Sam, what I don't understand about your proposal is, well, how it would actually work. The devil is always in the details in these things. When you say:

It would be private industry and individual citizens who could book whatever missions they wanted.

...what does that mean? What price will they get the service at? Who is purchasing from the launch providers?

My idea would be to have the government purchase some fixed (and large) quantity of various goods and space services (e.g., tickets to LEO, pounds to LEO, maybe even tickets and pounds to the lunar surface), use whatever there was a government need for, and auction the rest back on the market. If the market price turns out to be higher than the price paid by the government, then the program costs nothing at all (other than the cost of the services that the government needs). If it's a lot more, presumably the providers would stop selling to the government (assuming they were allowed to opt out) and sell directly to the market. If the differential was low, then we'd have a subsidy, in which the cost of the program would be the difference in price between market and government cost of the service.

But in order to make this fly, the country (and its government) would have to decide that having large amounts of activities in space at reduced unit costs were sufficiently important to justify what would be considered a large expenditure in the context of current space activity (essentially doubling the NASA budget under your proposal, but I think you could do a lot of damage to the problem for a few billion a year). There's been little sign of that so far.

The problem with having the government buy lots of launches and sell the unused ones back onto the market is that it makes the government drive the market even more than it does already. If you aren't on the inside track, you'll have to compete with the auction price of excess government launches. And if the government has too many excess launches, they flood the market and the little guys go out of business.

One alternative I have proposed is the utility buy-back approach: if you can launch to government mission parameters, they MUST buy 10 launches from you at the predetermined rate. The idea being to broaden the market and make it easier for new players to attract investors: "If we can get it to work, we're guaranteed to make this much."

If you aren't on the inside track, you'll have to compete with the auction price of excess government launches. And if the government has too many excess launches, they flood the market and the little guys go out of business.

I'm not sure what you mean by "the inside track." The point was that the government will purchase from all comers, large and small, up to its budget. Everyone sells to the government at the government rate, everyone buys from the government at auction, until someone is capable of selling directly to the market without the government subsidy.

It seems to me that as long as a bureaucracy is doing the purchasing, there is little chance that the buying process will not become a political game. A bureaucracy is fundamentally a political organization.

In other words, your phrase "buy from all comers large and small" sounds simple, but I think it would be difficult to actually achieve. What mechanism would you put in place to ensure that the process was equitable? And how would you measure that you had achieved success?

Would sonething like this be what you're talking about?

http://www.fourmilab.ch/documents/rocketaday.html

Is this still feasible appproach 12 years later...was it a feasible approach 12 years ago?