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MINING in SPAAAACE! Asteroid-scoopers? Nah - consumers will be the real winners

Governments, corporations... not so much

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Given the venal nature of what passes for a heart beating in this chest of mine, what really interests me is who is going to make all the moolah from this rushing off into space and mining 'n' stuff.

But this isn't a question that appears to have a simple answer, for there are five groups here and each will have a problem with asserting their right to a specific share of whatever cash is actually made out of activities up there.

The five parties will of course include the standard four in economics – the landlords, capitalists, workers and the entrepreneurs. But just for giggles we'll add governments to the list. In turn, again in standard economics, those groups get rents, profits, wages, Schumpeterian profits and taxes.

As seller of inflatable bubble habitats Bigelow Aerospace has pointed out the landlords are going to have serious difficulty in protecting any right to rent. Sure, there aren't any now up there but we can imagine various people who do manage to connect (gently connect that is) with an asteroid laying claim to the nickel/iron/platinum etc that's in it, and possibly trying to rent out such a claim to miners of those materials. The problem here is that private property doesn't exist up there in space.

Yes, I know, somewhere between the reefer madness of the '50s and the LSD of the '60s, the UN decided that no one should be allowed to own anything up in space. So that rather puts the landlords or would be stake claimers in something of a quandary.

Capitalists are definitely going to be involved: Planetary Resources, Elon Musk, there are various people making plans to mine and even settle. Assuming (something of a big “if” there) that there are profits to be had then some of them will get some: but again we run straight into that brick wall of no private property. If there cannot be a legal right to a certain place, deposit or asteroid, then as soon as something does become profitable anyone and everyone can just move in. You've worked out how to get helium 3 from the lunar regolith? Excellent: but with no private property then anyone else able to get to the Moon can do exactly the same.

What do you do? Oh, I'm a Moon miner

The workers will get paid, that much we can be sure of. At least in the first round of exploration they will be, as the skill sets required will mean they're being drawn from a very small pool. As one of those capitalists, you're not going to skimp on $100k or $200k a year in wages for someone driving your $2bn spaceship.

Entrepreneurs gain Schumpeterian profits: these are the profits that flow from invention and innovation rather than from financing a new adventure. These face rather the same problem as the regular capitalists. If you cannot keep people out of your unobtanium deposit, then how can you capitalise on having discovered it?

Consumers though, consumers will make out like bandits assuming there is indeed anything worthwhile up there to bring back down here. Precisely because all those other guys are going to have such difficulties protecting their monopolies (which is an extreme but still correct description of private property), there's going to be a hell of a lot of competition somewhere down the road. And what competition does is turn the potential value of whatever it is into consumer surplus.

An illustration of this from what is perhaps my favourite economics paper of all time. Of the value created by new companies in the US the entrepreneurs get under three per cent.

Finance capital gets a little bit more than that, but well over 90 per cent of the value created goes to the consumers in the new and lovely things they get to consume. And this is in an economy with strong property rights, patents and all the rest. None of which is going to really apply up there thanks to the UN's drug induced delusions about peace 'n' love 'n' sharing everything.

Lies, damned lies and taxes...

Which leaves us just with that final group: governments. One thing that's going to be interesting is that they'll not actually be able to tax the activities up there. When Sputnik first went up, the US deliberately did not complain about the Russian overflights: thus encoding the idea that there is a height limit to national sovereignty. This is now an established part of international law: you might have to ask for permission, even pay for it, to fly a plane over a country but not to sail a satellite past at 70 miles up (nor 23,000, obviously). Thus governments cannot claim that space is part of their taxing jurisdiction either.

They could most certainly insist that a company incorporated in their territory pay tax in that territory on profits made in space. But I have a very strong feeling that that first combat accountant who will open a company register on Ceres has already been born and that will stymie that idea. Which leaves them trying to tax goods as and when they cross the boundary of their taxing jurisdiction. And I'm not sure that that is going to work to any great extent for two reasons.

The first is that governments generally have now got the idea that imports are a good thing, they are in fact what we want from trade. These are, obviously, the things that other people can do better than we can so taxing our imports is a form of taxing ourselves. This is one of the reasons why trade tariffs are so low now: even as one who imports and exports internationally myself it's rare that the level of a tariff makes much difference.

The second is that competition thing again. Whatever is brought back from space is going to be high value and low bulk and there are near 200 countries that you might try to land it in. OK, maybe 50 that you might seriously try to do so in. And governments are going to find it very hard indeed to be able to tax traders who have that many choices.

But that's all how I see it possibly working out given the current legal situation. That no private property thing. And I don't see that lasting as a stable situation for very long. Simply because the determination of the ownership of property is crucial to the functioning of any sort of economy. Sure, we can have government ownership of it, we can have communal ownership, private: but whatever the system is there has to be a delineation of who does own what and who has the right to exploit whatever it is. And what I think will happen, at least in the early stages, is what happened the last time around we tried to do this sort of thing.

No, no, I'm not channelling Chariots of the Gods? bloke Erik Von Daniken here. Rather I see a lot of similarities between the early European explorations of the rest of the world and what's going to happen out in space. There will be one difference in that this time around communication will be possible (with perhaps 10- or 15-minute delays, but not the months of before) but travel, in the absence of a warp drive, is still going to take weeks to months both to and from any profitable opportunity out there. And that puts us squarely facing the same problems that the explorers did, from Vasco Da Gama through to Ferdinand Magellan.

Sure, there might be some idea of rights and law, but when you're that far away from home that's not all that helpful. And the current system of law says that anyone can come and have a go at your mine. And people just aren't going to do that. It will be more like the Dutch East India Company, which would quite happily do battle with anyone who attempted to muscle in on their nutmeg monopoly in the Moluccas. And why wouldn't they? They were making gross profits of 16,000 per cent. It wasn't quite the Wild West but the much more violent trading times of 1490 to 1750 or so. There's another story from this time that suggests the Basques knew damn well where North America was because they were fishing the Grand Banks but didn't tell anyone because they didn't want anyone else taking the cod.

Or there's another alternative: the sort of thing that Elinor Ostrom got her Nobel for. That smallish groups (up to a few thousand people) do seem to be able to work out property and customary law for themselves. With societal and mutual enforcement of what all will accept. Larger groups have very bad enforcement problems and these arrangements end up needing to be replaced with either State or private property and law.

Who will get all the money from the exploration of space?

I'm absolutely certain that it's going to be us as consumers, simply because we're the group that always benefits from invention and innovation. How the rest of it gets sliced up is really going to depend upon the property institutions that evolve, given that the UN's hippy dippy belonging to all isn't going to work. Either property rights will be enforced that Dutch way, simply by force, or there will be a developing mutual agreement as to what customary law should be.

And I'll close with one prediction: once there are enough people up there to be self-sustaining they're going to tell the rest of us to bugger off. Oh, they'll still trade, but governments and possibly even the capitalists will be told where to stick it. As the Americans did us Brits.

And it can be the strangest thing that sets off such revolts in favour of local autonomy. The Boston Tea Party was all about a tax cut after all: a tax cut which reduced the profits of the tea-smugglers who dumped the stuff into the harbour. And absent any governments setting up the Space Marines, there will be bugger-all anyone can do about it. ®

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