gratification. He then saw that others might also benefit. He performed the Austrian method of determining profit, he weighed it against his subjective preferences and acted accordingly. His whole project suffers from every problem in the public choice lexicon, yet it has occurred within the free market, voluntarily and is very successful.

Public goods theory fails to predict or explain reality far too often. In this post-Enlightenment age, I thought we threw away such theories and looked for other explanations. Whether such difficult to assess goods as defense or law needs a government to provide those goods, "It's a public good" is not a valid reason.


fn1. Of course this works the same with negative externalities, and thus why we have zoning laws - there are people who will not consider their neighbors and engage in actions that produce negative externalities as well.

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Your restatement of the

Your restatement of the public goods problem is spot-on, Dave. Homo economicus is false; Homo agitus (yes, I'm mauling Latin) is true. People act, and when the act brings more satisfaction than cost, that action is undertaken.
A 'public goods' situation is simply one where initial satisfaction has to largely be internal since the usual "sell a good, get money" form of remuneration won't work as well.

Rutan's accomplishment in

Rutan's accomplishment in reaching space on a shoestring budget, like all of his work, may fairly be regarded as a stunt, rather than as a serious commercial effort. This may, in part, be due to the fact that his career primarily involves aviation stunts. Unfortunately, in addition to his promotional successes, Rutan has left a long string of failed projects, bankrupties, and dead pilots in his wake. In this regard, he is, admittedly, not at all different from the pioneers in the early days of aviation; but, dammit, we really do know enough these days to avoid those kinds of failures; and we ought hold Rutan accountable for undervaluing that knowledge. Still, I have to be highly positive about his meeting the challenge for private enterprise in space.

On the plus side, Rutan has shown us how easy it is to get into space and how little piloting skill is required. In fact, (and this is a little secret few people know) nothing NASA shoots into space is any more complex than an ordinary jet airplane. Somehow, we've been led to believe it's almost prohibitively difficult to go into space. Granted, if you go about it wrong, as with the space shuttle, then it does cost billions of dollars and many human lives. That approach is, indeed, prohibitive.

But simpler approaches can be far less costly and much safer. NASA knew that back when the space shuttle was begun, but politics and fudged cost estimates played too large a role in the decision to approve the shuttle. In simplest terms, it makes no sense to put such large wings on a spacecraft using the technology available either then or now. The wings are there merely to allow the pilots to actually fly the thing after re-entry (with chest thumping bravura, trumpets, etc.), instead of dropping back to earth unceremoniously by parachute. This unjustifiable acquiescence to the pilot's ego has all-but drained America's resource for the space program. We have spent billions upon billions unnecessarily, and with little benefit; and, as a direct result, we are in danger of losing our lead to the Chinese and Europeans.

Finally, thanks to Rutan and his backers, and to other groups at work on the same mission, the dawn of space is really upon us. We now have commercial muscle behind the space effort. I can now see that private efforts might get us to the moon before NASA returns.

Tommorow, the stars!

Rutan has left a long string

Rutan has left a long string of failed projects, bankrupties, and dead pilots in his wake.

OK. I am very familiar with Scaled Composites and Burt Rutan's history. I am NOT aware of a single test pilot death. Since this is not the first time I've head this, I want names and NTSB report citations.

The rest of the comment comes to reasonable conclusions despite all the factual errors and unsubstantiated assertions in it.

Using MIME type switching

Using MIME type switching there is no such problem. However, DOCTYPE switching seems like a good idea. I would propose though to use only the standard compliant in XML mode. And leave the switching thing to text/html rendering.

I remain skeptical of the

I remain skeptical of the commercial viability of "space travel" for the foreseeable future.

First of all, chemical propulsion systems are inherently expensive and inherently extremely dangerous. Until someone comes up with a safe and reliable alternative to carrying fuel to lift the fuel that lifts the fuel that lifts the fuel...that lifts the payload, isn't this is going to remain a cost-prohibitive issue?

Secondly, once you get to space, then what? There's nothing there - literally. Bo-ring! So you float around for a little while. After ten minutes the novelty will wear off, I'm sure.

So, is the issue *really* that NASA has a corner on the market, or could it possibly be that there is something more fundamental in the way?