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Space Property Rights Open Letter


I enjoyed your space property rights article. I am a big advocate of space property rights [here, here and here].

I don't think a race is useful.

Optimal space development includes sustainability. An auction would provide money that could be used to subsidize space development. That would include the option to not go there which seems to be worth quite a bit. Also, what does first possession mean as far as the extent of the claim?

A race does have an advantage if you are in favor of speedy space development that the money spent on the race is off of the property rights regime's books so beyond the paws of the administrative bureaucrats. On the other hand, they can be captured as easily as the UN or the Olympic committee.

I do not agree that space outside of GEO slots has uncertain value. It's very close to zero. There is less activity dependent on space than there is in Louisiana. The Moon, for example, with regular commerce decades off, would be worth at most half what the technology that will allow economical transportation is worth. Since that's a gleam in the inventor's father's eye, it's basically worthless. Less than the fee simple real estate in New Orleans. (Perhaps $100 billion, but that's 0.15% of global annual GDP. On the order of US telecoms spectrum, not on the order of global oil revenue. Perhaps $500 million. If it's encumbered to allow exploration, perhaps nothing.) Like spectrum, it's worthless without technology to use it. So it's like blocking intellectual property. Only worth something if there is something to block. Lunar commerce=$30 million from Google.

You're right that it could be worth a lot or a little. Suppose there's 100 residents and 13,000 visitors annually in 2107 like Antarctica today. Let's say it costs 20% of the US annual per capita income in 2107 to visit (twice for population and four times for per capita income growth the $4000 for half a double room on a cruise to Antarctica today). That would be about $32,000 in today's dollars or $600,000 in 2107 dollars. So the Moon would be worth about $400 million in tourism and another $100 million in science in today's dollars (or about $10 billion in 2107 dollars). If the property owner could extract half that as monopoly rents after paying off transportation development costs prior to 2107, that's $5 billion per year in 100 years. At 25% annual discount for risky activities, that's worth about $4 today. If private development of the Moon is only 10 years away (extrapolating private Lunar development after private suborbital flight to be like the time from Yuri Gargarin's flight to Apollo 11), then the Moon's worth billions.

The first possession rule you propose prevents the property market from functioning as an information market prior to possession which is precisely the time when information is at its most diffuse (though certainly not its most valuable--that's later).

Auctioning allows there to be an owner who can provide money to a transporter to develop who would then benefit from an exclusive franchise. By buying cheap property, a default industrial policy is bootstrapped. If land is cheap enough on the Moon, I can buy it all up and then, in effect, have a monopoly on telecoms, transportation and just about every other service. With a race, there may never be sufficient ownership for the policy to encourage development.

Auctioning allows the prestige value of owning the Moon to be enjoyed before transportation is available. Auctioning creates a market history that can turn the land into a mortgageable asset. Auctioning allows Lunar property law to develop while waiting for transportation to emerge. Auctioning creates a tax base. Auctioning creates stakeholders. Auctions create funds that can be used to log roll with objectors.

Patents are special because no one knows what they are before they are created. For telecoms spectrum, companies, land, and so on, where almost all the value of the world economy is, races are not used. And where they are used (e.g., Argentina telecom spectrum), the results are dreadful waste. It's just a special kind of beauty contest. Before telecoms auctions there were hearings to award telecoms spectrum. Do we really want money being thrown away in a competitive process that is only loosely related to societies' goal for space? An auction results in money transfers only and has very low waste. The owners can then go about normal development. Like buying land in modern Austin instead of a land rush in Oklahoma. For property rights that can be well defined and easily surveyed, a race is counterproductive.


Posted by Sam Dinkin at October 30, 2007 08:53 PM
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Whoa. 25% per year for risky activities? That's nonsense over a century. Recall that the people who are going to invest will be almost completely risk insensitive or even risk seekers. Sure a high conservative pension fund might see the investment as worth $4 given the circumstances, but they won't be the ones making the investment.

Let's say that you have a 1% chance of $5 billion return a century from now (which incidentally would be far worse odds IMHO than any serious effort). What is that worth to you, risk insensitive investor? First, adjusted for risk, it's actually $50 million return. Second, at 9% ROI (ignoring issues of inflation), that would mean that the final potential $5 billion return would be worth roughly $9,000 now not $4. Your method would devalue the investment by 3 orders of magnitude. At 15% ROI, that would be $42, which is still a factor of ten greater.

Posted by Karl Hallowell at October 31, 2007 05:49 AM

Who has the authority to auction the moon? The guy who's been doing it for years as novelty gifts? The US government? The UN? Who?

Granting ownership upon proof of possession seems to be a little more defensible in that regard.

Posted by Big D at October 31, 2007 08:34 AM

Karl: Quite right. My hope is that I can get the number to hundreds of billions. That requires retiring risk, speeding up build times, reducing costs, selling the opportunity, educating the investor class and increasing revenues. One way of doing that is selling property rights to create an info market.

Big D: Who has the authority to recognize first possession? It would need to be established for both.

My understanding is that the international coordinating committee for lunar exploration would be a good place to start for the Moon to develop pseudo property rights that could be auctioned.

Posted by Sam Dinkin at October 31, 2007 11:05 AM

Karl: I also should point out you're begging the question of why bother with the Moon if it's $4 or $9000. If it's only worth $9000 or $9 million, then putting in place a property rights regime is an act of hope and charity that will become an enablement when the time is right.

Posted by Sam Dinkin at October 31, 2007 11:10 AM

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