Well, I just can't stop.

Here's the scenario. A large enough population base at "Habitat"
where we're primarily self-sufficient in the basic staples of life.
In this respect we'll appear to be deviating from a free trade
economy, but not really, because it'll be the lift costs that drive
us to self-sufficiency - after all who wants to may $1,000 for a box
of Cheerios.

The lift costs, when factored into the economic equation, will drive
us to continually invest into expanding our industrial capacity to
duplicate and replace what earth is sending to us.

Now, if habitats become bastions of the corporations, there'll be
three economies. The export economy, i.e. SPS energy beamed to
earth. The replacement economy, i.e. selling propellant and oxidizer
in LEO - this economy would really be a subset of the export economy
because we're not fully exporting to earth, we're servicing them
when they come to our territory, thereby replacing the fuel that
they would have to bring with them, but by doing this we're
transferring wealth from their society to ours. And lastly, there
would be our domestic economy.

So how do the corporations make their money? They earn it
domestically (for them that means earth-bound) from our energy
exports and from a postive balance of payments by supplying us with
more costly imports compared to our less efficient export of habitat
manufactured products. After-all who on earth will care a whit for
our hemp fiber clothes.

Eventually the corporations will be faced with a situation of
operating in two economies with no efficient means of transferring
wealth from one to the other. They'll making money on earth and
they'll be making money in the domestic habitat economy, after all
we'll still need toothpaste, combs, pots, pans, clothes, etc. In
that domestic economy, the corporations will be able to re-invest in
furthering their productive capacity, to manufacture more goods and
provide more services, but how can they reward their shareholders
for the use of their capital? The wealth that is created in the
domestic economy is impossible to transfer, if the habitat evolves
into a society with a dometic neutral balance of payments. This
would happen when we're not importing from earth, so the
corporations can't raise the price of imported items to extract
their wealth in the form of reducing their expenses to interact with
us. By reducing their expenses, they can return the savings to
shareholders as dividend. But when it comes to the point where we're
self-sufficient, what will the corporations do with their wealth? I
can see them using their habitat-locked wealth into paying for a new
habitat to be built so they can sell the houses to earth bound
people, thereby exchanging their habitat wealth for earth peoples
wealth. But this can't be the only method for wealth transference
because there aren't too many people who can plunk down cash to buy
a house. They usually borrow for it. I don't think that too many
terrestrial banks are going to be extending mortgages for habitat
housing. They'll want to know how they'll be paid. It would be like
going to your bank today and wanting to pay your mortgage in North
Korean Won. What's your bank going to do with that? Nothing. It'll
be worthless, because there isn't an exchange mechanism. Once we're
self-sufficent, the transfer of wealth between our two economies
will become more difficult. In fact, it may get to the point where
we'll be self-sufficient and then we'll be exporting our unique
products to earth. Then the wealth we create we be locked into earth
assets. What'll we do with those profits when we don't want many
things from earth anymore because we're either making them
ourselves, or the cost, with lift costs factored in, just make all
the goods seem unappealing.

Now the corporations may see the trend in the making, so they'll try
to restrict our move to self-sufficiecy so that they can continue to
extract wealth from the "Habitat" citizens buy forcing them to buy
expensive items from earth. So the citizens will start their own
import-replacement industries that are not controlled by the
corporations. A power struggle will ensue if the corporations try to
restrict the practice by not making availble the space they control
in the habitat.

Here on earth, foreign-exchange exists because there is robust trade
between economies, so somebody is always willing to trade a Euro for
a Dollar for a Yen because there is wealth moving between those
economies and their relative values are determined by the forces of
supply and demand. But what happens with us? Unless the corporation
finds somebody or some company on earth that will pay it money for
something it has in orbit, what will it do with its accumulating
wealth in orbit? How will the shareholders benefit from that wealth?

This whole issue of profit repatriation will complicate the
transferance of brands to our new society. Why will Proctor and
Gamble be interested in licensing or investing in manufacturing
faciilites for the production of Tide detergent, Crest toothpaste,
Dove soap. Do you think you'll see McDonalds up there? Now what I'm
talking about are not items we bring up from earth, but rather items
manufactured in the habitat economy. I think we'll probably concoct
our own breakfast cereal recipes, our own styles of clothes, our own
restaurants, etc.

Of course, when we grow our society's population sufficently, we'll
probably have our own captial markets, and develop competing
business's who'll try to differentiate by branding but it probably
won't be earth brands we'll be seeing.

Let's keep in mind that monetary systems are methods for keeping
track of value. I foresee a future where the huge infrastructure
costs, once we've bootstrapped up to a sufficient level of economic
sophistication, will have been repaid, and rather than our society
being fixated on the huge fixed costs involved in projects, we'll
start looking more at the variable costs and the marginal costs of
further expansion. With material items and energy takng smaller and
smaller portions of an individual's wealth, there are going to be
interesting economic factors coming into play. Take a look at how
much of your budget goes to energy in the form of heating,
electricity, gasoline and the sophisticated economic infrastructure
that is required to make that energy available to you. Apply the
same consideration to your material needs. Now contrast those
economic activities with putting up another mirror outside of a
habitat for more energy. Using a solar oven to vaporize the new
material resources your society will require. The up-front cost of
new energy or materials will be noticeable, afterall the mirror has
to be built and somebody has to go and get the asteroid, set up the
automated mine, service the mine and perform repairs, or perhaps
transport the asteroid to a closer orbit. But once the material flow
starts, it'll probably be highly automated, and whether you skim off
a thousand tons, or a billion tons, it probably won't add
significantly to the cost. These cost factors will directly impact
on the citizens where the value of their labors will yield more
energy and material wealth. Your money, which is a storehouse of
value, can now buy more. What happens if we ever get to the point
where most items a citizen would want our within reach - be
reasonable- no personal 20 billion dollar starships, please. What is
the value of your money and what becomes the purpose of your money?
With money becoming less important in your life how does your life
change?

To put this whole situation into historical perspective consider the
opening of the North American continent. There were fish, beaver
pelts, lumber, and cotton to export and all sorts of manufactured
goods to import. So the settlers came and built a society. It worked
because the transportation costs for the exports, while formidible,
weren't strangling, so they could afford the exorbitant imports of
required products. But what would have happened if they no longer
imported anything from Europe because domestic sources were less
costly? What would they have done with all of that European money
they got for all of the cotton, fish and beaver pelt they sent them?

Those are the long range trends and issues I see developing for us
in orbit and I think it'll pose some interesting economic problems
for all of us and the researchers. If these trends are indeed
accurate, what are the implications? So group, what are your
thoughts on these matters?

My closing thoughts are that these economic issues will always face
future colonies, planet-based, orbit-based, or extra-solar-based. I
also happen to think that Zubrin's Mars economy is doomed, because
it'll just be replicating another fixed gravity industrial economy,
with nothing unique to export in exchange for vital terrestrial
and "Habitatan" imports. The transportation costs would be even
steeper than what we'll face in "Habitat", they'll have no unique
industrial processes to create wealth, and they'll be facing the
same restraints on energy and materials that the earthlings will
face. They'll just be flatlanders, in a less hospitable environment,
depending on the largess of Earth for their survival. For Zubrin's
Mars, it'll never be a matter of economic integration followed by
self-sufficiency, rather it'll be sink or swim in the matter of self-
sufficiency. They'll only be able to depend on subsidies for so long
before the growing Martian population becomes too expensive to
subisize. Then they'll be completely on their own, most likely long
before they'll be anywhere near close enough to achieve self-
sufficiency.

Looing forward to your thoughts on these issues.

victoriatangoman wrote:

> Now, if habitats become bastions of the corporations, there'll be
> three economies. The export economy, i.e. SPS energy beamed to
> earth. The replacement economy, i.e. selling propellant and oxidizer
> in LEO - this economy would really be a subset of the export economy
> because we're not fully exporting to earth, we're servicing them
> when they come to our territory, thereby replacing the fuel that
> they would have to bring with them, but by doing this we're
> transferring wealth from their society to ours. And lastly, there
> would be our domestic economy.
>
> So how do the corporations make their money? They earn it
> domestically (for them that means earth-bound) from our energy
> exports and from a postive balance of payments by supplying us with
> more costly imports compared to our less efficient export of habitat
> manufactured products. After-all who on earth will care a whit for
> our hemp fiber clothes.

I think by the time that there are significant people upstairs
there will need to have been dramatic reduction in the cost of
launch.

The costs to launch are not going to be unreasonable, long
term: skyhooks, (maybe space elevators), and/or conventional
rockets, anyway the costs are going to come down; way down.

Below $500/lb appears very possible soon, below $200/lb quite
possible according to cost models I've run- lower than that
is probably doable also.

Last time I checked in 2001 we are at $1200/lb; my theory
shows halving of costs every 5 years (right now the theory
is probably off a little, the Iridium debacle has had a very
chilling effect on the Space Industry, and the cost, but I am
confident it will sort itself out before 2006.)

Therefore tourism, people going into space to mine asteroids-
once you get to LEO, I personally believe you are much closer
than half way to anywhere. Space hotels are going to be needed-
that probably implies space construction, and maybe prospecting.

And other exports- platinum metal, gold, iron; these are fairly
trivial if man can reach a suitable NEO- returning material to
earth is pretty trivial in comparison to getting there. (I
don't buy O'Neills swiss banker argument at all- rolling
downhill is pretty cheap, so you do it for anything there is
a market for on earth.

Also, building stuff on orbit means you use 100% latest tech.
That means that the unit costs to build something are going to
hopefully start off lower than on earth; that in turn means you
can turn return on investment from day 1. Investors like that.

Delivery is fun too. Pick an empty spot a few tens of km across
anywhere on earth. We deliver! 30 minutes? [ok, ok a bit
longer in practice, but in that case free pizza thrown in as
well, atleast it should be hot when it arrives! ;-) ]

> Looing forward to your thoughts on these issues.

It's an interesting theory you have; the combination of a
lot of people in space and high launch costs, I can't get
that point though.

--
- Ian Woollard (ian.woollard@...)

"Is a planetary surface the right place for an expanding
technological civilization?"
- Gerard O'Neill

Ian Woolard wrote,

"Also, building stuff on orbit means you use 100% latest tech.
That means that the unit costs to build something are going to
hopefully start off lower than on earth; that in turn means you
can turn return on investment from day 1."

I highly doubt this argument. Using "100% latest tech" means a lot of
risk.

Ron

rmenich@... wrote:

> Ian Woollard wrote,
>
> "Also, building stuff on orbit means you use 100% latest tech.
> That means that the unit costs to build something are going to
> hopefully start off lower than on earth; that in turn means you
> can turn return on investment from day 1."
>
> I highly doubt this argument. Using "100% latest tech" means a lot of
> risk.

100% latest tech doesn't mean it isn't proven tech.

No unions- you can robotize everything, you can use solar
energy; probably less issues with mining, no environment
to worry about; nuclear power may be pretty safe on orbit etc.
etc.

> Ron

--
- Ian Woollard (ian.woollard@...)

"Is a planetary surface the right place for an expanding
technological civilization?"
- Gerard O'Neill