Transterrestrial Musings

Comments

Rand

Not too hard really to explain.

Lets use Dennis Tito as an example of a Space Tourist. From published reports he was worth about $400 M dollars before his trip. He spent $20M dollars on the trip (lets not quibble about the published value versus the real value). Therefore his "wealth" is now $380M dollars. Now his intangible value of the trip was priceless but that is not the point. Of the $20M dollars 95% probably went to RSA/Energia and 5% to various other parties, thus increasing their wealth (minus the cost of goods sold) by a like amount. There was no net gain in wealth in the transaction.

Now lets look at a Comsat launch.

A comsat costs $350M dollars, including launch, insurance, and the price of the bird. That bird, lets say a Spaceway 3 FSS bird is launched and is successfully placed into orbit. That bird enables about 30,000 Internet over satellite users. Lets say that 5000 of those users are truck drivers. The truck drivers use a dish that dynamically points at the satellite while driving and delivers high data rate (1 megabit/sec downlink, 200 kbits/sec uplink) information to the driver.

Ok the driver has a cargo of vegetables from California and is driving on I-40 across the nation. A storm comes while he is in California and the CNN radar shows a snowstorm in real time in the Flagstaff area. Now he has to go to Nashville to deliver the vegetables to Kroger but if he continues on I-40 he would be delayed by 24-30 hours and the vegetables expiration date would not change which would cause a greater loss of product on the shelves when the date comes sooner because the product is on the shelves for a day less.

The trucker rerouts to Phoenix via highway 95 and then goes on 1-10 to I-20-to I-30 to I-40 and loses about 5 hours of time and about 50 gallons of fuel for the rerouting.

Wealth is gained (or at least not as much lost) by delivering the product in a more timely manner than if he did not have the sat dish and high speed internet.

Now this is a fair one but what about a fishing fleet in the gulf that uses the directway dish and radar data to follow rainstorms where the shrimp like to feed along the edges. The fleet gets a harvest 2x that of a trip that does not use this technology. That is a net wealth generator of 2x for that use.

Lets take this into the realm of humans in space. Tito's trip created no wealth. How about the situation where I buy a Soyuz and send a crew up to construct a GEO comsat with 50 kW of power, 200 transponders, and a lifetime of 15 years with on orbit servicing built in. You simply can't stuff that into a conventional launch vehicle but using on orbit assembly with human assistance I now have created (I used a progress to send the parts up) for no more than the cost of a typical primary launch and construction costs, a GEO comsat with 3x the capability of a conventional bird.

This example creates wealth by dramatically increasing the productivity of the process of building a comsat as the 200 transponder bird, instead of generating $100M per year, now generates $300M per year in revenue and 90,000 users of the bird for the same price as a conventional bird. Wealth is generated.

This wealth increase is what drove the steamship, the railroad, the Panama Canal and the Interstate and defense highway system. Productivity increases are wealth generators in a commerce driven society.

That was what I was getting at.

Dennis

Posted by Dennis Wingo at April 5, 2006 04:25 PM

I can do no better than recommend Frederick Turner's brilliant essay Worlds Without Ends. Not only does tourism create wealth, "charm industries" will dominate the economy in another generation.

Posted by Jay Manifold at April 5, 2006 04:26 PM

> I've had this argument before, once on the NASP program, with a second lieutenant who didn't believe
> that something had value unless you could drop it on your toe

This is a 19th-Century argument, which is still heard occassionally from talking heads complaining about "the decline of American industry" (by which they mean, exclusively, smokestack industries).

The first human industries were extraction industries -- hunting, farming, mining -- that literally or figuratively dug wealth out of the Earth. Those "primary industries" were soon joined by secondary industries -- manufacturing, which alters the form of materials extracted from the Earth. Finally, when humans became wealthy enough that they didn't need to spend 100% of their time extracting materials and crafting them merely to survive, they developed tertiary or service industries.

As society becomes wealthier, the percentage of weatlh generated by higher-level sectors of the economy increases and the percentage from lower-level sectors decreases. Extractive industries today account for a small percent of total GDP, and manufacturing is also a decreasing fraction.

Some experts even believe that service industries are peaking, and we are seeing the emergence of "experience" industries, which represent a fourth level. (See "The Experience Economy"by Joseph Pine and James Gilmore.)

Smokestack industry advocates recognize, quite correctly, that the lower-level industries are more basic and the higher levels depend on the lower levels. They are incorrect, however, in believing that the lower levels generate most of the wealth in our economy and will continue to do so in the future.

G. Harry Stine noted that it was service industries -- communications and weather forecasting -- that first moved into space. He predicted that manufacturing would follow, and finally extraction. The reason for this ordering was simple. Service industries produce the most value per pound of mass, manufacturing produces less, and extraction the least of all. Therefore, service industries are less dependent on space transportation costs, extraction industries more dependent, and extraction industries most dependent of all.

Unfortunaately, the Moonies haven't read Stine. They regard the primary extraction industries as the only true source of wealth and the first industries that should be established on the Moon.

Yet, ironically, while they've glommed onto primary industries, which are the most transportation-intensive of all industries, the Moonie religion is also opposed to anything that would reduce the cost of space transportation in the near term. That's one part of their dogma I don't understand. It's as if they're afraid cheap transportation would somehow make their lunar industries less viable, when in fact the opposite is true.

Posted by Edward Wright at April 5, 2006 04:40 PM

> Lets use Dennis Tito as an example of a Space Tourist. From published reports he was worth about
>$400 M dollars before his trip. He spent $20M dollars on the trip (lets not quibble about the
> published value versus the real value). Therefore his "wealth" is now $380M dollars.

> There was no net gain in wealth in the transaction.

Only if you assume RSA/Energia and those "other parties" made no profit on the transaction.

Even if that was the case, which I doubt, this is merely evidence that money changed hands, not evidence that wealth was destroyed or "depleted."

> Lets take this into the realm of humans in space. Tito's trip created no wealth.

According to you. Dennis Tito spent $20 million and received a service and an experience that was worth more than than $20 million to him. That's a profit to him.

> How about the situation where I buy a Soyuz and send a crew up to construct a GEO comsat with
> 50 kW of power, 200 transponders, and a lifetime of 15 years with on orbit servicing built in. You
> simply can't stuff that into a conventional launch vehicle but using on orbit assembly with human
> assistance I now have created (I
> used a progress to send the parts up) for no more than the cost of a typical primary launch and
> construction costs, a GEO comsat with 3x the capability of a conventional bird.

Now, let's say we built a vehicle that send up a 3-person crew for half a million instead of $20 million. Let's say that SkyCorp can now afford to buy a ride into space, instead of simply talking about. Wouldn't that generate wealth, Dennis?

> instead of generating $100M per year, now generates $300M per year in revenue and
> 90,000 users of the bird for the same price as a conventional bird. Wealth is generated.

Not according to your definitions. To generate $300 million in revenue instead of $100 million, customers have to pay an addition $200 million for the signal. So, by your definitions, there is no net increase in wealth.

You want us to believe that industry generates wealth if it delivers more satellite teevee channels or fresher lettuce but not if it delivers better vacations. That is simply personal bias.

Whether you entertain people with satellite teevee or with trips to space, wealth is created either way.

Posted by Edward Wright at April 5, 2006 05:06 PM

Now his intangible value of the trip was priceless but that is not the point.

That is exactly the point, Dennis. He parted with that money because he thought that the experience would be of higher value to him than the money. I can guarantee that he feels like a wealthier man than he did before he went. Any time there is a voluntary transaction, in which both parties are satisfied with the outcome, wealth has been created because value exists where there was none before, by definition.

By your argument, when someone spends money at Disneyland, they are destroying wealth, but few people (well, at least few economists) would think that a country in which people couldn't and didn't go to Disneyland was wealthier than one in which they can and do. Wealth is not just material goods. It also consists of intangibles, including services. Would you say that wealth is destroyed when you get a haircut? After all, you're out fifteen bucks. Government economists don't agree, because they would say that the GNP increased by that amount. One more haircut, worth fifteen dollars, was produced.

You can argue, if you wish, that traditional space applications have a higher return on investment than space tourism, but to argue that the latter actually depletes wealth is ludicrous. But I now understand the economic fallacy that causes you to poo poo cheaper launch.

Posted by Rand Simberg at April 5, 2006 05:12 PM

From the link offered by Jay Manifold:

Who will make all this happen? Not, perhaps, the nation state; it is doubtful that the state as an institution will ever again command the kind of loyalties and commitments and moral prestige that gave us World War I, the Grand Coulee Dam, the defense of Stalingrad, the Holocaust, and the Apollo program. It will be corporations that will go into space, but not, surely, corporations like industrial General Motors or information-based Microsoft. Charm industry corporations will be more like exclusive safari adventure outfits, theater companies, churches, movie studios, art workshops, literary publishers, sports clubs, resort hotels, restaurants.

And so long as ITAR exists in its present form, corporations from our nation-state compete with two arms tied behind their back.

= = =

Media, marketing, brand value and tourism. But not tourism in isolation, all by itself. Oh, and some lunar platinum for all those fancy new fuel cells and other nano-tech devices we hope to build.

PGMs and LOX may be the only viable non-charm industries outside of LEO.

Posted by Bill White at April 5, 2006 05:52 PM

While I agree that tourism and services are forms of wealth, I doubt they can become the underpinning of a sizeable economy.

One troublesome aspect of a service economy is that the per-capita productivity of labor cannot expand much beyond what one person can do. (New technology is going to help an aircraft manufacturer much more than a barber in terms of the amount of service they can provide). In an industrial economy, per capita productivity is virtually unlimited (possibly even more so with robotic technology), dependent more on the amount of capital than the amount of time ina day. This means that people who own or operate machinery and capital which produces wealth will always have the opportunity to become much more productive (hence much wealthier) than servants. This is why investment is so important in this day and age where people cannot as easily become captains of industry themselves.

Then there's the issue of who gets served, and why. No one is going to serve a country by shipping them industrial products and machinery when that country cannot export any material good in return. Taiwan and Japan are going to eat the lunch of nations like the Dominican Republic. The tool-makers still ule the economic world, IMO.

Posted by Aaron at April 5, 2006 05:55 PM

I'll have to lay out my understanding of economics to respond to this: An economy is made up essentially of the exchange of goods AND services. We use our labor to create a good or service that we exchange (via the intermediary of a currency) for the goods and services that we want. When those goods and services we want become cheaper, i.e. take less of our labor to obtain, we are richer. Productivity for both goods AND services determines our wealth.

Saying tourism depletes wealth makes no more sense than saying that, in Dennis's examples, eating vegetables and fish and using satellite delivered services deplete wealth. Wealth is related to the prices charged for those goods and services. Markets for those goods and services drive the producers to become more efficient. No one is going to put up a COMSAT to begin with if there is no market for what it can deliver.

A market for space tourism is just as legitimate a market as that for vegetables, fish, or satellite services. If, as Rand says, the demand for space tourism drives down the cost of access to space it will not only make us wealthier for having cheaper space tourism but wealthier also by leading to the lowering of the prices for other space derived goods and services, e.g. cheaper COMSATs since their launch costs will go down.

I'll also note that a single transaction doesn't change productivity. However, it can still be seen as increasing wealth for the two parties involved because every honest transaction is a win-win scenario. Tito thinks that the experience of going to orbit is worth more to him than $20M in the bank. So he would see his wealth as $380M + that experience, which to him makes his net worth more than $400M (in the broadest sense but perhaps also more tangibly if the publicity, contacts made, perspective gained, etc. increased business for his company, i.e. it increased his productivity) . The cost of his trip for the Russian space agency was less than $20M so it also came out ahead.

Posted by Clark at April 5, 2006 06:05 PM

By that standard, Hollywood does nothing but destroy wealth.

Hey, maybe he's got a point there.

Posted by Big D at April 5, 2006 06:33 PM

Clark

First, I did no say that wealth was depleted in toto, just not created.

I specifically said that Tito's wealth was reduced while RSA/Energia's was increased (along with MirCorp). There was no net gain in wealth. This is a zero sum game where some people win and others lose. The proposition that I put forth for the others either retains wealth (forstalls loss of productivity/product) or creates wealth (by the greater productivity of the orbital assembly concept.

Rand

To say that the intangible value creates wealth indicates a misunderstanding of what wealth means. Intangible wealth is just that, intangible. If we are ever going to generate enough economic activity to pay off some of this multi-trillion dollar debt that we have as a nation, we have to create wealth, not just move the chess players around. If you don't understand that then the repubs are in worse shape than I thought.

This is why manufacturing has moved to China and India. The lower labor cost results in a higher per unit productivity, lowering the point of use price, displacing American workers and industry who's labor cost is higher. It increases the wealth of the Chinese and Indians (who had very little to start with) while decreasing the wealth of this nation. Have you been to silicon valley recently? The vacancy rates are considerable up there.

We can recapture that with a research investment in higher productivity production tools (robots) to mitigate the advantage of lower labor costs.

Clark I did not say that space tourism was not a legitmate market, just one that does not create wealth, only redistributes it.

Lunar and asteroid mining to take this further, creates wealth and has a positive environmental impact on the terrestrial biosphere.

Dennis

Posted by Dennis Ray Wingo at April 5, 2006 07:00 PM

I specifically said that Tito's wealth was reduced while RSA/Energia's was increased (along with MirCorp). There was no net gain in wealth.

We know you said that, Dennis. It doesn't grow any more valid through repetition. Tito was wealthier after the trip than before, even if his bank account was a little less, just as one is wealthier after completing college, even if one has a student loan, if the courses and degree provide the potential for increased future earnings. These things aren't as intangible as you think.

If we are ever going to generate enough economic activity to pay off some of this multi-trillion dollar debt that we have as a nation, we have to create wealth, not just move the chess players around. If you don't understand that then the repubs are in worse shape than I thought.

This last seems like a non sequitur to me. I've no idea what the relationship is between what I think and what kind of shape Republicans (of which I'm not one, and have never been) are in.

We aren't "just moving the chess players around." The national debt is paid off by controlling spending, and continuing to grow the GDP, including that portion of the GDP consisting of services. All of it generates tax revenue.

You really need to talk to an economist about this, since you don't seem willing to take our word for it.

Posted by Rand Simberg at April 5, 2006 07:12 PM

PhD economist to the rescue. Start with the assumption things have value. People start claiming things, making new things, etc. So one of them says, hey let me sing or play sports or do backrubs or some older profession. Voila, services. Do services destroy wealth? No. Services create wealth. In Heinlein's, "We Also Walk Dogs" a great scientist in semi-retirement is lured into a project by a rare and wonderful piece of art. In _A Case of Conscience_ a gift economy pleases the givers of things for services. The givers feel bad about not having more to give to reward the contributions of another.

If I go watch a rock concert and like it, that makes me motivated to go earn more money to watch more rock concerts. Value is willingness to pay. Intangible creation of value works great in an economy. Who needs paper books when we can have ebooks? Or a story teller? Put the story teller on TV and you have a server who is providing personal services nationwide. We may be able to afford the services of thousands of people as we concurrently serve thousands ourselves.

The post-industrial economy will have plenty of manufactured (even many home manufactured) goods. That will leave services as the primary expensive good and the job that most people are demanded to do.

Do we destroy value by blogging instead of growing crops? No. We have enough crops. People read the blog, tip the tip jar and Rand can go out and eat.

Space tourism is as legitimate an economic activity as looking through big telescopes or looking through a boob tube or buying a nice house in Palisades with a view of LA and the ocean. Without space tourism, Dennis might not have been sufficiently motivated to help price capital so that more people could have more things (and non-things) that they want. There is the exact same multiplier value chain in the economy for tourism as any other good or service. Multipliers are double counting, but that's another story.

We continue to grow our capital faster than our debt so we can continue taking on more debt forever.

Dennis: read Adam Smith. Your "drive out industrial jobs" rant sounds like the old "bad money drives out the good". I think getting stuff for paper money is a great way to create value that people will do real work for without all the trouble of gold. The manufacturering workers get new jobs in the US and our GDP is still growing. Our compartative advantage is creativity, change, design, vision, luxury, standardization, protocol, business strategy, firing people, and many many other high value skills. Making a car is so 20th century. Making an ad campaign for a car, now that's awesome. If that increases the value of the cars so people are happier with them and the manufacturers sell more of them, that's a tangible result from an intangible. But it's just as true for the advertisement of a movie--lights and sound.

If less educated, less developed economies can do our manufacturing for us cheaper than we can, then we can hire them to do that, and have our people do something even more valuable. If it wasn't they would still be doing the manufacturing.

Dennis, at bottom, your irrational desire to cling to the physical is equivalent to a luddite saying that machine made merchandise is inferior to handmade merchandise and that we should destroy machines because machines destroy value. Value is in the eye of the beholder.

Posted by Sam Dinkin at April 5, 2006 09:08 PM

Dennis,
As Rand says, repeating it doesn't make it correct. I don't understand your mixing of a transaction like buying a trip to space with wealth creation except that you believe in general that services are neutral wrt wealth.

If so, that is not true. A service market is just as important to the wealth of an economy as a goods market. The wealth of an economy is determined by how efficient it provides both goods AND services.

If next year I can buy a car cheaper than I can buy the same car this year (i.e. with a smaller fraction of the hours that I work), that represents an increase in wealth. Similarly, if I can buy a week's stay in Orlando or in orbit at a cheaper price next year than I can buy it now, that also represents a net increase in wealth.

Your statement "The lower labor cost results in a higher per unit productivity" is exactly wrong. Productivity is determined by labor efficiency, not the price of that labor, i.e. it's production divided by the person hours that it took to provide the good or service. According to your definition, if we all worked for nothing, our economy would be infinitely productive.

I don't want to get sidetracked into a discussion of trade deficits and all that but China and India are still much poorer than we are because it takes longer there, on average, for a person to produce a good or service. (They might have world class productivity in, say, DVD players but not for building jet airliners, growing rice, delivering packages, running railroads, managing resort hotels, teaching engineering, etc.)

In fact, the overall US productivity, both in services and in manufacturing, is far, far greater than in any developing country and has been growing faster in the past decade than in most developed countries. That's why the GNP growth rate, i.e. the rate at which we are producing wealth, has been larger than in any large developed country and is why our deficit/debt relative to GNP remains in the mid-range for developed countries. Doesn't mean there are no long term concerns about the economy but it's important to keep things in perspective.

Posted by Clark at April 5, 2006 09:17 PM

Even monkeys understand non-tangible wealth.

In a system with a fixed number of bananas in a 'vending machine' arrangement and a fixed number of coins, one of the monkeys purchased a, um, service.

I can't argue "The monkey pair felt wealthier", but they did make the trade, and the experiment was soon terminated to prevent further, um, trades. Under the zero - sum - game model, the maximum GDP of this system was precisely the number of coins the system started with: there's _NOTHING_ else to buy.

Posted by Al at April 5, 2006 09:20 PM

Well this has been interesting.

No Rand I don't take your word for it. I did not say that space tourism was not a legitimate economic activity just that it is not a wealth creator.

We will just have to agree to disagree.

I think that it is funny how the responses start getting more virulent. That in itself illustrates that a nerve was hit. Tourism has become the mantra of the holy savior of space development just like RLV's were in the 1990s. Tourism does have its place but it will not, in and of itself, result in a space revolution in cost reduction. Luxury purchases are extremely sensitive to economic fortune where growing industries feed well during those times.

While I like tourism it is not what is going to, by itself, open the space frontier. Neither is NASA or DoD but that is another story.

Dennis

Posted by Dennis Ray Wingo at April 5, 2006 09:29 PM

Sam writes:

Making an ad campaign for a car, now that's awesome. If that increases the value of the cars so people are happier with them and the manufacturers sell more of them, that's a tangible result from an intangible. But it's just as true for the advertisement of a movie--lights and sound.

Spot on!

And maybe genuine lunar aluminum wheel covers can help sell Ferraris and Lexus-es. The car maker certifies that the wheel covers (or hood ornament) on it's $100,000 automobile is fashioned from 100% pure lunar aluminum.

$1000 per pound for plain ole' lunar regolith?

Posted by Bill White at April 5, 2006 09:32 PM

In Fall 2004 I went to SpaceVision in Boston and heard the Right Rev. Rick Tumlinson talk about "killer apps" and how space tourism was shaping up in his opinion to be yet another great killer app that would most likely fizzle out.

Might be a piece of the puzzle, but that is all, one piece of a complex puzzle.

There is no single solution. Major league ball parks are built by lumping together a huge variety of diverse revenue streams, from name rights to tax concessions to parking revenue and beer sales. And ticket sales.

Why should lunar development be any different?

If tourists want to pay to watch the lunar PGM miners, well cool. But whenever the question is either / or for revenue streams, answer "both" or "all"

Posted by Bill White at April 5, 2006 09:38 PM

> One troublesome aspect of a service economy is that the per-capita productivity of labor cannot expand
> much beyond what one person can do.

Ignoring the fact that we're already moving from a service economy to an experience economy, that statement is plainly wrong.

If you think a writer with a word processor isn't more productive than a writer with a chisel and stone tablet, you should switch off your computer and try blogging with a stone tablet.

> (New technology is going to help an aircraft manufacturer much more than a barber in terms
> of the amount of service they can provide).

A service economy does not mean everyone is going to become barbers. That notion is either a misunderstanding or a deliberate mistatement which is spread by protectionists.

> No one is going to serve a country by shipping them industrial products and machinery
> when that country cannot export any material good in return.

Do you think Apple is going down the tubes because it manufactures nothing, while the Taiwanese companies that build iPods will rule the world?

Wall Street disagrees. Largely because Apple makes far more money on every iPod than the manufacturer does. The knowledge of how to design iPods is far more valuable than the factory that builds them.

Sir Francis Bacon said, "Knowledge if power." He understood the value of information.

Even Jesus said that intangibles were more valuable than physical goods. "For what does it profit a man to gain the world and lose his soul?" :-)

Posted by Edward Wright at April 5, 2006 10:02 PM

Dennis,
Sorry if you were referring to me with regard to virulence. I respect your opinion and that's why I'm trying hard to change it! :-)

I do think it is a perfectly reasonable stance to believe that space tourism isn't "going to, by itself, open the space frontier." I think it will but I wouldn't bet my life on it. I'm certainly old enough to remember many disappointing predictions for space development and for many other areas. However, I do strongly disagree that there is an fundamental economic flaw in trying to open the frontier with a consumer service like tourism.

Posted by Clark at April 5, 2006 10:34 PM

Lets just keep Jesus out of this discussion, he is not your forte.

Clark

I bet my life on space every day. My business and livelyhood are directly linked to commercial space development. I am not interested in chasing markets that are highly dependent upon the vagarancies of how rich people spend money.

I prefer activities that present clear value to investors that can be described in an elevator pitch. That is what on orbit servicing does today, on orbit assembly tomorrow, and then orbital tourism. They do complement each other but I am sorry, space tourism does not, in and of itself, create wealth. I am sorry if this displeases the religiously oriented (you know you have pushed a button when Ed misquotes Jesus) who see the holy grail as tourism without other activities.

For example, I can clearly see multiple billions of dollars in business (per year) within ten to fifteen years in on orbit servicing and on orbit assembly. Can you by any stretch of the imagination, say the same thing about space tourism?

Dennis

Posted by Dennis Wingo at April 5, 2006 11:11 PM

"Barnstorming" and "airlines" deplete wealth rather than creating it. If a businessman pays an "airline" $200 to fly him from New York to Chicago, the businesman is $200 poorer and the "airline" $200 richer, so there is no net gain. Aviation will not create wealth until we find a way to mine some tangible material substance from the sky.

Posted by at April 5, 2006 11:16 PM

They do complement each other but I am sorry, space tourism does not, in and of itself, create wealth. I am sorry if this displeases the religiously oriented (you know you have pushed a button when Ed misquotes Jesus) who see the holy grail as tourism without other activities.

Sorry, Dennis, but this is not about space tourism fanaticism. It is about basic economics. Any competent economist will tell you that you are completely wrong, regardless of their opinion about the viability of space tourism as a market. Tourism creates wealth. Period. There is nothing unique about space tourism that suddenly renders it incapable of wealth creation.

Whether we can or not is irrelevant to the discussion, which was not about which creates more wealth, but about whether or not tourism creates none. But in fact, I can see billions of dollars per year in space tourism revenues in that time period, yes. Branson already has orders for many millions, and he hasn't even flown yet.

Let me repeat the previous commenter's point:

If a businessman pays an "airline" $200 to fly him from New York to Chicago, the businesman is $200 poorer and the "airline" $200 richer, so there is no net gain.

Do you really believe this? If not, why not, since it seems to be exactly your argument about space tourism. If so, you just flunked Econ 101.

No one is trying to persuade you to drop the other good things you're doing (which may, probably even will, indeed have a higher payoff for you), and suddenly get into the tourism business. Unlike you, our goal is not to maximize return on investment in our space activities. Our goal is to get a lot of people into space, while making enough money to continue doing so and continually making that activity more affordable. All we're asking is that you have the courtesy to stop denigrating our goal, in favor of yours, with economically illiterate arguments. Listen to Sam.

Posted by Rand Simberg at April 6, 2006 05:16 AM

Rand

How about finding one of these economists instead of insisting that they would tell me this.

The businessman illustration merely makes my point. The businessman in his or her trip is doing something (at least theoretically) that is creating wealth for him or her by the increase in efficiency that an airline flight brings. You and I do this all the time in our travels. A space tourist is dissipating his wealth for an experience while increasing the wealth of the entity providing the trip. If you think that this increases the tourists wealth then why does it take years for a person to pay off their credit card after a worldwide trip? That type of travel is economic activity but there is no net increase in wealth, it just rearranges who has the cash. Vegas is built on this redistribution of wealth.

Why is stating the obvious denegration?

I have stated time and time again that tourism is an aspect of opening the space frontier but to hijack the entire space advocacy movement to support that one goal you expose yourself to the inevitable problems that come with that approach. This is exactly what happened in the 1990's with RLV's.

Dennis

Posted by Dennis Ray Wingo at April 6, 2006 07:34 AM

How about finding one of these economists instead of insisting that they would tell me this.

One of them, Dr. Sam Dinkin, PhD in Economics, already did tell you this, in this very comments section. Go find a non-Marxist economist who will back you up--it will be a lot harder, I'll guarantee you.

Dennis, it is not for you to determine whether or not a traveler has increased their wealth by making a trip, it is for them to do so. Once again, "wealth" is not measured purely by the size of a bank account.

..to hijack the entire space advocacy movement to support that one goal...

I must have missed that. When did I do that, again?

Did I not just say, right above, that you are doing good things, and should continue doing them? Who has been telling you that you shouldn't be doing what you're doing, or that it "destroys wealth"? It seems to me that you're the one with the agenda, not us.

Posted by Rand Simberg at April 6, 2006 07:53 AM

Dennis,
Anytime someone champions a particular idea it can be labeled pejoratively a religious conviction. You have championed space tugs and in-space satellite assembly despite lots of criticism, setbacks and disappointments. As you say, you are betting that they will succeed, but you don't have concrete proof that they will. You have to rely on educated guesses plus a good deal of "faith" that all of the necessary parts will eventually fall into place.

I'm sure that when someone argues against the existence of your grails, you respond with a good deal of righteous indignation and ferocity. Knocking other people's religions is common among the religious but I won't knock yours. Instead I urge you to "Keep the faith, baby!"

In fact, by continuing to struggle religiously to make them happen, you appear to be succeeding in reaching the first grail (space tugs) and may someday make the second one a reality as well. Being unreasonably stubborn and steadfast in pursuing such goals is want separates space wannabes from rich space entrepreneurs, which is what I hope you become.

We should continue this discussion over some brews in Phoenix. I will end my rantings here with the following points:

1) If, as many have long predicted, DTH TV and other satellite services succumb to fiber and high bandwidth terrestrial wireless competition and the comsat business in turn takes a steep dive, then your "multiple billions of dollars in business" may never appear. I believe DTH, etc. will remain competitive and thrive, but that's just a matter of faith on my part and apparently on yours as well.

2) As 1) indicates, your business plan depends on a strong consumer service market, i.e. DTH, satellite radio, etc. No matter how cool and capable and potentially productive is your hardware, if there is no market for the services produced you won't make any money.

3) Rand points out that there are already very strong signs that commercial suborbital spaceflight will be a success. It may produce billions or just hundreds of millions of dollars in business, but in either case it will have a tremendously positive impact on space transport development.

4) As I noted the other day on my blog, if orbital tickets fell to the $2M range, almost certainly a few thousand customers would show up. That would mean billions of dollars in revenue. I hope the lure of that big payoff will attract lots of efforts to develop space transports that can offer $2M rides profitably. That's a grail well worth pursuing.

Posted by Clark at April 6, 2006 08:57 AM

Clark

Thanks for the well reasoned reply. After the dustup here I consulted with a few of the wise old owls that I know (Yea I know, appeal to authority) and I don't find a lot of disagreement with the premise that tourism, pretty much of any type, is not a net gain wealth creator but lets all just agree to go on.

One interesting comment was that in the process of developing a space tourism vehicle interesting technology can be developed that is then applicable to lowering the cost and increasing the productivity of wealth producing space activities which I agree with.

The problem with orbital tickets dropping to $2M dollars is that it does nothing to directly support other types of space activities because a $2M ticket for a 200 lb person is still $10,000 per lb to orbit which is MORE expensive on a pound per pound basis than the current art for cargo.

As far as strong signs that commercial suborbital tourism will be a success, yes I agree. However, lets see what happens after the first round of pent up demand is satisfied before we conclusively make that determination. We had very strong indications in the 1990's that RLV's were going to be successful as well but guess, what: without a market to sustain them, the money to build them never appeared.

As I stated in the previous paragraph, at $10,000 per lb there is no positive impact on space transport development using your own numbers for anything other than humans. Now that is valuable to me in that humans in space are far more valuable as workers than as tourists but it does not support your contention that it is a positive impact on the overall space transportation market.

As for your contention in (2) yea I agree there but guess what, even with the expansion of cable and fiber and all the other stuff the DTH market share is growing, not contracting and I work in the Internet over Sat market every day and it is growing by leaps and bounds, which is starting to drive the demand for new birds as the recent Spaceway 3 announcement indicates.

The demise of satcom has been predicted for over 30 years and it is yet to come to pass and all indications are that with the global continuing expansion of the Internet that Internet over satellite will replace the lost revenue of the old FSS telephony market. It is interesting to me that with IP based telephony that the FSS market will continue to see an increase in demand. One of our affiliate companies is selling local London telephone numbers to DVB/RCS IP Telephony customers in Africa. This completely bypasses the corrupt local telco infrastructure in these countries.

We do live in interesting times.

Dennis

Posted by Dennis Wingo at April 6, 2006 02:24 PM

Dennis, your appeal to authority would have more...well...appeal, were it to economists, rather than "owls," wise and old or not. As I noted in the post with my anecdote about the young AF lieutenant, it's long been conventional (which is to say, at least in this case, mistaken) wisdom in the space industry (which for historical reasons largely doesn't understand conventional commercial markets or economics) that tourism isn't a real market, which is one of the reasons that it's taken so long to get people to take it seriously and start investing in it. Why do I suspect that this sort of person was the source of your consultation (that's a rhetorical question)?

Clark's point about the two million dollar price was to indicate that even at that high price, there's a market of billions. At lower prices, which are certainly technically feasible, and answers your concern about them being too high, it's even larger.

The difference between tourism and the will'o'the'wisp markets of the nineties is that in this case, the payloads are already built, and ready to launch. They're just waiting for someone to sell them a ticket, and we've already seen that once someone does, they buy.

Posted by Rand Simberg at April 6, 2006 02:51 PM

This reminds me of an exchange I once had (under an alias) with someone on sci.space.policy, a few years back. This person decried all the activities (attending sporting events, for example) that don't make them more money.

I pointed out the fact that people (if they're not Ebenezer Scrooge) don't make money just for the sake of making more money, they do it to increase the range of needs and wants they can meet.

Sometimes that need or want (buying a car or house with cash, a comfortable retirement, the peace of mind that can come with signifigant emergency savings, etc.) may require continuing to save and/or invest one's income in various ways, but there's almost always a non-monetary goal at the end.

Entertainment is often one of those wants (and from a psychological standpoint, it may be a 'need,' as well), and travel/tourism, for the novelty value, or to return to a place where one has had a positive (whatever that is for you) experience before, and/or perhaps for the non-formal learning experience (some people just enjoy learning, without any definite intention to use that knowledge professionally) is a subset of entertainment and at heart, why tourism exists.

It does consume some part of one's personal wealth, as any product or service will, but with the expectation that one will get something one personally values in return. (After that, it's mostly a matter of taste as to what you specifically want.)

Again, what else are we really working for? Dennis Tito certainly appeared to have gotten the experience he wanted. (Though I'm sure hed've preferred to have spent less to obtain it, but we all want a good deal on anything.)

That tourism has and will continue to be done anywhere in the Universe beyond Earth's atmosphere, wouldn't appear to change that logic.

Posted by Frank Glover at April 6, 2006 03:06 PM

Rand

Geez I even put a disclaimer in that the appeal to authority was not intended to be serious.

As for Sam, heck I don't know every space person on the planet so had no idea that he was an economist.

As for the comment that tourism creates wealth period, that is absurd as anyone on a Southwest flight from Vegas will attest.

________

Sam Speaks

__________

This is not necessarily the case. The buyer could be a druggie that goes out and steals from others to buy tickets.

Value may be the williness to pay but it does not axiomatically follow that the transaction increases wealth. We can bandy about point and counter point on this all day long and each will be right within the context of the relevant example.

I have no idea where you got any idea about "driving out industrial jobs". I don't think that I said anything about that.

I go to Vegas often and worked there for a short while. Just because they built those multibillion dollar towers does not mean that wealth was created, just redistributed from the folks that go there and spend money to the people working at, operating, building, and owning the (gambling halls [this program does not like the word cas*no, go figure]). The fact that the people that go for the most part like the experience is a separate issue from the creation of wealth.

Of course wealth that is created can be intangible. This is the root of the entire struggle over music and video. What is the value of the bits of a song replicated a billion times. It still has value and that value is what people are willing to pay.

As for your comment in the final paragraph, well it speaks for itself. I don't think that you understand the definition of Luddism to make the comment in the way that you did.

Dennis

Posted by Dennis Ray Wingo at April 6, 2006 08:04 PM

As for Sam, heck I don't know every space person on the planet so had no idea that he was an economist.

Then you weren't even reading the comments, because he told you he was.

As for the comment that tourism creates wealth period, that is absurd as anyone on a Southwest flight from Vegas will attest.

All that means is that it's as possible for tourists to throw their money away as it is for Vegas residents. That doesn't mean that tourism per se is a waste of money, or destroys wealth.

It's quite possible, and even likely, that if those tourists hadn't lost their money in Lost Wages, they would have done it in some other way (say, on their local bookie). The Vegas people probably put it to more productive use than the bookie would have.

And many people enjoy gambling, even when they lose.

Posted by Rand Simberg at April 6, 2006 08:11 PM

Rand Speaks

All that means is that it's as possible for tourists to throw their money away as it is for Vegas residents. That doesn't mean that tourism per se is a waste of money, or destroys wealth.

____________________________

At no point in this discussion have I claimed that tourism is a waste of money or destroys wealth. What I have repeatedly said is that tourism is not a net wealth creator, unless there are technologies derived from the development of tourism assets that have applications and sales in other areas.

I also said that most folks that go to Vegas know that they are not going to win and that they are thowing away money and are quite happy to do so. While they may be happy, they are not creating a net gain in wealth. No matter how you restate this Rand does not change that fact.

I readily admit that I did not read his post initially except for the Luddite part which was funny.

*******************

Rand Speaks from a previous post

____________

Excuse me? Mike Kelly had an option contract from Hughes to fly as many as ten comsats and he still could not raise the money for his RLV. Iridium bought ten launches on various vehicles and so did Globalstar and Orbcomm. The fact that these systems were not economically viable and went into chapter 11 is what cast a pall on the RLV market.

I was at the Rotary Rocket roll out and heard all of the glowing predictions for its markets but guess what, no one believed it and they were not able to raise money beyond what Walt and Clancy put in. They were visionary capitalist who put their money where their dreams were and not for hard nosed capitalist reasons (which are too conservative in my opinion).

Dennis

Posted by Dennis Wingo at April 6, 2006 10:03 PM

At no point in this discussion have I claimed that tourism is a waste of money or destroys wealth.

So, what is the distinction between the two words "depletes" and "destroys"? Because you certainly made the false statement that space tourism depletes wealth. It's the statement in the other post that kicked off this one. And you've repeated it here.

What I have repeatedly said is that tourism is not a net wealth creator, unless there are technologies derived from the development of tourism assets that have applications and sales in other areas.

Well, you continue to be wrong about that as well, as any knowledgable economist will inform you. You still haven't apparently consulted any, and the one that tried to enlighten you, you continue to ignore.

Mike Kelly had an option contract from Hughes to fly as many as ten comsats and he still could not raise the money for his RLV.

Ten whole comsats? Wow. Can you imagine that? What a huge market.

Makes thousands of space passengers, waiting to plonk down their money, look trivial in comparison.

So was I. I was even working for them at the time, but I didn't believe it either. They weren't real markets. Gary didn't go for the real market because he was told that it didn't have any credibility. Partly because of economically fallacious arguments like yours. It put him out of business.

So don't tell me about "hijacking the movement to support one goal." Once more, no one here has said anything to denigrate what you're doing. Why do you persist in denigrating what we're doing? What is your purpose?

Posted by Rand Simberg at April 6, 2006 10:26 PM

Rand

I really like your reporting style but your reading lacks something.

Here is what I said in my explanation at the beginning of this thread

_________

Rand

Not too hard really to explain.

___________

I said that there is no net gain in wealth in the transaction. I posted this in response to the beginning of this thread to explain what I meant by a wealth depleter.

***********

Rand says again

__________________

I ignore things that are patently false. It is false that tourism, in and of itself creates wealth beyond what was in the system initially unless there are spin offs that create applications that can be used in other circumstances. I stand by that and I can't help if you don't see it.

&&&&&&&&&&&&&

Rand also says

____________

Gary did not have any credibility because he had a crappy design that had zero chance of ever working. Ask any competent propulsion engineer about the rotary system and they laugh at the insurmountable problems that it had. Anything else is a lie. He was able to con Walt and Clancy who had no competence in this area and a lot of hope but no one else.

Again, why is stating the obvious denigration? Why is stating that space tourism, in and of it self is not going to open the space frontier? What I seek is balance, just as we did in the 90's and were ignored. I want the tourism guys not to oversell the market, be realistic, and seek further markets beyond simple tourism. Fortunately Elon is doing that and bless him for doing it.

The reason that I push this is that irrrational exuberance for tourism is bad for the overall space market just as it was in the dot com world. I almost lost everything because all of the money went away in the RLV debacle and the Iridum/Globalstar debacle and everyone was lumped in together as a "space" became a bad bet for competent investors.

Dennis

Posted by at April 6, 2006 11:28 PM

Gary did not have any credibility because he had a crappy design that had zero chance of ever working.

To whatever degree that's true, he also was forced to pick the wrong market by his investors, and his investment banker.

Again, why is stating the obvious denigration?

Because a) it's not obvious and b) it's wrong, as any economist will tell you. But I see that you're going to continue to keep dumping on us, despite your inability to find any competent (or even incompetent) economist to back you up. Or anyone else posting here, for that matter.

I give up.

Posted by Rand Simberg at April 7, 2006 06:19 AM

Rand

Sorry that you think that this is dumping in you or us or whomever.

None of us are perfect.

Dennis

Posted by Dennis Ray Wingo at April 7, 2006 06:30 AM

No one is requesting "perfection," Dennis. We're simply asking you to stop making demonstrably false and economically illiterate statements which, if anyone is foolish enough to take them seriously, makes it harder to raise money. I don't recall telling anyone that your business plan sucks, or "depletes wealth." I don't know why you insist on doing it (falsely) for space tourism.

Posted by Rand Simberg at April 7, 2006 07:17 AM

Rand

Why would my statements make it harder to raise money?

I have clearly stated that the economic activity of Space tourism will result in a transfer of wealth from the tourist to the tourism operator/builder. This is what powers Las Vegas and this fact has never stopped people from building those big buildings out there. All an investor wants to know is "what is my ROI". There is certainly an ROI for investors and this is what is driving Branson and others who are putting money into this realm.

I think that you are still misunderstanding my statements on this and are letting your emotional tie to the subject cloud how you read my posts.

Rand I talk to investment types all the time and never do I denigrate the ability to make money on tourism. This is a COMPLETLY separate discussion from the generation of net wealth argument.

It is funny in a way that the tourism market has been validated by the use of government developed assets whos cost are not figured into the cost of doing business which undermines many of the arguments about the value of ISS. Without ISS there would be no space tourism. No one has seriously considered going up for a 7 day stay in a Soyuz.

As for economists, Sam is just as much commited to the tourism thing as you are and so his judgement is colored by that. I think that his new space gig is cool and I hope that he makes tons of money but it is still not a net wealth producer for anyone but him.

Dennis

Posted by Dennis Ray Wingo at April 7, 2006 08:39 AM

It may be that you don't use this as a reason why space tourism isn't as good an investment as, say comsat business, but believe me, I've heard others do so. But if you now claim that it doesn't matter whether or not it creates wealth, then what is your point? Why did you say it in the first place, and why do you stick by it, and continue to insist on repeating it (again, in the face of basic economics)?

As for economists, Sam is just as much commited to the tourism thing as you are and so his judgement is colored by that.

Sam wasn't expressing his "judgment." He was describing the fundamentals of economics, known to every reputable economist. Again, we await one with a contrary opinion.

Without ISS there would be no space tourism. No one has seriously considered going up for a 7 day stay in a Soyuz.

That's because other options were available. But I'll bet you that even in the absence of ISS, someone would have done so, if it was the only way to get to orbit.

Posted by Rand Simberg at April 7, 2006 08:46 AM

Rand

The whole point, which I continue to repeat, is that space tourism alone is not going to open the space frontier. There has to be goods and services that increase productivity, provide a general increase in the wealth of society, and show the general public (and congress) that there is value in space that justifies updating laws to create economic conditions favorable to increased private investment and a devolution of the current FAR and DFAR based contracting approach.

Again, I dispute that every single economist on the planet would disagree with my position and in time I will continue to build the argument with proper references that I just don't have time to dig up right now.

Rand I did not say that tourism is not as good of an investment for an investor. I would state that it will be a very long time before space tourism reaches a significant fraction of the value of the comsat business. That is just simple math. Just in the past 36 months several billion dollars have been made by hedge funds in this market space and even yesterday a multibillion dollar deal was made to sell the assets of Alcatel/Alenia Spazia to Thales.

It is obvious that there is money to be made for investors in a tourist type market or Las Vegas would not exist. Investors for the most part don't care that wealth is created for anyone but them! The point is that this activity is not a net creator of wealth and I stand by that.

Dennis

Posted by Dennis Ray Wingo at April 7, 2006 09:17 AM

The whole point, which I continue to repeat, is that space tourism alone is not going to open the space frontier.

Even if that's true, so what? Why keep repeating it? Who is preventing us from doing other things?

There has to be goods and services that increase productivity, provide a general increase in the wealth of society, and show the general public (and congress) that there is value in space that justifies updating laws to create economic conditions favorable to increased private investment and a devolution of the current FAR and DFAR based contracting approach.

Sorry, but lots of people being able to buy the service of visiting space increases the wealth of society. That alone is sufficient to encourage the government to make it easier to happen, once those people who want to do so, or continue to do so, realize this and lobby the government.

I dispute that every single economist on the planet would disagree with my position

I must have missed the post where anyone said that they would. As I said, I'm sure you can find many Marxists who would agree with your position. But you'd have trouble finding one at Chicago.

I would state that it will be a very long time before space tourism reaches a significant fraction of the value of the comsat business.

Again, even if true, who cares? What difference does it make? Why do you continue to repeat things that don't affect anyone's decisions on anything? You keep repeating these things that are running down the prospects for space tourism, but you won't say why, or what your point is.

It is obvious that there is money to be made for investors in a tourist type market or Las Vegas would not exist.

And yet, given this existence proof of the creation of a major city from nothing but tourism, you refuse to believe that we could do the same thing in space.

Posted by Rand Simberg at April 7, 2006 09:33 AM

Rand Speaks

It is obvious that there is money to be made for investors in a tourist type market or Las Vegas would not exist.

And yet, given this existence proof of the creation of a major city from nothing but tourism, you refuse to believe that we could do the same thing in space.
_____________________________

Rand

I don't refuse to belive this, I simply state an obvious fact that tourism is not a net wealth creator, just a wealth redistribution method. This is not running down anything, simply stating a fact.

I continue to state that space tourism alone is not going to open the space frontier in order to help focus the discussion on a broad range of markets that will.

There was a discussion in the Foundation earlier this year about strategies for further space commercialization efforts. Everyone was focust on the COTS procurement as the new great savior of commercial space. While this will help a few companies, it does not really do that much to open the space frontier.

A complement to COTS would be a concerted effort to enact legislation such as Zero G Zero Tax. There was not really any denial of this just that, while everyone agrees with this, none of the usual suspects even understood what the current incarnation of the bill was until Ed Wright pointed it out.

Tourism, like COTS, helps a few companies. Tax incentives and services agreements instead of FAR contracts and government procurements do much more to level the playing field and open up the conditions whereby ALL space commerce can thrive rather than someones pet project.

This is something that needs to be included in any discussion about space commercialization.

Dennis

Posted by Dennis Ray Wingo at April 7, 2006 10:12 AM

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