I use the “s” word because the “f” word seems to really upset people, even though it’s more accurate. It’s a shame that Hitler gave it such a bad name.
Anyway, Jeff Foust has an article today on the irrational antipathy of Congress, on both sides of the aisle, to private enterprise. Well, OK, it’s not all irrational. Some of it just typical rent seeking. Congressman Culberson comes off as particularly foolish, and not just for his Marine analogy:
“If the private sector exclusively owns access to space, who owns the technology? They’d have the right to sell it to any nation on the face of the Earth?” (Not easily, thanks to the export control regime that covers space technology in the US today.)
“Imagine if America had to hitch a ride on a commercial vehicle,” he continued. “If the private sector and the Chinese and Russians control access to space, they could charge us whatever they want.”
Yes. Whatever they want. As long as the price wasn’t higher than their competitors.
Why does this so-called fiscal conservative either not understand, or not believe in, how markets work?
You know who really charges “whatever they want”? A monopoly cost-plus contractor for NASA. Which is why Ares I has already cost about twenty times as much as Falcon 9, for similar capability (if it’s ever completed), with first flight for the former still years away, versus weeks away for the latter.
Rand,
As someone with an actual background in economics I should point out the correct use of the term (especially since you seem to be so picky on words being used correctly…) is state ownership of industry.
http://wordnetweb.princeton.edu/perl/webwn?s=socialism
http://www.merriam-webster.com/dictionary/socialism
Neither Lockheed Martin or Boeing are owned by the government, they are owned by private stockholders. The government doesn’t own the space industry and never has.
Nor has the government prevented private firms from building private rockets using private investment capital for HSF as would be the case if it was a socialist space program. Socialism in its proper economic definition usually prohibits private competition as is the case with the oil industry in Mexico.
The reason private vehicles for HSF have not been built yet is the estimated revenue for their demand has fallen far short of the estimate cost of their development. And using government subsidies in the form of commercial crew to close the gap is a policy that not consistent with capitalism based on its economic definition but is really a step in the direction of socialism.
Really the only different between the Obama space policy and the current model is that the ownership, and the liability that goes with ownership, of the space vehicles which change from the government to the contractors.
A good analogy for commercial crew would be that instead of the USAF owning its F-22 fighter aircraft they were actually owned by Lockheed Martin and the USAF just rented them at a set cost per flight hour pushing the operational costs, and liability for those costs, from the USAF to Lockheed Martin.
I am sure that change how the USAF procures fighter aircraft, but the changes might not be in the national interest. But in any case you see how the term socialism simply does not apply.
“Imagine if America had to hitch a ride on a commercial vehicle,”
Imagine if Americans had to hitch a ride on a commercial vehicle for transport from DC to LA. They could charge us whatever they wanted!
One other thing that the acolytes of Obamaspace do not mention. There is no provision in Obamaspace (in the form of tax incentives, etc) to help commercial space companies develop private markets. Unless that happens, what we are seeing is a form of state, crony capitalism.
Mark,
No. What you are getting simply is a set of government contractors that may have excess capacity to offer to private markets if the price required to cover their marginal costs are low enough for the private market to be willing to purchase it.
It will be an interesting experiment which venture capitalists I am sure will be watching closely to see if private HSF is a viable market to invest in or if it will require continued government subsidies.
What I expect is a repeat of Goldin’s RLV programs, with the private orbital launch industry, other then those with NASA contracts, going into a holding pattern until the success or failure of the program is determined. Hopefully the outcome this time will be more favorable to the future of New Space then NASA’s RLV program was.
That is solved by free market competition. Of course it is hard to have competition when there is open collusion in prices between vendors. I mean, what is ULA but that? You get competition for large payloads by going outside the US. Which is not always possible because of ITAR.
I find it funny the Soviet Union lunar program had more design bureaus working on launch vehicle design than the US had. Korolev (N-1), Chelomei (UR-700) and Yangel (SK-100) all had designs. In the US IIRC it was all coordinated by von Braun. Sure the work was delegated to several subcontractors. However this happened in the Soviet Union as well (e.g. Soyuz capsule launched by Proton rockets, or multiple engine manufacturers). In fact the reasons most commonly pointed for the failure of the N-1 program are lack of design focus, and funding level which did not even allow for stage hold down tests.
However I think it is foolish to even consider that it is possible to truly open up space without private enterprise driving the process. The statist programs were useful in that they showed it was possible to do it. Now it is up to private enterprise to make it affordable.
Rand,
Wait, I thought Hitler was a National Socialist… Mussolini was the Fascist.
So, why do certain parties here hate Italians so much?
“Nor has the government prevented private firms from building private rockets using private investment capital for HSF as would be the case if it was a socialist space program. Socialism in its proper economic definition usually prohibits private competition as is the case with the oil industry in Mexico.
The reason private vehicles for HSF have not been built yet is the estimated revenue for their demand has fallen far short of the estimate cost of their development.”
This is a rational argument and it needs to be addressed if space development is ever to really occur.
I think there are at least two important points against this argument.
First, I think the way government undertook the designing and building of rockets from the 1960’s to the present was detremental to free market development of rockets. The existence and operation of NASA presented an insurmountable hurdle to small private startups. This hurdle included competition for talent, investors deciding NOT to invest in competition with the government, and probably other things I haven’t thought of. So although the federal government did not ‘prohibit’ competition, it did a great deal to inhibit competion.
Second, it seems like the idea that everything that has been designed and developed was designed and developed because the estimated revenue for the demand of the product was greater than the estimated cost of development is an incomplete idea. While that kind of economic analysis makes perfect sense for well established industries, does it apply in a well-defined manner to disruptive innovation? I don’t think the Wright brothers were overly concerned about the estimated cost of their development process relative to the potential market. I think they were interested in powered flight, and probably were perfectly happy to find ways to make money off of it after they had been successful. People doing the early work on personal computers were more interested in the technology than the market. I’m sure Bill Gates planned to make money, but I suspect he would have wildly underestimated the eventual demand when he was working on BASIC for those early computers. I think the guys at ARPA working to network computers together had a reasonable set of goals and did not forsee the world wide web.
I think what SpaceX and other private startups are doing makes sense both creatively and economically. They hope to make enough money to survive by supplying the demand that is there currently. If these companies are successful in significantly reducing the cost of access to space and perhaps developing a large and robust earthbound and in-space infrastructure, the future demand is very unpredictable. I hope that the future demand is gigantic, in which case some of these companies might eventually seem like geniuses. It could turn out there is no real large demand. It could turn out there is, but these companies fail to take advantage and are not the ones that survive. Who knows?
In any case, is Thomas Matula right? Is there simply not enough demand to make it worthwhile for private investment in space?
Jeff,
[[[First, I think the way government undertook the designing and building of rockets from the 1960’s to the present was detremental to free market development of rockets. The existence and operation of NASA presented an insurmountable hurdle to small private startups.]]]
One could use the same argument to say that government funded computer projects should have prevented small personal computers from being developed, except they didn’t. Why? Because the cost of development was less then the potential revenue, in this case from hobbyists which got the ball rolling for the personal computer industry. More importantly the start-up funds needed were small enough that 3F funding could be used. This isn’t the case for most space launch systems.
Also there were no highly visible government funded projects in the area of flying cars or flying belts, yet small start-ups in those industries have failed to obtain the financing needed to close their business models. Based on your arguments this should the lack of government projects should have been a plus and make funding easy to obtain. And surely there is a demand for flying cars and flying belts.
[[[I don’t think the Wright brothers were overly concerned about the estimated cost of their development process relative to the potential market.]]]
The Wright Brothers didn’t need outside funding for their project, they used the income from their bike shop to engage in their “hobby”. This is the essential problem with orbital launch vehicles, the huge amount of money, and the long development period, to take an idea to market takes it out of the hobby range another other then millionaires.
That said, Blue Origin and SpaceX were following the Wright Brothers model until COTS and now Commercial Crew steered them into NASA’s sphere, and probably into a commercial dead end since designing to NASA needs will probably make their HSF too expensive for the private part demand. To me this is the real tragedy of COTS and the new policy.
This is also why I think the new policy is really more like socialism then the old policy. 6 billion dollars for commercial crew over the next 5 years is far more then these firms could realize serving non-government markets. Expect their design strategies to focus even more on serving the needs of the government market rather then a private one.
For example there is a story making the rounds that NASA will not let SpaceX use the Dragon capsule on more then a single mission. If that story is true what reason is there for SpaceX to spend extra money to make it reusable? Yet being able to reuse capsules will be key to lower costs for private markets…
BTW if you want to see where government subsidies to an industry (i.e. commercial crew) may lead you might like to look up the history of the Merchant Marine Act of 1936. Its a great illustration of what happens when the government subsidizes an industry to close a market gap rather then allowing the industry to develop naturally as it did with PCs and commercial aircraft.
The Wright Brothers had low entry costs. However I also think it is a bad idea to speak of the Wright Brothers in comparison with current orbital space launch. Sure they did the first airplane using a private effort. So what? Try to find like one design element in Flyer which is still used today. Performance? Pathetic.
Robert Goddard built and tested the first liquid fueled rocket with a private effort just as well.
However rocket technology advanced in leaps and bounds thanks to government funding during WWII and the Cold War.
Aircraft technology also advanced in leaps and bounds thanks to government funding during WWI and WWII. All metal construction, jet engines are examples of aircraft technologies developed during the wars.
The difference is that there was a larger market for aircraft. Namely in transport of people and goods. There was also less regulation. Lower entry costs. People found plenty of applications across the whole performance envelope. In space launch most of the money is in orbital launch. Not everyone is going to jump into that. Especially not with an investment that takes like half a decade, or a decade until you start flying and see some income.
I also note that the US government forced the aircraft manufacturers to get into a patent pool when it entered WWI. A thing to bear in mind next time Northrop Grumman/TRW makes noises against SpaceX about injector designs, or whatever. Leveling the playing field helps.
These are much the reasons people do not want to build nuclear power plants. Takes a huge amount of money until you get a return, you need large loans, regulation and licensing is a minefield. There are also proliferation concerns. OTRAG got into hot water because of that.
Spaceports are also important. You cannot easily launch a rocket from anywhere. There are considerations regarding range safety and dropped stage impacts, orbits, etc, so forbidding someone from doing launch activities in an area can be crippling to a company.
Its a great illustration of what happens when the government subsidizes an industry to close a market gap rather then allowing the industry to develop naturally as it did with PCs and commercial aircraft.
A quick look at Wikipedia suggests that this doesn’t show the effects of subsidies but the effect of protectionism. In general I’m opposed to subsidies, but that doesn’t mean that valid government activities should not be procured commercially. You could argue that manned spaceflight is not a valid government activity, in which case it should be abolished. Protecting a government monopoly is a bad idea in any case.
This is a rational argument and it needs to be addressed if space development is ever to really occur.
Real commercial space development has already occured, and continues to grow, regardless of astronauts.
(another poster)
Now it is up to private enterprise to make it affordable.
Real space commerce is already affordable, and has been making profits for decades.
Seriously, some of you people need to get your heads out of the sci-fi pulps and start thinking about this galaxy a little more often.
Thomas Matula:
What you are getting [with COTS] simply is a set of government contractors that may have excess capacity to offer to private markets if the price required to cover their marginal costs are low enough
Agreed. And it’s a great way to seriously distort a market and pretend that it is far larger and far more imminent than it actually would be in a free market that would have to cover all the costs, not just the marginal ones (or worse just the severely discounted spare seats, which can be priced at just over the marginal cost of a marginal cost as long as the far greater costs of other kinds are completely subsidized).
The real money — over 99% of HSF money — remains in the fat space agency contracts.
I do agree with Mark that broad-based tax incentives (e.g. for launch services generally) would be a good approach and are sadly missing from the current “commercialization” plan.
Blue Origin and SpaceX were following the Wright Brothers model until COTS and now Commercial Crew steered them into NASA’s sphere, and probably into a commercial dead end since designing to NASA needs will probably make their HSF too expensive for the private part demand. To me this is the real tragedy of COTS and the new policy.
Well said. Although I still think there is time for SpaceX to save itself from government contractor zombiehood and get a much better balance of private and government launch customers if it stops pursuing “Commercial” Crew. It should sell its Dragon division to Northrop or similar. Let somebody else build the obviously non-commercial capsules while they engage in the real commercial activitiy of launching satellites and (secondarily) capsules.
Martijn Meijering:
I’m opposed to subsidies, but that doesn’t mean that valid government activities should not be procured commercially.
But the argument here is circular — most NewSpacers support government funding the activity, i.e. think it is a valid government activity, because they believe NASA can lead commerce towards an HSF market. In other words, it’s valid just because it is a subsidy we hope will bring about the market we dream of.
Besides being a circular argument, this leads to the severe distortions in our expectations as indicated above. In fact it just provides the illusion of a market: after decades of hype about the commercialization of HSF, it is still over 99% funded by government space agencies: astronauts for the sake of astronauts. Real space commerce lies elsewhere.
I expect the first really profitable spacecraft to be suborbital, as in LA to Tokyo. It is not too far-fetched to see craft like SpaceShip2 evolving in stages into serious transportation as airliners did before them: From the Benoist XIV in 1914 (St. Petersurg to Tampa) to the AeroMarine Model 75 in 1921 (New York to Miami) to the Fokker and Ford Tri-Motors (1925 – 1933) to the Boeing 247, Lockheed Electra and Douglas DC-3 in the mid thirties was only a span of 20 years. I can’t see a guy like Burt Rutan stopping with SpaceShip2.
Martijn,
“A quick look at Wikipedia suggests that this doesn’t show the effects of subsidies but the effect of protectionism. ”
Haha, what do you think the commercial crew program is about? You’ll note that only this week ULA and Orbital Sciences tried to play the cost game. They can’t imagine doing commercial crew for less than $100M/seat.. SpaceX isn’t playing ball though, they promise to beat the price of Soyuz. If commercial crew actually happens, expect lots of protectionist rhetoric to justify it.
But the argument here is circular — most NewSpacers support government funding the activity, i.e. think it is a valid government activity, because they believe NASA can lead commerce towards an HSF market. In other words, it’s valid just because it is a subsidy we hope will bring about the market we dream of.
Perhaps some do, but not all of them. I for one don’t. I’d be perfectly happy if governments got out of the manned spaceflight business altogether. I’d be even happier if they didn’t, and procured launch services, crew rotation and resupply commercially. Not because it would be a valid way to spend taxpayers’ money, but because I happen to be excited about it. The only scenario I wouldn’t like is government-funded, government-provided manned spaceflight.
Real space commerce is already affordable, and has been making profits for decades.
Sure it is affordable. Like an IBM S/360 mainframe was affordable. Awesome system, still used today, just not cheap enough for the average guy to buy.
PCs would have happened without Bill Gates, whose company produced horrible operating systems until IMO Windows 2000 came out. That was caused by a single source contract from IBM with Microsoft. Compare that with CPUs where IBM insisted in a multiple vendor contract and you still have Intel and AMD fighting at it today. But that is the nice thing about having a market, a lot of people participate.
It took several “silver bullet” technologies to be developed to make personal computers possible.
In the hardware side it was printed circuit boards, integrated circuits. They replaced the previously manual labor intensive processes, where multiple wires were individually soldered by hand connecting many tiny transistors, into a highly automated and mass manufactured product.
I could see similar improvements being done for rockets by using either hybrid engines, or simplified rocket engines (e.g. channel wall vs tube nozzles), or something like Flowmetrics pistonless pumps.
SpaceX uses less manual friction stir welding. Manufacturing processes also matter.
In software there was development in compilers and high level languages such as FORTRAN, COBOL, and yes BASIC (which was not invented by Bill Gates). Then there was C which is still used as a systems language today. This meant the design process was more automated as you could use higher level tools to build software.
The analogy in aerospace could be with CAD/CAM and finite element analysis (FEA) software. CAM (e.g. using a CNC machine) is like a lousy replicator. Being able to do prototype testing in a software simulation with FEA, without manufacturing actual hardware, allows for a more rapid and cheaper design cycle enabling advances to be made faster.
Another possibility is to use genetic algorithms to design engines. Instead of engineers doing prototypes by instinct and painstaking testing, use a computer to automatically explore the solution space to search for a good solution. I know the automotive industry used this with some degree of success. Reading about the issues with rocket engine chamber design I could not help to think this could be helpful in that area.
If you’re looking for something that’s affordable for an individual to buy, try a CubeSat: $50,000 plus the cost to launch a kilogram of satellite, and getting cheaper and smaller and more functional every year.
Godzilla, modern rocket engines get pretty close to the theoretical thermodynamic limits of the engine. There’s really only two ways to go now. Either design a rocket engine that has a remarkably low cost of construction or find a way to break the ISP barrier for high thrust to weight propulsion systems.
Well, you can also take what we currently have and just use it a lot more than we currently do.
Karl,
[[[Well, you can also take what we currently have and just use it a lot more than we currently do.]]]
Yes, that would create good economies of scale if you are able to find the demand at the price you are charging. That is the essence of the problem of high launch costs, not some magic government program.
I predict when all the work is done NASA will be paying as much per seat for commercial crew as they are paying per seat for the Shuttle.
Let’s see. If you set the Shuttle’s launch cost at 1 billion and split it equally between crew and cargo, and it carries 7 astronauts, you should get a price of $71.4 million a seat. So we will see how Commercial Crew beats it.
If you set the Shuttle’s launch cost at 1 billion and split it equally between crew and cargo
That’s a pretty arbitrary split.
Rand,
So how would you split it cost between cargo and crew?
Tom
I don’t know. That’s why it’s arbitrary. If it were being run by a business, you’d figure out what the market was for the various services, and charge accordingly. Trying to figure out what each part of an intrinsically bundled set of services “costs” is a fools errand.
Rand,
OK, so let’s use a market based approach in which you use the replacement of the two services (Crew and Cargo) the Shuttle provides in today’s marketplace as your benchmark of the split. So let look at what it is costing NASA to purchase replacement services for the bundle know as the Shuttle.
Currently NASA is paying Russia $51 million per seat to ISS. So that figure as the market price it would require NASA to spend $357 million to replace the crew value of the Shuttle to NASA.
Then NASA is paying SpaceX 1.6 Billion for 8 Falcon 9/Dragon flights to deliver 44,000 lbs of cargo to ISS. That comes out to a bit over $36,000/lb.
The Shuttle has the ability to carry about 50,000 to ISS, so at 36,000 lb that would be $1.8 billion to purchase the same ability from replacement sources to replace the Shuttle’s services.
Add the 1.8 billion with the .357 billion for crew and NASA ends up paying 2.157 billion in the market place to replace the bundled services a Shuttle flight provides to NASA for 1 billion dollars.
Now using those market ratios, of the 1 billion NASA spends on a Shuttle flight 17 percent or $170 million covers the crew and 83 percent or 830 million covers cargo. This give the cost of a seat on the Shuttle as $24.3 million and the cost of cargo to ISS as $16,600 lb. ISS to save over the cost of using Shuttle flights to service it.
BTW the 1 billion for Shuttle is a good average. John Shannon stated somewhere the Shuttle costs 3 billion a year regardless of the flight rate. So if you have 5 flights as are scheduled for 2010 the cost drops to $600 a flight, while if you have 2 flights it would increase to 1.5 billion. In the later case the cost for a seat would be $36.5 million and for cargo $24,900/lb. In the former case of $600 a flight it would be $16.57 million a seat and 11,067 lb cargo.
But the 1 billion would hold for 3 flights a year. So if NASA was a business if would select commercial crew if they could beat the price of $24.3 million a seat and $16,600 /lb for cargo.
BTW this also shows if NASA was a business commercial crew and cargo would make no sense. But then NASA is not a business so it does make sense as a way of subsidizing commercial launch systems.