Market size – The total amount of money contained within a market. The dollar value total number of potato chips sold in the U.S. is the size of the potato chip market
Market failures – a situation where the way a market allocates goods is not efficient. This is in contrast to how markets tend to operate, where goods and services are allocated optimally between participants
Investor. Traditionally, it is acknowledged that markets should not exist for goods that create market failures, and the government usually provides this good instead.
Spearhead – to take the lead or commanding role.
Gestation – the time it takes something to develop into maturity
Plethora – an abundance of something
‘black box’ – a black box refers to something that you cannot see inside of. More abstractly, it refers to processes that are not open and transparent, so you do not know how decisions are made.
ESA – European Space Agency
IPO – Initial Public Offering. An investment term. An IPO occurs when a company that was previously owned by those who operated it issue stock to be traded on the stock market, in effect transferring ownership of the company to others.
Permutation
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[____] Cooperation between the public and private sectors can overcome the problems with privatization.
Vasilis Zervos and David Seigel, Professor of economics and space policy at the International Space University; Dean and Professor School of Business, University at Albany, October 2008, “Technology, Security, and policy implications of future transatlantic partnerships in space: lessons from Galileo”, Research Policy Volume 37, Issue 9, October 2008, Pages 1630-1642]
Despite encouraging market projections for navigation markets for example, such industries are subject to numerous market failures. The most prominent market failures are related to early-stage technology and risks associated with future market size, as well as uncertainties in the development of competing and existing publicly developed and owned systems and future security restrictions. Thus, it is unlikely that such a project can be undertaken by industry alone despite the existence of optimistic market projections and returns (see Section 3). For example, in the presence of conflict, such as war between two nations or civil war, where adversaries utilize the signals for military purposes, the stakeholders exercising political pressure for or against regionally jamming the signal could range from the UN and the authorities in the country in question, to financial institutions owning shares in the enterprise. Although ultimately the commercial entity is responsible for obeying the laws and regulations of the licensing country, numerous issues relating to politics and international law are likely to turn potential investors with no public involvement away into ‘safer’ and less strategically significant investments. Multi-public–private partnerships (MP3) spread the financial risk associated with high-technology requirements, while easing investor concerns over politically sensitive security issues and decisions. Moreover, the presence of multiple countries in space projects results in more resilient public commitments, reassuring the private firms.
[____] Public-private partnerships mitigate the risk of commercial space failure.
Vasilis Zervos and David Seigel, Professor of economics and space policy at the International Space University; Dean and Professor School of Business, University at Albany, October 2008, “Technology, Security, and policy implications of future transatlantic partnerships in space: lessons from Galileo”, Research Policy Volume 37, Issue 9, October 2008, Pages 1630-1642]
The formation of transatlantic multi-public–private partnerships, where partners such as NASA, ESA and industrial firms develop and commercialize space programs such as re-usable launch vehicles for commercial applications (space travel), or radio-navigation services, could provide blueprints for addressing economic and security concerns of using space for commercial purposes. This would require space agencies evolving from acting as ‘black boxes’ of government space programs into more flexible partnerships that would be able to contribute to the commercialization of space programs and systems. Export restrictions and technological-related security issues could then be addressed by the participation of the relevant national agents in the partnerships. Traditionally, national security enhancement has been addressed by government control over the relevant industries (nationalized utilities). Increasingly however, regulation is used to address the security dimension of security sensitive industries and technologies, allowing companies to participate in international partnerships, for example in the aerospace and the oil industry.
Privatization Fails – No demand
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[____] There isn’t sufficient demand to go into space for privatization to be successful.
Eric Sterner, former Associate Deputy Administrator for Policy & Planning at NASA, April, 2010, “Worthy of a Great Nation? NASA’s Change of Strategic Direction,” http://www.marshall.org/pdf/materials/798.pdf, pg. 8-9
Some may argue that demand will be higher because the private sector will seek to go to space as well, once a private capability to take people to orbit exists. This seems to be the logic behind the administration’s plans. It hopes increased demand will lead to new suppliers, which promotes competition, which eventually lowers prices. Unfortunately, increased demand normally leads to higher prices until the market reaches a new equilibrium, a “benefit” that the administration does not advertise. Even then, there is not much evidence to support the notion that private demand will eventually lead to greater, less expensive access to space for people, largely 8 Marshall Institute Policy Outlook because no compelling private rationale has been offered to engage in human spaceflight to LEO. According to material prepared for the Committee on Science and Technology in the House of Representatives, NASA did not conduct market research to assess potential demand for private access to LEO before changing its strategy for accessing LEO. Indeed, all that White House officials reportedly could point to in the way of supporting documentation for their underlying assumptions was an eight year old market survey that overestimated the demand for commercial human spaceflight by roughly 300%.28
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[____] Privatization attempts have failed in the past because there is not a large enough market.
Richard Kaufman et al. member of the board of directors and a vice chair of Economists for Peace and Security, and Director of Bethesda Research Institute, Henry Hertzfield, Jeffrey Lewis, and Michael Intriligator, 09/2008, “SPACE, SECURITY AND THE ECONOMY”, 9
The overall government attempts to privatize and outsource functions. The attempted privatization of the remote sensing satellites, first in the late 1970s and again in the mid-1980s were premature and not very successful. In fact, the suggestion that the satellite weather service be privatized resulted in Congress declaring that meteorology and the satellite-based weather system was a “public good” and would not be privatized. The private market for space goods and services has not developed as rapidly as was expected although most of the privatization proposals have not been implemented due mainly to a lack of a sizable nongovernment market as well as to the large up-front investment requirements.
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