SpaceX: A New Monopoly, Great Opportunity

      On Monday night, December 21st, 2015, SpaceX made history again. The private space rocket firm launched 11 satellites into orbit for ORBCOMM, but that has become the norm for them. What was impressive was the achievement of their secondary objective: successfully landing the primary stage rocket on land. That has never been done before, by anyone, and it is a big deal.

      The biggest problem for space travel, tourism, research, and really anything involving putting stuff into orbit is costs. Making a rocket is very, very expensive. It is made even more expensive by the fact that they are not reusable. Upon launch, the rockets and fuel chambers, which cost millions of dollars to develop and build, are jettisoned into the ocean, or burn up on reentry.

      To understand the immense waste this causes, think about a commercial airplane. A Boeing 747 costs hundreds of millions of dollars, and seats less than 700 people. If the plane were to be built, carry 700 people across the country, and then immediately be dumped into the ocean, that would be something like what space travel is currently like. To make a profit, each passenger would have to pay hundreds of thousands of dollars for one plane ticket. The result: very few people, if at all anyone, would fly. That is the current state of space travel: only big governments and corporations have the money to even think about going to space. Several months ago, SpaceX's website listed the cost of one flight on their Falcon 9 rocket as over $60 million dollars. Their larger Falcon Heavy model was over $90 million per flight. At the time, however, that was the cheapest anyone could get.

      The significance of SpaceX landing the rocket in one piece is that now it is reusable. Now that we are no longer dumping multi-million rockets into the ocean after one use, the cost of building a rocket can, like the cost of building a plane, be spread out over many flights, making each individual flight much, much cheaper. As of today the prices on SpaceX's website have been taken down, and not yet replaced: likely while they recalculate the new cost of space travel. This raises the question: exactly how cheap will such a future be?

      SpaceX now has the closest thing to a monopoly possible in today's space age. Already the cheapest way to transport goods to space, no one can now compete with them on price. Traditional basic monopolist theory would suggest that they would artificially keep the price high to boost profits. This would be a shame. Fortunately, basic monopolist theory assumes that the producer is pursuing profit, and SpaceX is not. Elon Musk has made it his goal to drastically reduce the cost of space travel, with the eventual goal of sending humans to Mars in large numbers to establish a colony. This means that the price of space travel is likely to fall dramatically.

      The changes of reusable spacecraft, and thus cheap space travel, cannot be understated. Commercial aircraft have revolutionized the world, accelerating globalization, and connecting us across continents. How much easier it is to travel to Europe by plane rather than boat. A cheap way into orbit and beyond will mean many more satellites, which could, say, give internet access to everyone in the world. It will drastically reduce the cost of research, and allow much more accurate weather and climate tracking networks. Already there has been talk of sending fleets of nano-satellites into orbit, and even plans for asteroid mining. All these plans and more have just become much more feasible.

      There will likely be many more changes brought about by this revolutionary feat: the future is coming, and it really doesn't look so grim.

By: Jonathan Wood

Carbon Taxes

      With the ongoing Paris talks, many ideas are being floated to combat changing climates. Many are complicated and technical, others involve quotas and strict regulation. A straightforward way to address consequences caused by human actions would be to change those human actions. Economics shows that generally, when an activity becomes more costly, it is done less. Thus, to reduce the burning of fossil fuels and the emission of carbon, tax carbon, a lot. Small taxes on carbon emissions, and activities that promote it, such as Mexico's $1 per ton, would be nice efforts to raise a little cash for governments. To effect real change, much larger rates must be implemented, particularly given the currently low base prices of oil and gas.

      The effects of taxing carbon would be straightforward. Higher costs of crude oil, coal, and natural gas would reduce consumption of gasoline and electricity. It would make renewables more attractive for many people, and spur investment in alternative forms of energy, as well as in more efficient appliances and products. Even for those whom a carbon tax does not make renewables profitable, taxing emissions would encourage many firms to switch from coal fired plants to gas fired ones, which produce far fewer emissions. This would have a huge impact, since coal fired plants make up such a large portion of electricity generation world wide, while China burned 3.8 billion tons in 2011, and is expected to grow. BP has estimated that switching 1% of the world's coal fired plants to gas fired would cause an equivalent carbon emission decrease to increasing the amount of renewables by 11%. A carbon tax would certainly help nudge energy companies in that direction.

      Beyond merely reducing global warming and hopefully keeping temperature low, there are other reasons for adopting a carbon tax. Air pollution is harmful to human health, as emissions release tons of particulates, tiny particles that clog the lungs and cause a number of ailments, and a variety of harmful chemicals that humans inhale. In India, research done by Greenpeace, the Conservation Action Trust, and Urban Emissions recons that coal emissions kill at least 80,000 people, and result in heal care costs of at least $3.3 billion. The health benefits alone of reduced emissions would, some argue, justify a carbon tax of $30 per ton. Of course, due to different needs, local costs, or economic conditions, using a tax to establish a world carbon tax may be very unsustainable. More likely, prices will remain different between region or countries.

      To be sure, such a high tax would not be without costs. Higher prices in the short run will hurt consumer demand for many goods, reducing consumption. However, the case is easy to make that the long run benefits of moving quickly to a cleaner and more energy efficient society will outweigh the short term pains of change.

By: Jonathan Wood