Public Choice Economics and Space Policy: Realising Space Tourism

ABSTRACT

Government space agencies have the statutory responsibility to support the commercialisation of space activities. NASA's 1998 report "General Public Space Travel and Tourism" concluded that passenger space travel can start using already existing technology, and is likely to grow into the largest commercial activity in space: it is therefore greatly in taxpayers' economic interest that passenger space travel and accommodation industries should be developed. However, space agencies are doing nothing to help realise this - indeed, they are actively delaying it. This behaviour is predicted by 'public choice' economics, pioneered by Professors George Stigler and James Buchanan who received the 1982 and 1986 Nobel prizes for Economics, which views government organisations as primarily self-interested. The paper uses this viewpoint to discuss public and private roles in the coming development of a space tourism industry.

INTRODUCTION: 'PUBLIC CHOICE' ECONOMICS

The 1982 Nobel Prize for Economics awarded to Professor George Stigler of the University of Chicago, and the 1986 prize awarded to Professor James Buchanan of George Mason University, were largely in recognition of their research into the economics of government behaviour. Professors Stigler and Buchanan and their professional colleagues greatly advanced the systematic application of the assumption of self-interest, which underlies traditional economic analysis of business and consumer behaviour, to politicians and government officials. This work has been extremely powerful in clarifying and predicting the behaviour of governments and government organisations.

More or less since Adam Smith published the "Wealth of Nations" in 1776 it has been conventional for economists to make the assumption that businesses and consumers act in their own economic self-interest. This is an over-simplification: most people are motivated by many things other than money, and many companies also make generous contributions to charitable causes, community activities and so on. Thus it could be said to be 'offensive' or 'cynical' to assume that everyone is self-interested; indeed, Smith's book caused a great deal of controversy when it was published by seeming to approve of selfishness. NB Smith did not approve of selfishness: he explained in detail how 'market forces' which arise spontaneously with the use of money guide those freely pursuing their economic self-interest (within an appropriate framework of laws) to cooperate in creating wealth, thereby enriching society, raising the average standard of living, and bringing about what is today called 'economic growth'.

Nevertheless, as a means of predicting how businesses and consumers behave, the assumption of self-interest is very successful. For example, in the competition for promotion within a company, those who are more effective at earning profits tend to be preferred to those who are less effective. And while individuals may sometimes act against their own economic interest, it is rare for whole classes of people to do so. Consequently economic analysis based on this assumption has become very widely used.

An important discovery in economics was the existence of 'market failures' - situations in which market forces demonstrably fail to maximise social welfare (most notably in the provision of public services such as defence, law and order). Consequently there are some services of which government provision may be economically beneficial. The significance of this is due to the entirely different nature of government activity from market forces. Whereas participation in market activities is based on free choice, government activity is founded on compulsion: citizens face imprisonment and even death if they do not obey government dictates.

Although the value of work on the economics of government has been recognised with multiple Nobel prizes, the starting-point of this work - that in order to understand the behaviour of government organisations one should make the fundamental assumption that politicians and civil servants act in a self-interested manner - is still sometimes considered 'offensive' or 'cynical'. However, it is no more so than to make the same assumption about business-people and con- sumers: it is not credible to suggest that those who become politicians and civil servants are fundamentally different from those who work in business - and of course many people work in both sectors at some time during their lives.

A mature view would seem to be that effective government systems are those which are designed to ensure that politicians and civil servants pursuing their own interests bring about a net increase in social welfare as a result of their activities - just as the framework of law surrounding business activity is designed to ensure that free market forces lead to economic growth. Different government bodies perform relatively well or poorly depending on a number of factors such as the clarity of their objectives, the ease with which their performance can be evaluated, and the quality of the oversight to which they are subject.

Just as the assumption of self-interest applied to business and consumer activity has great explanatory and predictive power, so the same assumption applied to government organis- ations has great power. At the 'macro-level' it explains such facts as the strong tendency for democratic governments to generate inflation and public indebtedness, as politicians compete to win the public's favour at elections, described in [1]. At the 'micro-level' it explains many aspects of the behaviour of politicians, government officials and organisations [2].

Following this analytical approach, it is assumed that politicians' primary motivation is to win the elections ahead of them, while civil servants' primary motivation is to preserve and if possible extend the scale and scope of their department. As in the application of the assumption of self-interest to business-people and consumers, this does not mean that some, even many, politicians and civil servants are not genuinely motivated to achieve benefits for society. But the process of selection within their respective fields of activity systematically promotes politicians who are most successful at winning elections, and civil servants who are successful in defending their departments. Because of this, just as companies themselves can be described as profit-seeking, government organisations can, for example, be described as motivated to survive and expand.

Government organisations suffer from particular weaknesses arising from the incentives that they create for their staff, which have been extensively described and analysed by organisational theorists and others. These include weaknesses at cost reduction, at innovation, at releasing information to the public, and at revising plans once they have been announced. In all types of organization there is reluctance to admit mistakes; however, in the case of companies, when the business environment changes sufficiently that a plan is no longer viable, it is eventually changed. When IBM lost $15 billion in the first 3 years of the 1990s, the chairman was replaced, and the new chairman sacked 80,000 staff. During the 1990s, Nissan staff strongly resisted necessary restructuring, but after 7 years of losses in 8 years the company was finally taken over by Renault. By contrast, governments do not have shareholders, and their actions are only very indirectly held accountable, via elections that occur every few years; as a result they are slower to correct mistaken policies, particularly in areas that are perceived to have relatively little economic or social importance for voters. In addition, like private sector monopolies, government monopoly organisations also have an economic interest in preserving their monopoly status.

These weaknesses and others can lead government organisations to behave in self-interested ways even where this is clearly and greatly against the public interest. The recent scandals in both France and Japan in which senior staff members in their Ministries of Health connived in the deaths of hundreds of citizens, through knowingly allowing them to be infected with the AIDS virus in order to benefit client companies, are good examples of this. Although these are perhaps extreme cases, it should not be thought that they are therefore unrepresentative: detailed studies of government intervention in many different areas of the economy have shown clearly that, in most cases, the effects are negative, making consumers economically poorer as a result [2, 3]. This work was largely responsible for the spread of de-regulation and privatisation of government bodies throughout the world.

The significance of the above discussion for the present paper is that the great majority of space activities to date, including all crewed space activities, have been performed by government organisations. For some years, the production and operation of satellites for telecommunications and broadcasting has been performed mainly by commercial companies which (through self-interest) compete to reduce the costs of these services, thereby benefiting consumers economically. By contrast, all space travel activities - that is, all activities related to the design, manufacture and operation of systems for people to travel to, from and in space, and most launch activities - have been dominated for 40 years by government monopolies. Self-interest causes these organisations to behave very differently from businesses, although their work is commonly described as, and their large budgets justified as being for the public good.

This situation is historically unique; it is entirely different from the development of other forms of transportation such as railways, automobiles and aircraft. However, economists have given very little attention to the space industry to date, presumably because it is small relative to other industries - for example, many large companies have sales of $50 billion/year, which is larger than the entire space industry. In addition, a certain amount of specialized engineering and scientific knowledge is required in order to understand certain important issues. Furthermore, being still largely government-funded, space activities are not yet a 'real industry' - other than communications and broadcasting satellites, which are essentially part of the telecommunications industry.

Nevertheless, government space agencies' decades-long monopoly status might have been expected to attract economists' interest, in view of the well-known inefficiencies and problems from which monopolies suffer. For example, the widespread belief that "space activities are so expensive that only government agencies can afford them" might have been expected to 'ring alarm bells', since excessively high costs are a hallmark of monopolies.

In the following we start to look at the economic consequences of space agencies' historically anomalous monopolisation of the space transportation industry. Even this very preliminary study reveals that, as public choice economics predicts, this situation has imposed large and continuing costs on taxpayers in terms of economically wasteful use of taxes, delays in exploiting major business oppor- tunities, and lost contributions to economic growth. It has also had a range of other non-economic costs for society world-wide.

PUBLIC CHOICE ECONOMICS AND SPACE POLICY

Because space flight activities have been dominated by government organisations from their start nearly 40 years ago until the present, the use of the 'public choice' approach to analyse the development of passenger space travel seems to have particular promise. Indeed, it can be seen as a 'case-study' for analysis, since it should show clearly the features that are predicted by public choice economics.

Most government space activities are funded through national or international space agencies, of which the behaviour is strongly influenced by their history. The largest of these, the US National Aeronautics and Space Administration (Nasa) was established during the Cold War to compete with the Soviet Union's state-funded space activities, by performing a range of government-funded 'space missions' similar to those of the Soviet Union. This activity become known as the US 'space program'. The 'Apollo project' to land two people on the Moon before the Soviet Union was effectively a strategic step in the Cold War, and in order to realise it Nasa's budget grew rapidly during the early 1960s, while its employees grew from 3,000 to 30,000. Other countries' governments also established 'space programs', and eventually 'space agencies', to develop space technology, partly to subsidise the development of ballistic missile technology, and partly to benefit from economically valuable applications which it was said would arise.

The current level of funding of space agencies is approximately $25 billion/year, comprising $14 billion for Nasa; $6 billion for the space agencies in Europe, of which the European Spage Agency (ESA) receives about half; some $3 billion for the various space research organizations in Japan, including the National Space Development Agency (NASDA); and several billion dollars spread between Russia, China, India, Israel, Brazil, Korea and other countries. Of this funding, some 10 - 20% is spent on space science research, including astronomy, micro-gravity science and biology. Consequently, in round figures, the G7 countries' space agencies (ie USA, Europe and Japan) spend some $20 billion/year on a range of 'space development' activities, in large part comprising development and operation of expendable launch vehicles, satellites for various applications, and development and operation of space station equipment. In total, government space agencies have spent approximately $1 trillion (in current US$) on civilian space activities to date, although it is difficult to estimate accurately due to major currency adjustments and inflation since the 1960s.

Commercial applications that have resulted from this investment comprise the manufacturing, launch and operation of telecommunications and broadcasting satellites, a business with a turnover of some $10 to 20 billion/year. (Note that some commentators describe the telecommunications satellite industry as having revenues of $40 - 60 billion/year; however, these figures include revenues earned through satellites' operation, which are more correctly treated as revenues of the communications industry.) 'Remote- sensing' satellites are also used for a growing number of purposes, particularly for weather- forecasting, but most of this activity is government-funded rather than commercial.

The commercial activity arising from taxpayers' investment in space activities is therefore extremely small - roughly 1/50 of what would be expected from commercial investment on the same scale. Clearly an important contributing reason for this was because at least the early years' activities were explicitly politically motivated (though in fact considerable economic benefits were claimed as 'spin-offs' from Nasa expenditure during the 1960s). However, the lack of economic benefits from the very large expenditures by government space agencies during the 30 years since Apollo 11, and more particularly since the end of the Cold War, would appear to be due more to the fact that government organisations are not primarily economically motivated. In order to understand these reasons better it is enlightening to identify some of the economic interests of the main interested parties, following the public choice approach.

Economic interests

1. Being government organisations space agencies are motivated towards self- preservation, that is to ensure the continuation of their funding from governments. In order to achieve this, among other things they need to avoid criticism; this leads them to avoid risks that might lead to the perception of failure, and to avoid innovation which inevitably involves such risks. High costs and inadequate innovation are well-known weaknesses of monopolies, both private and governmental; since space agencies' costs are high, they can avoid criticism by preserving the high cost of space activities, which they can do by preventing the emergence of effective competition. This motivation acts in the same direction as the fact that, being monopolies, space agencies are motivated to preserve their monopoly status. Avoiding making promises that might not be fulfilled, and using their public relations budgets to manage public expectations, continually emphasising the difficulty of their work, and the need for larger budgets, etc, all work to the overall end of preserving their status. This motivation also leads to the "making mountains out of molehills syndrome", whereby every project becomes more complex than necessary, and costs many times more than necessary, thereby employing larger numbers of staff.

2. All organisations have a 'culture', largely determined by their leaders, which influences how their staff think and behave. In the case of Nasa, the leading role played in the early post-WW2 years by politically socialist engineers and planners from Germany had a major influence in gaining support for the concept that US taxpayers should pay for a government monopoly organisation to perform 'space missions' on behalf of the public - something that is inherently and deeply contrary to American ideology. That this thinking, including specifically Werner von Braun's overall plan for a crewed 'mission' to Mars, is still very influential, is described by a former director of the National Space Institute:

   "Human space flight in Nasa still lives by that 1950s Werner Von Braun plan. The Agency clings to that vision as a missionary to a Bible. No truly different vision of human space flight has ever been considered [within Nasa]" [4].

   As a tactic during the Cold War, the US government's use of a space agency was effective in winning the 'race' with the Soviet Union to land people on the Moon. However, a decade after the end of the Cold War, the joke that the acronym NASA stands for "Non- American Space Agency" has a serious point: it is far from clear that a government monopoly institution which is completely contrary to traditional American values is beneficial. Certainly, by comparison with the huge cumulative cost to US taxpayers, comprising some $500 billion directly, and an uncertain but important amount indirectly, the net economic balance is strongly negative, as discussed below.

3. Politicians who support space agency budgets benefit from bringing central government funds to their electoral areas: they can then claim credit for "bringing jobs to the district". What the funding is used for is of far less importance to politicians - provided that complaints do not arise too frequently. As in other government organisations, criticism of cases of misuse of funds, waste, inefficiency etc do arise periodically, and the results of the loose oversight of Nasa are noteworthy: for example, in 1993 the US congressional General Accounting Office revealed that it was investigating more than 400 criminal cases at Nasa involving waste, fraud and abuse [5]. Another example is that Nasa spends large sums, probably amounting to tens of millions of dollars/year, on work preparing for an expedition to Mars [6] - although successive US presidents have ruled this out, directing Nasa to concentrate on activities that have economic benefits [7]. ESA likewise spends much of its budget on politically motivated projects, including particularly unprofitable expendable launch vehicles, rather than on ones that could earn economic returns for taxpayers [8].

4. In recent years, space agencies have been directed by governments to support the commercialisation of space activities. It is important to note that the spread of genuine commercialisation is clearly against the economic interests of space agencies as they are currently structured. This is because companies are better at commercial activities than government organisations, and consequently any activity that is commercialised thereby becomes 'lost' to space agencies, and will lead to reductions in their budgets and hence their employment and influence, except to the extent that they can persuade governments to provide more funding for other non-commercial activities. This creates a strong preference for projects that cannot be commercialised, of which von Braun's plan for a Mars expedition is a classic example.

5. The strategic role of public space flights in the Cold War was a historically unique event, and it is now in the economic interest of taxpayers to receive economic benefits from the massive investment that has been made in space technology in their name. Space agencies state that one of their objectives is 'technology development' - but in the absence of economic objectives for technology development, the results are largely worthless. However, there is a strong element of the 'Labour Theory of Value' in the way in which space agencies' work is discussed, both by the agencies themselves, and by the media: that is, if $14 billion is spent on some activity, it is assumed that it has that value. But the 'Labour Theory of Value' is, famously, wrong: economic value is in fact determined by the market - and the economic value of any activity is not the cost incurred in performing it, but the saleable value resulting. And from this point of view, most of space agencies' activities have little economic value, as measured by the very small amount of commercial activity that has resulted.

6. Due to the vague and non-economic nature of space agencies' objectives, particularly since the end of the Cold War, and the low level of understanding of the technical issues and possibilities by the general public and the media, overall criticism of this situation is very muted. In order to avoid such criticism it is of course in space agencies' interest to preserve this situation; to constantly emphasise the difficulty of their work, and that it is unreasonable to expect missions to actually succeed, and so on. This behaviour has reached such a level in recent years that Senator Sensenbrenner even publicly criticised Nasa for claiming "Target achieved" in respect of a project that was in reality a failure [9]. He also criticised Nasa for falsely claiming to have made savings of $685 million that were later revealed to have been no more than $95 million [10]. It is further revealing of the economically unsatisfactory nature of the political process whereby Nasa's budget is decided and its activities monitored, that Senator Sensenbrenner is from the state of Wisconsin, which does not have a significant economic interest in Nasa. Politicians from the large number of states that benefit significantly from Nasa's 'largesse' typically do not publicly criticise Nasa, even for such striking, self-serving misdeeds.

It is worth noting that the first Nasa administrator, the career civil servant James Webb, was regarded as politically astute in siting Nasa facilities in most states of the USA in order to win the votes of the majority of congressmen and senators that was needed to ensure the survival of an unpopular government institution through the 1960s. (Contrary to popular mythology, Nasa had a low level of popular support throughout the 1960s, and without such political manipulation the Apollo project would almost certainly have been cancelled [11].) However, the effect of such planning was to create an institution that now has considerable ability to pursue its own objectives even against the public interest, due to the support of politicians who benefit from Nasa's expenditure in their districts.

Principal-Agent Problem

Government-funded bodies such as space agencies exhibit a further economic problem, which is known as the 'principal - agent problem'. When a person employs someone else to achieve a particular objective they incur costs to ensure that the results of the agent's work are satisfactory, and these costs are higher to the extent that an agent's economic interests differ from those of the principal. The oversight of government organisations such as space agencies suffers this problem doubly, since space agencies are agents of government and so are overseen by politicians who are themselves agents of voters/taxpayers, from whom they have demonstrably different interests, as discussed briefly above. Thus the oversight of space agencies is very loose, and reflects voters' preferences only very indirectly.

The link between the general public and space policy is rendered even weaker by the fact that space activities represent only a very small part of the economy, and consequently opinions about the national 'space program' play almost no role in voters' behaviour at elections. This low level of popular interest is reinforced by the fact that much of space agencies' work is technical, and not easy for most people to understand or judge. Most of the politicians who choose to be involved in overseeing the funding and monitoring of space agencies are those who have an electoral interest, typically because they have a space agency facility or space agency-funded company in their electoral district.

As a result of the above influences, government space agencies are only very indirectly motivated to work for the economic benefit of taxpayers. Their supporters typically emphasise political benefits, such as 'national prestige' which is a conveniently vague concept. They also emphasise the scientific value of agencies' work, although only about 10% of government space funding is used for scientific research, and most of it is not subject to the same peer review and competitive selection process as science research funding in other areas.

As with other arms of government, another control mechanism is having a free press - the 'fourth estate of the realm'. Unfortunately, as discussed further below, the news media are largely ineffective in this role, generally confining themselves to repeating space agency publicity material, not least due to space agencies' inescapable monopoly influence.

Future direction

Recently, since the end of the Cold War, space agencies have been directed to support 'commercialisation' of space activities, and their public relations nowadays refer to the benefits of this - although they emphasise that economic benefits will arise only in the longer term, and require many years of further government-funded research. Space agencies periodically publish scenarios of their future activities: these typically show space activities still being mainly government- funded even several decades in the future. At their present level of funding, space agencies could expect to spend US$750 billion over the coming 30 years. If there was no prospect of significant economic benefit arising from space activities in the foreseeable future, it could be argued that the cost of several more decades of space agency work is a tolerable burden for taxpayers in rich countries as a form of 'cultural' activity - like the funding of astronomy (of which the budget is, however, just a few percent of space agency funding). However, it has recently become clear that this is emphatically not the case.

Growing work on the feasibility of developing a passenger space travel industry analogous to air travel shows that it has potentially great economic value; that it would be a very popular service and requires far less investment than space agencies already receive; and that substantial funding for work on this possibility is very desirable from many points of view, economically, socially, politically and inter- nationally. It is therefore very instructive to examine space agencies' attitude towards this possibility. A 'public choice' viewpoint would lead us to expect space agencies to be unenthusiastic, since the operation of regular passenger flights to and from private facilities in orbit would end space agencies' monopoly control of space activities; the lower costs that private companies would achieve would reduce the need for the large part of space agencies' budgets devoted to space transportation; and the very need for government space agencies could even be called into question. As discussed in the next section, the behaviour of space agencies, led by Nasa, has not only been unenthusiastic, but it has been deliberately obstructive, and has already successfully delayed this very desirable innovation by a decade or more, at great cost to the general public.

SPACE AGENCIES AND SPACE TOURISM

Government space agencies use considerable rhetoric to the effect that they are "opening space up to the human race." Nasa administrator Goldin in particular has frequently said that he wishes to see "as many people as possible visiting space as soon as possible." However, the total amount of spending by the space agencies of the G7 countries aimed at making space accessible to the general public is essentially zero. They have taken no opinion polls on the subject (although they frequently survey the public about the level of support for increasing space agency budgets); a fortiori they have performed no market research on the potential demand for space travel services; and they have performed no design work on passenger- carrying space vehicles such as sub-orbital and orbital launch vehicles, nor of orbital accommodation facilities (although these are technically much simpler than the scientific research station under development by space agencies today). The situation was summarised in the San Francisco Chronicle: "Nasa doesn't believe that its mission is to help taxpayers go to space" [12]. The other government space agencies follow suit, having largely ignored the subject, and they devote no significant funding to it.

To the extent that space agencies have a formal obligation to support commercialisation of space activities, working to facilitate the realisation of passenger space travel is certainly within their mandate. And as with any new field, even small amounts of funding could achieve great progress. However, space agency administrators appear determined to delay doing anything to help until they receive explicit directions to do so from policy-makers.

Figure 1: The most economically valuable report that Nasa has published to date [14]

If it was the case that the establishment of a passenger space travel industry would require the investment of hundreds of billions of dollars; that it would require decades more research; or that it would benefit only a small fraction of the population, then this attitude could be justified economically. However, the truth is that the realisation of passenger space travel services that would be affordable by the majority of the middle classes requires the investment of just a small fraction of what space agencies receive from taxpayers every year. Consequently, space agencies' negative attitude is not economically justifiable.

What is more, this attitude of neglect has recently grown into active obstruction. Nasa administrator Goldin and his senior colleagues have extended their negative attitude towards space travel by the general public to the extent of deliberately concealing very important information - which is clearly against taxpayers' economic interests. In doing so they reveal the priority that they give to their own economic interests over the public good, even at great cost to taxpayers, as described in the following.

Nasa-STA Cooperative Research

Concerned at the lack of growth in the launch market, the US Space Transportation Association (STA) persuaded Nasa in 1995 to collaborate in a joint study of the feasibility of developing a passenger space travel industry [13]. The Final Report of this study "General Public Space Travel and Tourism" was published by Nasa in March 1998 [14].

Nasa Report NP-1998-03-11-MSFC reached a number of economically very significant conclusions:

1. Almost anyone will be able to travel to and from space without difficulty.
2. Sub-orbital space flight services can start using existing hardware.
3. Tourism is likely to become the largest business activity in space.

The report contained positive research findings on the expected conditions of both demand and supply for such services, and also included such emphatic conclusions as:

"generally available trips to orbit and week-long stays in LEO hotels now can be seen as certainly feasible" [14].

The report thus clearly identifies what will become the largest commercial activity in space, and includes a long list of recommendations for action by Nasa and other government and private organisations that could help to realise it. On this basis we can conclude that NP-1998-03-11-MSFC is the most economically valuable report that Nasa has published in its 40-year history.

(It may be worth noting that although there are controversies in the field of economics, estimating the economic value of an activity is not one of them: it is the present value of the future profits to which that activity could give rise, which can be estimated using the Discounted Cash-Flow method which underlies all financial calculations. This definition can be modified to included non-monetary benefits, as in Cost Benefit Analysis, but the underlying principle is the same. An activity which is expected to grow into the largest commercial activity in space is economically far more valuable than space activities that are not expected to ever be profitable.)

The great economic value of NP-1998-03- 11-MSFC contrasts strikingly with its cost to Nasa: this has not been published, but it seems sure to have been much less than $1 million (over 3 years). Since to date Nasa has spent approximately $500 billion of US taxpayers' money (in current US$), the cost of Nasa's most valuable piece of work was achieved using barely 1 millionth of its total expenditure - and less than 1/40,000 of its expenditure of $42 billion during the 3 years of the study.

However, this poor correlation between Nasa's expenditures and taxpayers' economic benefit is over-shadowed by the fact that Nasa has acted and continues to act to deliberately minimise the publicity that the report has received. Most notably, the report is not accessible, and its existence is not even discoverable, through Nasa's internet web-site: using the 'search' function of the Nasa web-site gives no hint of the existence of Nasa's own very positive report on space tourism. In addition to this, Nasa's document service has even told enquirers that this report - paid for by US taxpayers - is "not available" [15].

The author questioned Nasa administrator Goldin about this matter at a public session of the Space Frontier Foundation conference in September 1999; he stated that the report would be put on the web-site. Nine months later the report had still not been made accessible, and so the author raised the matter with associate Nasa administrator for policy and plans Lori Garver, who has stated in articles and interviews that she and Nasa support space tourism. She stated at a public session of the Space Transportation Association's space tourism conference in June 2000 that NP-1998-03-11-MSFC will be made accessible on Nasa's web-site. However, as of late 2000, two-and-a-half years after its publication, these two senior Nasa staff- members have yet to keep their promises - and this economically most important report is still being hidden from the public and the press.

The only plausible explanation for this situation is that it is the result of deliberate decisions among Nasa's leadership. Consequently, so long as Nasa does not make NP-1998-03-11-MSFC easily accessible on its web-site, public claims by Nasa staff Goldin, Garver and others to the effect that they support space tourism and wish the public to have access to space, etc, are knowingly false: they and their colleagues at Nasa are not even neutral towards general public space travel and tourism - they are actively and deliberately trying to delay and/or prevent its realisation.

In addition to behaviour that is so strikingly against the public interest, it is noteworthy that Nasa has also not implemented any of its own recommendations in the report concerning how to realise the maximum possible commercial benefits from space activities - including even activities that have no financial cost, such as:

"The Federal government... should inform the general public about space travel and tourism possibilities; such communications should focus on the idea that ordinary people - not just astronauts - should be able to go on a space trip in the relatively near future as a result of government- private sector cooperation" [14].

These facts deserve emphasising: both space agency rhetoric about "opening the space frontier" etc, and the expectation of the general public that space agencies are working to make space accessible, are false. Space agencies are not seriously trying to achieve economic benefits for taxpayers through developing economically valuable space capabilities; they are knowingly spending taxpayers' funds in ways designed to delay public access to space, and to preserve space agencies' public funding and monopoly status.

Although Nasa has the legal responsibility to encourage commercialisation of space activities - which applies a fortiori to what Nasa itself has confirmed to be the most promising business opportunity in space - the present leadership have chosen to use their influence to defend the short-term interests of Nasa and its beneficiaries, at the cost of delaying the most important direction for space commercialisation. This result is an extremely striking case of the validity of the 'public choice' analysis of a public sector organisation. In the following sections we will see that this motivation extends throughout most space agencies' spending decisions, which are knowingly designed to avoid making space accessible to the public.

Other space agencies

Other space agencies have also largely ignored or resisted the possibility of space tourism. ESA has paid for two small studies to date. A report commissioned from Bristol Spaceplanes Ltd in 1994 explained the economic case for passenger space travel and proposed a low-cost incremental development path [16]. This was the first ever report on this subject paid for by a space agency, and its main conclusions were subsequently endorsed by the British government's minister responsible for space policy [17]. However, this contract was not followed up with further funding either from the British National Space Centre nor ESA, which have since spent billions of dollars on loss-making projects, including satellite launch vehicles. A second report commissioned by ESA and published in 1999 concurred that passenger travel is a potentially large market, but no further funding has been provided [18].

Double-standard

In discussing the subject of space tourism, there is a pseudo-economic argument that space agencies use - namely that since it is not certain that passenger travel services will earn a sufficiently high rate of return to be commercially profitable, research aimed at realising them should not be funded. How- ever, when coupled with acquiescence with the status quo of public space expenditure, this is to employ a 'double-standard' since it makes the unstated assumption that existing space development activities should continue to receive $20 billion/year from taxpayers, even though these are certain to earn almost no economic return. Consequently this argument against investment in developing passenger space travel services is false: a 'level playing-field', or 'zero-based budgeting approach' whereby funding was allocated not according to history and vested interests but according to estimates of economic potential, would see substantial resources being allocated to work aimed at realising passenger space travel, since this has been identified as likely to become the largest business activity in space.

It is worth noting that governments' policy towards passenger space travel, as carried out by government space agencies, is completely different from governments' policy towards passenger air travel, which has for many decades been to aid the growth of the commercial air travel industry. That policy has been very successful, and aviation has grown into a global industry with revenues approaching $1 trillion/year, creating employment for tens of millions of people in travel, tourism and related industries.

POTENTIAL ECONOMIC IMPORTANCE OF SPACE TOURISM

It is worth noting that passenger space travel will not be a leisure activity for just a small number of wealthy people. Market research to date has been very limited, since space agencies have declined to provide any budget for them. However, surveys performed in Japan, Canada, USA, Germany and England all show a similar pattern, with most people being keen to make a visit to space. Analysis of the level to which the cost of such services could fall, given the scale of potential demand, shows that space travel services could indeed become available to the general public like air travel, as summarized by the ex-head of Nasa's advanced projects office in [19]. Due to the well-understood synergistic effects of large-scale business operations, costs can be expected to fall progressively and the market expand in the 'virtuous circle' which drives business and economic growth.

Since the Nasa report 'General Public Space Travel and Tourism' was published, a number of other publications have reached similar conclusions and added many further details. A report published by the American Institute of Aeronautics and Astronautics ( AIAA) concluded that:

"In light of its great potential, public space travel should be viewed as the next large, new area of commercial space activity" [20].

The Japan Federation of Economic Organisations, (the major organisation representing business in Japan), concluded that:

"Space tourism is expected to give a strong impetus toward the commercial- isation of space activities" [21].

Ex-chairman of Lockheed-Martin Corporation Norman Augustine, has written that:

"the most important space development will be the advent of a burgeoning tourist industry to near-Earth orbit during the middle of the next century" [22].

Thus there is agreement by almost all those who have studied the subject (including in Nasa) that space tourism is a very promising new area for commercial space activity, due to its technical feasibility and the popularity of the concept.

It thus seems probable that popular space travel services can grow throughout the 21st century much as air travel services grew during the 20th century. Studies performed by the Japanese Rocket Society ( JRS, references 2, 3, 6, 7, 11 and a) in [14]) concluded that orbital services could start within 10 years, and a scenario based on the JRS work suggests that revenues could grow to reach $100 billion in 2030 [23]. Indeed, in view of the growth and globalisation of the world economy and financial system over the past 100 years, it seems possible that whereas air travel will take about 100 years from its start in 1903 to reach a turnover of $1 trillion/year, space travel might reach that figure within 50 years.

The development of a vigorous new industry with such growth potential has potentially important implications for the world economy. Unemployment in many developed countries including Japan, Germany, France and Russia, as well as in many other less advanced countries is at historically high levels - fundamentally due to inadequate innovation and investment in new industries. Likewise the US trade deficit of more than $1 billion/day is evidence of a lack of competitive, tradable goods and services.

In this situation it is highly desirable that a new industry with potential on a par with air travel should be established, as discussed at some length in [24]. Economic problems, and specifically unemployment, are the basic cause of much social friction and conflict, including wars. Consequently, continuing to delay the establishment of a major new industry with almost unlimited growth prospects is helping to needlessly prolong the current exceptionally high levels of unemployment around the world, with the attendant human costs of unnecessary conflicts. The existence of a real geographic frontier also has a range of important social benefits, adding further to the case for developing passenger space travel.

The existing launch industry offers a sharp contrast: having reached a turnover of a few billion dollars/year (that is, some 1 or 2 launches/week world-wide) it has shown little growth for a decade, and is not commercially profitable in the normal sense of the word, since sales of launches are not sufficient to repay the vehicle development costs, which are written off by government space agencies. The satellite launch industry is currently facing a crisis of oversupply, which has already started to cause sharp falls in launch prices [25], and is predicted to lead to a "bloodbath" in the near future [26]. At an international symposium in 2000 devoted to the future of the space transportation market, speakers agreed about the imbalance in the existing launch market - but the only alternative 'solution' to the author's advocacy of developing the promising new market for space tourism services [27], was the proposal for governments to pay for space agencies to carry out an expedition to Mars. However, if such a project was undertaken before a new generation of low-cost reusable launch vehicles had been developed, it would be a further large burden to taxpayers, with essentially no offsetting economic value.

SPACE AGENCIES & REUSABLE LAUNCH VEHICLES

The key to realising a passenger space travel industry is to develop passenger-carrying vehicles capable of flying regularly to and from orbit. The work performed by government space agencies on reusable launch vehicles (RLVs) is thus of relevance. However, the details of the work that space agencies do in this field reveal clearly the difference between space agencies' interests and those of the general public.

During the 1970s Nasa developed the 'space shuttle', the only partially reusable vehicle currently capable of reaching orbit. This was not designed to achieve low cost passenger access to space, but to be able to carry 25-ton payloads to orbit, and to satisfy a number of US military requirements. The space shuttle is an extremely complex vehicle requiring several thousand people to operate, and the cost/flight is of the order of $500 million. As a result, the popular image of space flight is that it is far too difficult and expensive for private industry. In order for passenger space travel to be commercially viable, the cost/flight of passenger vehicles needs to be reduced to approximately $1 million/flight. This is claimed to be achievable provided that flight operations are sufficiently frequent to achieve economies of scale as in aviation, which requires carrying passengers (as there is no other large market) [19].

In recent years, Nasa and other government space agencies have started to devote a small part of their funding - less than 2% at Nasa and less than 0.2% elsewhere - to work towards developing reusable launch vehicles, purportedly in order to lower the cost of access to space. They typically stress the need for heavy funding of research to develop new technology. However, sub-orbital passenger space travel can start using existing technology, and the key to reducing launch costs is not developing new technology, but addressing a sufficiently large market. For example, the policy of the US Space Transportation Association (STA) is that it is not possible to reduce launch costs significantly by developing an RLV unless it is designed for passenger travel. The reason for this is that the market for launching satellites and government payloads is too small to amortise vehicle development costs of several billion US$.

It is instructive to compare the reusable satellite launch vehicle design 'Venture Star' of Lockheed-Martin Corporation (LMC) with the ' Kankoh-maru' passenger vehicle designed as part of the Space Tourism Study Programme of the Japanese Rocket Society. LMC have stated that the $5-6 billion that they estimate necessary to develop 'Venture-Star' cannot be amortised on a commercial basis due to inadequate flight demand even for 2 vehicles. By contrast, the $12 billion that the JRS estimate necessary to develop the (smaller and technically more conservative) ' Kankoh-maru' could be amortised commercially, due to the need for more than 50 vehicles to supply the much larger market for passenger space travel.

Figure 3: Comparison of ' Kankoh-maru' passenger vehicle with LMC's RLVs.

It is therefore of great interest that all space agency work on RLVs concerns unpiloted vehicles for launching satellites. From the economic point of view, these would never be profitable (unless they were to be developed at very low cost - less than about $1 billion), and hence the motivation for their development is, at best, unclear.

In recent years the greatest progress towards realising reusable launch vehicles was made by the 'DC-X' Vertical Take-Off and Landing ( VTOL) rocket developed by McDonnell- Douglas for the US Department of Defence (not Nasa). This vehicle demonstrated, at a cost of less than $100 million, that 'aircraft- like' operation of a VTOL rocket is possible, as well as low-cost, rapid turn-around, with flight operations controlled by a team of 3 people. Largely in response to public interest in the DC-X project, Nasa announced two new RLV projects, the ' X-33' and ' X-34' which it claimed would make great progress towards the development of low-cost RLVs, including for passenger-carrying.

' X-33' project

Nasa announced that it would use approximately $1 billion to fund the development of an autonomous, reusable, sub-orbital rocket which, starting in 1999, would fly repeatedly up to Mach 13 or more as a prototype for an unpiloted Single-Stage-To- Orbit ( SSTO) vehicle that would carry 20 ton payloads, after being developed as a commercial project. However, instead of selecting the follow-on to the successful DC-X vehicle, Nasa chose LMC to develop a more complex, experimental design which it claimed would lead on to the 'Venture Star' orbital vehicle being developed commercially.

As of late 2000 there is no prospect of the X-33 flying soon, since the test-vehicle failed some major structural component tests, and LMC and Nasa are negotiating over whether LMC should receive the remaining $100 million (which was to be a performance payment on successful flight) to continue the project [28]. LMC has said that if it does not receive further funding it will "walk away from" the project, which its contract with Nasa allows it to do [29]. In the view of many commentators the ' X-33' is unlikely to fly before 2002, if ever. From the economic point of view, the failure of the ' X-33' project has not only wasted $1 billion of US taxpayers' money, but it has also delayed the start of passenger space travel services by some 6 years, during which time Nasa will have received $84 billion from US taxpayers.

' X-34' project

The ' X-34' was to be a much smaller, simpler vehicle, somewhat like an unpiloted X-15, which would be used to fly a number of new reusable systems at speeds up to Mach 8, also starting in 1999. Originally funded at $60 million, the costs expanded to $95 million as of 1998. In May 2000 Nasa requested an additional $170 million for modifications to the project including additional safety systems, but was turned down by the White House Office of Management and Budget [30]. The X-34 is currently in limbo, and like the X-33 is not expected to fly before 2002, if ever. It is noteworthy that the fully reusable X-15 rocket-plane which, starting in 1959, flew 199 times up to Mach 6.7, was piloted; it was therefore not subject to the unreliability problems of the X-34, and could have been upgraded for passenger- carrying.

All launch vehicles today are still expendable or partly expendable; they carry auto-destruct devices; they are launched over the sea or desert areas; and most are not reused. The X-33 and X-34 were planned to fly repeatedly from airports, and so the 'munitions-thinking' underlying their designs is now colliding with the reality of aviation rules which assure safety in the skies above populated areas - one of which is that all vehicles must be piloted. This being so, it is apparent that these two projects based on space agencies' paradigm that unpiloted rockets are safer than piloted rockets, were fundamentally misconceived. Even if the vehicles did eventually fly in the future, they would contribute far less towards realising commercial passenger space travel than would using the more than $1 billion of taxpayers' funds that they have received to fund piloted vehicles capable of carrying passengers.

Space agencies' economic interests

It remains to be seen what, if any, penalty Nasa suffers for its extraordinary mismanagement of the X-33 and X-34 projects. In view of Nasa's monopoly status, and of the lax supervision which it receives, it is quite likely that it will not suffer any significant penalty - certainly nothing comparable to what would occur in the private sector in the face of such mismanagement.

From the economic point of view it is interesting to consider the question: "In whose economic interest is this outcome of the X-33 and X-34 projects?" It is clearly not in the public interest, which is to see passenger space travel services realized as soon as possible - however vociferously the Nasa administrator may defend the value of the work performed. However, as a result of these projects' delays, the threat to Nasa's monopoly on access to space, and the threat to LMC's $1 billion/year satellite launch business using expendable launch vehicles (ELVs) have been delayed by more than 5 years. (It should be remembered that the directors of a well-run commercial company cannot knowingly act against the interests of its shareholders; so it is simple to show that it is in LMC's economic interest to spend even several hundred million dollars to delay an RLV designed to launch satellites for several years. It is not necessary to cast aspersions on the individuals involved to acknowledge that such conflicts of interest are well-known to be very undesirable, and it is elementary good policy to avoid them.)

It is also notable that during the period of the X-33 and X-34 programs, nearly 20 start-up RLV companies have been unable to raise sufficient investment to complete their plans for both sub-orbital and orbital vehicles; investors are understandably reluctant to invest in projects that compete with Nasa-subsidised vehicles [31]. If, instead of being given to a company with a clear economic interest in delaying RLV development, the same funding of $1 billion had been shared between these independent RLV companies which do not have an interest in preserving ELVs, several of them would now be offering sub-orbital passenger flights to space - thereby starting a commercial revolution in low-cost access to space. This would have been greatly in the economic interests of US taxpayers - and against those of Nasa and its clients wishing to preserve the status quo.

Nasa's reaction to the failure of these programs is also instructive: emboldened by the negligible amount of criticism they have received, Nasa leadership is currently pressing the US government to provide some $4.5 billion over 5 years for a 'Space Launch Initiative' to fund further technology work aimed towards RLVs. In view of the failure of the X-33 and X-34 programs, there is no reason to suppose that this new program would have any greater benefit for taxpayers - unless the economic motivations of the participants were changed fundamentally through major restructuring. On past experience, and in view of the economic interests of Nasa and its favoured clients, the 'Space Launch Initiative' would be most likely to waste 4 times more taxpayers' money than the X-33 and X-34 programs, and to delay the arrival of passenger space transportation yet again - probably for a full decade. This is only to be expected if previous delinquent behaviour is not followed by commensurate penalties.

Even without the evidence of the X-33 and X-34 fiascos, the argument by space agencies that the solution to reducing launch costs is to provide more funding for government agencies to perform technology research is patently false. The key issue for reducing launch costs is not technical, but commercial - to target a market which can grow large enough to amortise the vehicle development cost, and to generate sufficiently voluminous operating statistics to achieve acceptable levels of reliability and safety. To date, the only known candidate is passenger-carrying, which shows enormous promise - but which Nasa and the other space agencies refuse to address. This refusal is revealed in another recent Nasa study ostensibly aimed at reducing launch costs.

Space Transportation "Architecture" Study (STAS)

The STAS, on which Nasa has spent some $40m to date, was described by Richard Christiansen, Nasa's acting associate administrator of aeronautics and space transportation technology, as being to "bring the principles and practices of the aeronautics sector to space transportation" He also described it as an "...all-encompassing space transportation architecture study to determine what is the right mix of launch vehicles for Nasa's future" [32]. Thus this very expensive study entirely ignores passenger transportation. But a study of space transportation that considers only Nasa's needs is not only not "all-encompassing" - it does not cover even 1% of the potential demand for space travel - as explained in Nasa's own report NP-1998-03-11-MSFC [14]. Economically, therefore, the 'Space Transportation Architecture Study' is almost worthless; it is equivalent to the FAA spending $40 million to study the flight requirements of FAA staff - and nothing at all to study the general public's needs.

In view of the above, it is apparent that space agencies' work on RLVs is very ineffective in making progress towards passenger space travel, not least because it is perceived as being against the economic interests of the agencies themselves. This economically very unsatisfactory situation is the result of space agencies' institutional structure whereby the agencies themselves perform operations rather than support the activities of private industry - thereby giving the space agencies economic interests contrary to those of the general public. Until this situation is changed the cost and waste will continue.

ROLE OF AVIATION INDUSTRY

Despite the widespread use of the word 'aerospace' there is in truth little real collaboration between the space and aviation industries. This is partly because people working in the space industry lack experience of passenger-carrying. Their experience of space flight, started during the Cold War, is still with ELVs originally converted from missiles, or with partially expendable vehicles, and their thinking is that 'unmanned missiles' are safer than 'manned missiles'. Consequently space agencies are working to develop unpiloted vehicles to launch satellites to orbit, supposedly in order to subsequently develop passenger-carrying vehicles.

The aviation industry's approach is very different: the logical sequence for developing passenger flight services to orbit is via the preliminary step of sub-orbital passenger space flight services using piloted vehicles. This has many advantages, including that such vehicles are technically far simpler than orbital vehicles; the costs of development, production and operation will all be approximately an order of magnitude less than in the case of an orbital vehicle (either piloted or unpiloted); and the cost/flight will be so low that they can be flown hundreds of times - sufficiently frequently to generate operating statistics on which reliability and safety can be based, and to develop 'aviation-like' maintenance procedures.

In choosing between these two approaches, it is noteworthy that the experience of the aviation industry is far greater than that of space agencies; its safety levels are many orders of magnitude higher; and the wealth created by aviation is hundreds of times greater. With a budget less than that of Nasa, the FAA oversees the US share of a global industry that generates nearly $1 trillion/year of commercial turnover, employs tens of millions of people, and carries 1 billion passengers/year with an extremely high level of safety. Consequently, from the economic point of view, we must conclude that the space industry 'paradigm' of space flight is seriously flawed, and that the aviation approach is far more likely to be successful and economically profitable.

In support of this, and in sharp contrast to the negative attitude of space agencies, the Office of Commercial Space Transportation (OCST) within the US Federal Aviation Administration (FAA) is already working to realise passenger space travel, as far as its budget allows. Associate Administrator Patricia Grace Smith has spoken of developing space transportation

"...into a real mode of transportation... when a multitude of entrepreneurs will open space to all kinds of activities: thrill-rides, vacationers, industry and even trips to the Moon and beyond" [33].

In early 2000, US Transportation Secretary Rodney Slater announced the doubling of OCST's budget in order to help this effort [34]. This represents a rise from $6 million/year to $12 million - less than 1/1,000 of Nasa's funding - so there is a huge discrepancy in the government resources being made available for economically promising space activities and economically unpromising ones.

In order to realise passenger space travel as soon as possible, collaboration between aviation and space organisations could make most effective use of existing know-how [35]. However, this requires a major change in attitude, a true 'paradigm shift' away from space agencies' quasi-military mentality, as described in [36] - a change which is currently being strongly resisted by space agencies. In the absence of such collaboration, reallocation of funding from space agencies to appropriate aviation organisations would be economically beneficial.

Lessons from aviation history

It is noteworthy that the early history of aviation, including both successes and failures, has much to teach concerning how best to realise passenger space travel. The 1986 accident in which the space shuttle 'Chal- lenger' was destroyed was very similar to disasters that occurred in the early days of aviation, from which it was learned that government organisations should not develop aircraft, due to the conflicts that arise between political, engineering and regulatory objectives. This problem is illustrated clearly in the book " Slide Rule" [37] which describes the R101 airship disaster, which was one of the cases through which this lesson was learned. The loss of the Challenger, which resembled the R101 disaster in important respects, could surely have been avoided if the lessons from aviation had been heeded within the space industry.

Once the appropriate role for government in aviation was learned, government organisations contributed greatly to the growth of commercial aviation, funding research on a range of safety-related systems such as airfoils, engine cowlings, de-icing, air routes, weather- forecasting, training and certification, and other topics. They did not spend large budgets on trying to develop future technology, but focused on the needs of the industry as it was. For governments to play such a role in relation to passenger space travel, rather than continuing to fund a range of expensive but commercially unpromising space activities, would be economically very valuable today.

The aviation industry also has long experience of flying a range of reusable rocket engines on aircraft. These were used to a limited extent to assist take-off by both civil and military aircraft. As an example, the BS 605 hydrogen peroxide rocket engine used on 'Buccaneer' bombers by the South African Air Force reached sufficient maturity to enable 60 firings between overhauls. Thus the aviation industry already has a foundation of experience relevant to developing passenger vehicles capable of reaching space, Earth orbit and beyond.

FURTHER MONOPOLY DISTORTIONS

There are a number of groups in society which might have been expected to criticise the economically unsatisfactory behaviour of government space agencies, and to press for work to be performed to realise space tourism, but which have failed to do so to date. These include most notably the news media and members of the aerospace industry, both corporate and individual. In the following we briefly discuss the failure of these organisations to draw attention to this economically very important problem.

News media

Most media commentaries on the subject of passenger space travel are unfortunately misleading, confusing technical and economic issues, and they tend to quote space agency statements uncritically. This is presumably due to the fact that most journalists have insufficient technical knowledge with which to judge issues for themselves. There is also the inescapable influence of monopoly space agencies which tempt journalists to mute criticisms by admitting favoured members to exclusive briefings and other events.

What is perhaps more surprising is the uncritical nature of the economic reporting on the subject. Many journalists from economics and business magazines, who normally pride themselves on taking a 'hard-nosed' attitude towards their subjects, not only suffer the same weaknesses, but also use a 'double-standard' in relation to the economics of space agencies and private space activities. Space agencies' expenditures of some $20 billion/year, if invested commercially, could generate revenues growing by some $20 billion/year/year, earning 10% annual return on their investment, or some $2 billion annual profits, and creating of the order of 1 million new jobs/year. However, the fact that space agencies earn effectively minus 100% /year return on investment is overlooked, while the inability of venture companies trying to develop RLVs to guarantee 20% annual return to investors is accepted as justification for their not receiving investment.

A recent example of this phenomenon is an article entitled "Space Travel Is Still a Dream" published in Business Week in July, 2000, which describes the problems of developing an RLV as being technical: "Nasa and private companies came up with ideas such as the X-33 program, which began in '96. It hasn't worked... The basic reason? Physics" [38]. The article does not explain that making a Mach 13 reusable rocket need not be difficult - it is LMC's particular design that is flawed; it makes no reference to the facts described above that both Nasa and LMC have a strong economic interest in preserving the status quo; that LMC's expendable launch vehicle business earns approximately $1 billion revenues/year, and its annual contract income from Nasa is even larger; nor that LMC's main difficulties with its proposed 'Venture Star' are not technical but economic - because it is designed for a market that is too small.

Under the sub-title "Breakthrough Needed" the article even states that sub-orbital vehicles designed to compete for the $10 million 'X Prize' competition to carry passengers to 100 km altitude need new technology - yet these require only the technology level of the X-15 rocket planes that flew ('reusably') 199 times during the 1960s.

The article does not mention that the $1 billion of taxpayers' funds that Nasa wasted on the X-33 project could instead have been used to fund all of the US entrants for the 'X-Prize', thereby initiating public space services which could already be generating commercial revenues. The article also does not mention that developing orbital passenger travel services requires investment of much less than one year of Nasa's $14 billion/year budget, nor that it would be economically beneficial if a significant portion of that budget was aimed at this objective.

Another interesting feature of the article is that it quotes John Pike, the director of the 'Space Policy Project' at the Federation of American Scientists, who is a frequently quoted critic of efforts to reduce the cost of launch. One might expect a business journalist to recognize that the economic interests of space scientists are very different from those of the general public: specifically, they benefit greatly from government funding of space science research, and particularly from Nasa's budget. Pike's statements predictably match his organisation's interest in supporting Nasa in its efforts to preserve its government funding.

Such statements as "Fuel weighs so much that a reusable rocket is 'vaporware'" greatly exaggerates the technical difficulties and covers up the important facts discussed above, including that the major difficulty of developing reusable launch vehicles is economic, not technical - since no significant funding has ever been made available for the purpose. For a Business Week reporter to quote such a spokesman as an unbiased source of information is surprisingly poor journalism, for which 'cui bono' is surely the watch-word in evaluating any statement.

Quite apart from these points, it is surely of historical interest that even such a mainstream magazine as Business Week can publish an article that is not only so misleading technically, but also so extremely naïve - the very opposite of the 'hard-nosed' attitude that might be expected - concerning the economic interests of the various participants, and particularly about Nasa's economically damaging role as a monopoly. As such it is surely far from the standard of journalism that would be expected in relation to mainstream business topics, and is an example of the broader failure of the press as one of the social mechanisms relied on to help control government behaviour in the field of space.

Americans are commonly considered to be 'hard-nosed' about business and economics: for example, the "Monetarist", "Supply-Side" and "Public Choice" revolutions were largely propelled by American economists. Yet most US media commentaries on space activities are quite the opposite, failing to consider the economic aspects of government space activities, and helping to shore up the charade promulgated in their own interests by monopoly government space agencies. Most non- US journalists are equally uncritical: for example, the 'Venture Star' unpiloted satellite launch-vehicle concept continues to be quoted as Nasa's future RLV, years after LMC has said that it is not economically viable.

As a rare exception, The Economist magazine has often commented about the wasteful nature of the international space station. Recently it wrote: "The station has no scientific merit, despite Nasa's suggestions that new drugs or miracle cancer cures will be easier to discover in space than on Earth. It is kept aloft partly to give Nasa's astronauts something to do, and partly because of its value as a tool of foreign policy?" [39], and "Arguably, bad science (such as the space station) promoted by esteemed scientists is even more insidious than that peddled by nutters" [40].

Aerospace industry

In view of the potentially large new business revenues that could be earned from passenger space travel services, it might be expected that aerospace industry interests would be pressing for action including government support for work in this field. Thus it is notable that the largest professional organisation representing members of the aerospace industry, the AIAA, has not followed up the conclusion reached in its own report [20] that tourism will become the largest commercial activity in space. That is, it has not to date taken any action to help to realise it, although it remains the only significant new space business opportunity that has been proposed for the near future. The value of pursuing this potentially large new market has been particularly high during the 1990s during which the aerospace industry has been in crisis, shrinking and restructuring due to post-Cold War defence budget cuts. The AIAA itself was even obliged to leave its prestigious headquarters building in central Washington DC for cheaper accommodation elsewhere.

From the economic point of view, a major reason for this economically costly inertia of the space industry is presumably because a wide range of US aerospace companies and other organisations receive funding from Nasa's annual budget of $14 billion, and they have an economic interest in preserving their access to that source of funding. Nasa being a monopoly, there are very few participants in the US space industry who do not receive funding from it in one way or another. This was commented on by Nobel laureate Richard Feynman in his essay describing his role as the only member of the committee investigating the destruction of the 'Challenger' who was neither directly nor indirectly receiving funding from Nasa, and the crude attempt to 'muzzle' the committee [41].

For the aerospace industry to make no serious moves towards realising passenger space travel is a case of "starvation in the midst of plenty", and the lack of activity is further evidence of the economically very unsatisfactory situation of having a monopoly funding source for space activities. It is famous that micro-computers were not developed by mainframe computer- makers - in part at least due to the latters' vested interest in preserving the mainframe computer business for as long as possible. Space tourism will not be developed by com- panies which prefer to continue receiving low-risk funding from government space agencies.

Another sign of the deadening influence of the status-quo is the long-running correspondence in the pages of the leading aerospace magazine 'Aviation Week & Space Technology' on the demoralisation of aerospace engineers. A series of articles in the summer of 1999 discussed a 'crisis in aerospace' and laid blame for a series of Nasa fiascos on "deep, systemic industry ills". These articles elicited a voluminous correspondence from frustrated aerospace engineers that continues today [42]. US aerospace engineers are concerned not only about their continually falling pay relative to other branches of engineering, but at least as much about the lack of inspiring projects, and lack of vision among the industry's leaders who seem to be able to think only of cost- cutting as a means of improving their companies' performance. Aviation Week editorialised that the solution is for the industry to create "enjoyable jobs where [aerospace engineers] are appreciated, given real incentives and challenged" [42].

In response to this pervasive problem, it is hard to think of work that would be likely to generate more enthusiasm among the aerospace engineers bringing it to reality than the development of a large-scale passenger space travel industry - which has the potential to grow through sub-orbital services, to orbital accommodation and the development of large-scale orbital entertainment facilities, and on to lunar orbit and lunar surface tourism and accommodation [23]. Anyone without an economic or political interest in preserving the current government space agency monopoly would have to agree that this is an economically more desirable future for the space industry than for taxpayers to continue indefinitely paying $20 billion/year for a range of government activities of little economic value or interest to most of the general public.

As mentioned above, economists too might have been expected to comment on the poor economic performance of government space agencies. In addition to the problems mentioned above, their silence is presumably due to the fact that many of those with sufficient knowledge to comment are presumably employed within the aerospace industry, and so are not free to speak out against their employers' economic interests.

Related space agency activities

The following two activities are not directly related to passenger space travel, but being major activities that are strongly supported by government space agencies and advance their economic interests, they reveal further the lack of consideration of economic value in space agencies' planning and motivation.

International space station This project was initially proposed during the 1980s as a research facility for the scientific community at large, and planned to cost $8 billion. It is now expected to cost some $100 billion in total, and is considered not to be cost-effective by most of the major science research organisations, including the US National Science Foundation, the American Physics Society, the American Chemical Society, the Institution of Electrical and Electronic Engineers, the British Science Research Council and others. The facilities it provides, including particularly the micro- gravity environment and the legal regime, are not attractive for most scientific researchers. As a consequence, the space station has effectively become a research station for the space agencies themselves - and much of the work that will be done concerns long-term human habitation in micro-gravity, which has little value except for preparing for a Mars expedition.

As quoted above, The Economist magazine has described the space station frankly as a project designed to create work for Nasa’s astronauts, and for the space shuttle despite its cost of some $500 million/launch [39]. Interestingly, the only potentially significant commercial application of most of the structural components and habitation systems that are being developed at such cost to taxpayers would be for providing accommodation in orbit. Following the scenario quoted above, this could apparently grow into a multi-billion dollar business - but it is not among the uses to be researched by Nasa.

It has been pointed out that a space station is a poor project for effective control via the indirect, political management that space agencies receive from the political world, since the definition of 'success' or 'failure' is unclear [43]. By contrast the original 'Moon-race' had a clearly defined criterion for success: at least one person had to successfully make a return-journey to the Moon's surface by the end of 1969. As a consequence the current International Space Station ( ISS) project gives space agencies and politicians wide leeway to use it for purposes other than taxpayers' economic benefit. Indeed Nasa had spent some $10 billion before any flight hardware had been built, and some $20 billion before any hardware had been launched, but due to its monopoly role it is effectively above correction, short of cancellation of the project (which has nearly happened once). Unfortunately, elementary economic logic shows that, to the extent that the project is believed to be 'uncancellable', Nasa has a clear economic interest in delays to the project, since every year represents an additional $14 billion of income for Nasa and its clients, which is not certain to continue once the station is completed. The long history of delays to ISS can therefore be predicted to continue.

Further evidence of the poor economic justification of the space station is the fact that the 'Mir' space station is already in orbit, and requires only about $100 million/year to maintain. If there was any urgent or economically valuable research to be done in orbit, it would be under way aboard Mir. However, with already 30 years of experience of micro-gravity research, scientists and manufacturers have learned that there is little of near-term importance. An interesting discussion of the non-standard manner in which Nasa's micro-gravity results are announced, and the consequent difficulty of evaluating them scientifically is given in [44]. The use of $100 billion of taxpayers' money to build and operate such a poorly justified facility requires the space agencies to maintain a public relations charade that the work done on board will be valuable, innovative and difficult. However, the British Science Research Council decided not to participate in ISS, and even ex-Director-General of ESA Roy Gibson has described it as a "white elephant" which is far too expensive to be cost-effective, and micro-gravity research as being inadequate justification of its cost [45].

As an anecdotal measure of how little Nasa has achieved since Apollo 11 it is interesting to recall that US citizens walked on the Moon during the 1960s, before any other country than the Soviet Union had even launched a satellite - and the USA had the 'Skylab' space station in orbit 4 years later, where successive teams of staff lived and performed experiments for several months at a time. 30 years later, after spending almost half a trillion more US tax-payers' dollars, Nasa is spending $100 billion to build another space station - but with less justification and at many times the cost.

Mars expedition It is a subject of debate what tasks Nasa may perform once the current ISS assembly activity is finished [46]. In response to this, for the past several years senior Nasa managers have become single-minded about planning an expedition to Mars, which they see as the activity with most promise of guaranteeing Nasa's survival unreformed: since such an activity would have essentially no economic value, it is perceived that it would not be threatened by commercialisation. In view of the minimal criticism that Nasa receives even for major delays in projects such as ISS, Nasa leaders may well believe that such a project could become a 'meal ticket' for decades. Using substantial public relations budgets to generate popular interest in the idea, Nasa has for years been pressing to obtain political commitment to finance a Mars expedition, amounting to religious obsession, as described in [4], although the US president has specifically ruled out a crewed mission to Mars, and recommended activities that have economic value [7]. Despite this, Nasa managers use tens of millions of dollars/ year on work that has little value other than as preparation for a crewed Mars mission - as indeed can be said of ISS.

SPACE AGENCIES: THE BALANCE SHEET

If the $20 billion/year used by government space agencies in USA, Europe and Japan was invested by commercial companies it would generate commercial sales revenues growing by some $20 billion/year/year. The use of such funding for space activities which earn essentially no economic return therefore represents a very large direct cost to taxpayers.

In addition to this direct cost, there is an 'opportunity cost' equal to the value of the lost profits from commercial opportunities not being exploited because of current space policy. Delaying the start of what can grow to become a major new industry is against the public's economic interest by delaying the earning of new revenues and profits. Following the space tourism development scenario of the Japanese Rocket Society, orbital passenger travel services could start in 2010, and annual revenues could reach $100 billion by 2030 [23]. Continuing growth such as has been achieved in passenger air travel would lead to revenues of perhaps $1 trillion in 2050. Given an average rate of profit, the present value of such a business development scenario is some tens of billions of dollars. Delaying this therefore represents a substantial additional cost to taxpayers, of several billion dollars/year.

Thus we can estimate that, in round figures, the 9 years' delay in the development of space tourism through the Goldin administration at Nasa has had a net economic cost to US taxpayers of some $150 billion. $120 billion of this is Nasa's expenditure during his tenure, the results of which have little economic value; the remainder is the annual cost of delaying the growth of space tourism multiplied by 9 years. The application of Cost-Benefit Analysis to Nasa would be very unlikely to value the political and scientific benefits of its work as highly as this.

For governments to continue to fund space agencies' favoured projects that were planned decades ago during the Cold War, and would not only make no contribution to economic growth but would add tens of billions of dollars to government debt - rather than to help the development of a passenger space travel industry which could start earning commercial revenues within 5 years and could grow into a major new consumer service industry with unlimited scope for expansion - would represent a massive failure of government policy, and of government policy-makers.

The only way in which taxpayers' enormous investment in space technology can start to earn an economic return is through the development of a space tourism industry, as Nasa has effectively admitted in writing [14]. Economically, general public space travel and tourism is the most attractive paradigm for post-Cold-War, 21st century space activities. But due to the economic interests of govern- ment space agencies, continuation of existing government 'space policy' would postpone this attractive future indefinitely.

REMEDIES

In view of the above problems, it is clear that if governments and the general public were to leave the development of passenger space travel to government space agencies in their present monopoly form, it would not become available even 20 years or more from now, because the agencies have no economic incentive to do so - and strong incentives not to. In addition, their paradigm of space flight, based on the 'expendable vehicle mindset', is not appropriate for commercial passenger travel. Yet, if activities designed to help realise passenger space travel were allocated funding of just a few percent of government space agencies' budgets, these services could start within a few years, thereafter growing into the largest commercial activity in space. It is therefore incumbent on governments to remedy this situation as quickly as possible, by making appropriate arrangements for investment, both public and private, to be made in the develop- ment of passenger launch vehicles, related systems and infra-structure. In doing this, there are a number of distinct roles that governments can play.

Government role

Following the precedent of governments' active role in the development of other transportation systems including aviation, it could be econo- mically beneficial for governments to help the development of passenger space travel. The denial of responsibility by the current generation of government space agency leaders raises the question of what governments' role in promoting this new industry should be. It seems clear that future passenger space travel and accommodation services should them- selves be provided by private companies, as in the aviation, travel and accommodation industries today. However there are a number of roles other than providing the services that government could beneficially play - as they have in other transportation industries. The following lists some of these, starting with the minimal unavoidable role.

Regulation A range of regulations are needed, notably in order to preserve public safety and enable the insurance industry to play its role efficiently. In principle, aviation authorities seem capable of performing all the necessary regulatory tasks: the Office of Commercial Space Transportation (OCST) in the US Federal Aviation Administration (FAA) is already doing helpful work, including studying the extension of air traffic control to Earth orbit, and medical guidelines for space travel passengers - though European and Japanese aviation authorities have yet to respond to OCST's proposal for international collabor- ation in this field. In view of the large amount of work involved, increased budgets will be needed for this purpose, and indeed OCST's budget is being doubled [34].

Public Education Due to the relatively high public profile of space agencies, speeches by their leaders are widely reported in the news media, and they could have a very positive influence informing the general public, investors, politicians and others about passenger space travel. Furthermore, this function can be performed at almost no cost, and is one of the specific recommendations in Nasa's report on space tourism [14]. Currently, however, space agency leaders such as Nasa administrator Goldin do the opposite, suppressing important information and frequently stating the need for many more years of expensive technology research - to the extent of deliberately misleading the public about the feasibility of passenger space travel.

Research There is a wide range of space- tourism-related topics that could benefit from research, such as those listed in [27]. An important part of such research would focus on short-term stays in orbit by members of the general public, instead of long-term stays in orbit by statistically unusual people. (The latter, which is the object of most human space-biology research today, is of little use other than for planning a Mars expedition.) As in aviation, an economically useful objective of national governments' research could be to help national companies compete in the international market.

Facilities Space agencies currently operate extensive research facilities. If their work is to become more economically valuable by helping the realisation of a passenger space travel industry, the use of these facilities should be decided by whichever organisations are most effective for this purpose, which may well be aviation authorities. For example, it might be cost-effective if they were used in the process of certifying passenger-carrying space vehicles. Other means would be for space agency funds to be 'ear-marked' to pay for particular economically valuable research managed by outside organisations, or for facilities and their operating budgets to be re-allocated from space agencies to organisations that will use them for these purposes.

Space agencies' future

If government space agencies are to make any contribution to realising passenger space travel, they must clearly be directed in such a way that they have no alternative but to work towards this objective. The most effective way to achieve this will be to introduce competition. Both economic theory and generations of experience in many different fields testify to the highly damaging effects of monopoly, specifically in resisting economically beneficial change. Space agencies' behaviour described above shows that without the pressure of competition they will continue to pursue their own interests against those of the public.

If space agencies are not to be required to make any contribution to realising passenger space travel, but are to be allowed to continue to pursue their own objectives, then it is economically desirable that a large part of their funding should be reallocated to different organisations, mainly within the aviation industry. The following is a list of some of the main possibilities.

1. The most extreme remedy would be to privatise space agencies, transferring responsibility for space science research to existing science research funding bodies, and selling the remaining activities to commercial bidders. This would have the great benefit of sharply cutting economically wasteful government space expenditure. In addition, the new commercial owners would focus on work to realise passenger space travel - since this is the only promising new market for space activities. If such privatisation was implemented without warning, it would likely be 'traumatic' since most existing space activities would be cut sharply. However, announcing such a privatisation in advance could itself be effective in making space agencies focus on economically valuable activities. Likewise, even announcing an independent study of the potential benefits of privatisation would tend to have a similar effect - though any changes would be cosmetic unless the recommendations were followed through.

2. Somewhat less traumatically, making major and progressive cuts to space agencies' budgets, and transferring the funds to aviation and other interests that would use them to develop passenger space travel, could have many of the advantages of 1). The behaviour of the Russian space agency in recent years is an interesting precedent: having had its government funding cut very substantially, it has recently privatised its space station Mir, forming an international joint venture that is already offering tourism services. It is noteworthy that such services are not available in the USA or Europe despite their far greater expenditure on space activities.

3. A third possibility is major restructuring, including the introduction of 'Zero-based budgeting' whereby agencies' activities would be decided independent of the historic allocation of budgets and of existing vested interests. This would lead to their re-allocation according to potential economic value, which would lead to rapid growth of work to realise space tourism. However, to the extent that space agencies preserved their existing institutional form, this would be likely to be less effective than 1) or 2).

4. Some portion of agencies' funds could be allocated, or 'ear-marked', by policy-makers to provide funding to passenger space travel research not under agencies' direction. To the extent that the funds were used effectively, the greater such re-allocation of funds the more this would be in the economic interests of taxpayers. A proposal has been made in the USA for Nasa to be formally permitted to use funds for Mars research in proportion to the growth of commercial revenues from passenger space travel; this could have the benefit of giving Nasa an economic motivation to ensure that such work was successful [47].

5. In the longer term, the best possibility for space agencies may be for them to follow governments' role in aviation. In the USA the federally-funded National Advisory Committee on Aviation (NACA) was very successful in advancing many different areas of aviation, such as safety, fuel efficiency, aerodynamics, equipment and others. Renaming the FAA as the Federal Aerospace Administration and converting Nasa into the National Advisory Committee on Aerospace under the FAA's direction might achieve the greatest benefits for US taxpayers, with the least 'trauma'.

n each of the above possibilities, it would be important to eliminate space agencies' monopoly status which is economically indefensible, and against all but political interests. Overall, in order to make govern- ment space expenditure more economically productive, space agency funding should be made to answer to economic criteria rather than supposedly scientific funding criteria [48]. More than 80% of space agency expenditure is used for technology development - not science research - and this should have clear economic objectives. Furthermore, as mentioned above, space agencies' science research is not subject to the same peer-review process as non-space- agency science budgets; this too should clearly be reformed.

In economic terms there is no value in the survival of a particular company or organ- isation. Economic activity, not the name of the organisation by which a service is provided, is what has value. Consequently the public has no economic interest in space agencies' survival in their present form, or with their present names. Nostalgia may perhaps have some value in a rapidly changing world - Nasa administrator Goldin's long-running campaign to replace the 1970s 'worm' logo with the 'meatball' logo dating from the 1950s may be aimed at this - but even the most generous estimate of the value of such public sentiment could be barely a fraction of the cost to taxpayers of preserving Nasa unreformed.

Giving the incoming Nasa administrator in 2001 clear directions to collaborate with aviation interests in realising passenger space travel, as well as the political back-up necessary to enable them to tackle the vested interests of the Nasa centers, could lead to positive developments. As government organisations it is the role of space agencies to implement governments' policies, not to make 'space policy' themselves. However, since space agencies have accumulated considerable influence on policy-making due to their monopoly role in each country, reform requires strong political will.

Fortunately, political change is possible and does occur - although sometimes only after a crisis. And in view of the very large potential constituency for space tourism shown by market surveys, and the economic value of generating wealth from space activities, this objective should be politically very popular. However, in order to benefit from this, public education is required about the near-term feasibility of space tourism, which is still not widely understood.

SUMMARY & CONCLUSIONS

The early development and operation of passenger space travel services is economically desirable, and would contribute to economic growth. It is economically desirable for governments to facilitate this development, as they have aided the growth of other forms of transportation in the past. Policy-makers must therefore decide how best to facilitate the growth of passenger space travel, in order to achieve the major economic benefits that it promises to bring.

Although government-funded space agencies in the G7 countries currently receive more than $20 billion/year from taxpayers, they are not only not helping to realise passenger space travel, they are knowingly delaying its realisation by suppressing important information. This is clearly against the interest of the general public, although it is predictable from 'public choice' economic analysis as being in the agencies' own economic interests - which are to preserve their monopoly status and continue receiving government funding.

It is a serious weakness of government space activities that the arrangements for the oversight of space agencies are only very 'arms-length', and they are carried out largely by politicians from areas which benefit from the flow of central government funds, regardless of the economic value of the work for which space agencies use the funds.

Although the great economic potential of space tourism is increasingly widely accepted among those who study the subject, there is wide- spread ignorance of this potential among the general public, not least due to Nasa administrator Goldin's suppression of Nasa report NP-1998-03-11-MSFC. The institutional structure created by the first Nasa administrator was designed to generate political support in many states: however, it is now extremely costly to the US public, not only in using $14 billion/year with very little economic benefit, but even more in delaying the economically far more valuable activity of public space travel.

It is naive of the general public to assume that government space agencies are working in the public interest. Partly due to the residual 'halo effect' from the successful Apollo 11 flight in 1969, Nasa administrators are widely viewed as spokesmen for the public interest in space - but they use this influence to press for more funding for Nasa. The present Nasa administrator's actions to suppress information about the feasibility and benefits of space tourism, and his decision to provide no funding at all to aid its development reveal clearly that he does not work for the general public, but for the narrow special interest group of Nasa staff, the companies to which Nasa passes contracts, and the politicians who benefit from these flows of federal government funds. It would be in US citizens' interest to return to their traditional scepticism of government and of government monopolies carrying out operations supposedly on the public's behalf.

It is a serious problem that, in order to perform space activities, governments have created institutions of which the economic motivations are now perverse. The monopoly role of government space agencies is now very damaging to the economic interests of taxpayers - exactly as economic theory warns. As long ago as 1776 Adam Smith cautioned that any proposal for government intervention in the economy should be examined

"with the utmost suspicion. It comes from an order of men, whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it" [49].

As a forerunner of 'public choice economics', this is a strikingly objective description of the behaviour of government space agencies today in hindering the development of general public space travel and tourism. They are deceiving the public by concealing important information and spreading 'disinformation' about the feasibility of space tourism; and they are oppressing the public by wasting large sums of their money on worthless activities, and delaying the start of valuable ones.

Changing times need appropriate changes in policies and objectives; ten years after the end of the Cold War, government space agencies, much of whose work began due to Cold War competition, are in need of redirecting to work in the public's economic interest. In order to achieve this, economic policy considerations should take priority over 'space policy', and space activities should be chosen to achieve economic benefits [48]. Among other desirable results, this redirection will lead to the development of space tourism services, and to institutional change in the form of detailed collaboration between space engineering and aviation interests.

The potential for space activities to contribute to economic growth has been largely ignored by economists to date, due to their small scale, and to the perception that the technical issues involved are outside many economists' expertise. But it is becoming increasingly widely accepted that passenger space travel activities could grow through the 21st century as passenger air travel grew through the 20th century. This is economically very desirable, offering the possibility of creating tens of millions of jobs in future, and policy-makers should take appropriate steps to facilitate its early realisation.

The behaviour of government space agencies against the economic interest of the public is a richly rewarding field for research, as a case study for 'public choice' analysis of the pathological state to which government organisations may deteriorate if they are allowed to pursue their own interests without clear and well-informed guidance. It is desirable that economists should give more attention to the behaviour of gove