Don’t Ask An Astrophysicist About Economics

Neil deGrasse Tyson has reach almost messiah levels on the Internet and it’s easy to see why. He’s a brilliant man who managed to avoid the social awkwardness many brilliant individuals suffer from. But he’s an astrophysicist, not an economist. He made this very clear during a recent interview:

It seems really easy to delude ourselves about the state of space now, right? We look at a company like Mars One and say, “Oh yeah, totally, that seems possible. A reality show would definitely fund a mission to Mars.” Or even SpaceX, we’ve looked at that company with wide eyes and only now question them after a very public failure.

The delusion that relates to private spaceflight isn’t really what you’re describing. They’re big dreams, and I don’t have any problems with people dreaming. Mars One, let them dream. That’s not the delusion. The delusion is thinking that SpaceX is going to lead the space frontier. That’s just not going to happen, and it’s not going to happen for three really good reasons: One, it is very expensive. Two, it is very dangerous to do it first. Three, there is essentially no return on that investment that you’ve put in for having done it first. So if you’re going to bring in investors or venture capitalists and say, “Hey, I have an idea, I want to put the first humans on Mars.” They’ll ask, “How much will it cost?” You say, “A lot.” They’ll ask, “Is it dangerous?” You’ll say, “Yes, people will probably die.” They’ll ask, “What’s the return on investment?” and you’ll say “Probably nothing, initially.” It’s a five-minute meeting. Corporations need business models, and they need to satisfy shareholders, public or private.

A government has a much longer horizon over which it can make investments. This is how it’s always been.

SpaceX may not be the company that manages to get privatized space exploration off the ground but not for the reasons he gives. Expense and danger have never been major hinderances to entrepreneurs. Oftentimes the State will cite dangers as its reason to hinder an entrepreneur but our history is riddled with people who took tremendous risk in the name of being the first to develop a new technology. With that said, most entrepreneurs don’t blindly rush into danger but make a best effort attempt to identify and mitigate risks. SpaceX is a great example of this. Recognizing the potential dangers rocketry imposes SpaceX has been investing resources into designing an ejection system for astronauts in case something bad does happen (something, I might add, the National Aeronautics and Space Administration (NASA) never bothered with).

But Tyson’s biggest mistake was claiming there’s no return on investment. He fell into the common trap of assuming just because he can’t imagine a return on investment one must not exist. Successful entrepreneurs are successful because they realized a return on an investment others did not. Space offers up tremendous returns to the right entrepreneur. Astroid mining, zero gravity manufacturing, tourism, and an environment that allows a lot of research to be more easily performed are just a few returns available to entrepreneurs who get into space. Mining alone could be a huge return simply because moving large amounts of raw materials through vacuum and dropping it down near where it’s needed is easier than transporting the same amount across a planet.

I think his claim that government has a much longer horizon is also in meaningless. The longest horizon in the universe won’t accomplish anything noteworthy without creativity. Governments are terribly uncreative. Unless something may expand a government’s ability to expropriate wealth it tends to have little or no interest in pursuing it. What makes entrepreneurs valuable is their creativity. An entrepreneur by definition is somebody who used their creativity to come up with a new good or service. A successful entrepreneur is somebody who came up with a good or service people wanted. Because there is nothing obviously worth stealing in space it’s unlikely governments will invest any notable resources into exploring it. It may, however, attempt to tax any goods or services an entrepreneur creates in space. And entrepreneurs will try because there is a great deal of potential value in space.

Space exploration is, amongst other things, an economics problem. I wouldn’t doubt Tyson’s input when it came to the physics involved in space exploration but I’ve seen no reason to believe his knowledge about economics comes close to his knowledge about physics.