Space Capitalism: The Economic Frontier Demands Property Rights
A new book by City AM columnist Rainer Zitelmann, titled New Space Capitalism: The Entrepreneurial Path to the Stars, posits that property rights, which form the bedrock of capitalism on Earth, must be extended to outer space to unlock its vast economic potential. This argument draws a compelling parallel to the evolution of smartphones, suggesting that legal frameworks often precede and enable technological breakthroughs.
The Smartphone Analogy: Legal Innovation as a Catalyst
Over a decade ago, an economist highlighted that smartphones emerged not solely from technological advances but from a legal innovation in the 1990s: the use of market mechanisms to allocate usage rights over the electromagnetic spectrum. This led to more efficient airwave use, spurring mobile phone adoption and later, smartphones. The economist emphasized that without this legal shift, the technological marvel might have been delayed, implying a parallel universe where such innovations occurred decades earlier.
This notion raises provocative questions: what other innovations are stalled due to inadequate market mechanisms? It evokes images of an alternative 1980s where people in retro fashion filmed TikTok-style videos at the Berlin Wall, underscoring how policy can accelerate or hinder progress.
Space as an Economic Goldmine
Space represents a new frontier in economics, rich with resources like rare-earth metals in asteroids. However, the lack of clear property rights keeps these opportunities hypothetical. Zitelmann argues that while asteroid mining and space tourism are not yet technologically feasible, establishing property rights now is crucial. Technological innovations will follow legal ones, as seen historically; without a framework, advancements may remain dormant.
The book reveals that a private space economy already exists, focused on satellites and growing rapidly. This industry has seen marketisation trends, contrasting with state-led efforts like the Apollo program. Critics of industrial policy, such as Mariana Mazzucato's 'moonshot' rhetoric, often overlook issues like political pork-barrel projects and cost inefficiencies in government programs.
Challenges and Solutions for Space Capitalism
State-directed space exploration, including the space shuttle missions, faced problems like rent-seeking and lack of cost incentives due to 'cost plus' contracts. Cost reductions only occurred when private entrepreneurs entered the scene. Zitelmann contends that the next stage requires a property rights system for outer space, currently governed by outdated international treaties.
To attract huge upfront investments for uncertain returns, reducing legal uncertainties is key. Zitelmann proposes a system akin to 'homesteading' laws used in the American West, providing a clear path for ownership and development. This is not science fiction but sound economics, emphasizing that property rights must underpin capitalism in space as they do on Earth.
In summary, New Space Capitalism makes a persuasive case for legal innovations to drive the space economy forward, ensuring that humanity does not miss out on future opportunities due to policy delays.
