Space colonization as a 'safety valve'

> In what currency will the debt be issued?<

I did think of that question, but I was getting long-winded enough
already. I don't see any reason to rule out the possibility that
there will be such a currency, one way or another. So debt went on
the list of possible mechanisms.

Maybe the technical details will come out so that having the first
colony build more colonies, and then having the second-generation
colonies build the solar power systems, will work better than having
the first one ever return anything to earth. If so, I think people
will set up a means by which Island One can cover its launch costs
and ongoing imports from earth (incurred in extant currencies) off
of the benefits that the second-generation habitats provide to
earth. If the means is grossly unjust, or if it gets to the point
where the dependence is entirely one-way, it will break down
eventually.

> So, let's say that this group promises to pay you a Billion dollars
> per year for the next 40 years. You Habitat of 10,000 does import
> items from Earth but will they need a Billion dollars of goods or
> services per year in addition to what they are already buying with
> their own export earnings?

Need? Why would it be limited to need? It would be nice to have
various luxuries, and if they can get an extra B$/yr worth by
building new colonies, why wouldn't they?

As for their own export earnings, my point is that they don't
necessarily have to have any *direct* export earnings: if it's more
efficient for them to specialize in producing new colonies, having
them do so is compatible with having the setup be a good deal for
everyone involved.

> In the meantime, the cost your Habitat incurred in building that
> other Habitat that you sold to the buyers had to be paid for and
> salaries and fuel costs in orbit, etc also had to be paid for.
> Where did that money come from?

Well, what did it cost, in real terms?

It cost some of the labor of the people on Habitat1: directly that
came from those people, but they had to have their food and air and
so on in the meantime. Those came from various sources who expected
to be paid back with interest and risk premiums when Habitat2 starts
exporting. (Or maybe part of it came from the Bill and Melinda
Gates Foundation, or from the taxpayers of some earthly government.
There are lots of scenarios.)

It cost some raw materials: they came from the moon or asteroids.
Getting them cost some of the same as everything else costs.

It cost some capital: it required the use of equipment that could
have been doing something else instead. Once again, the people who
provide that probably expect to be paid back with interest by
Habitat2.

The bottom line is that there has to be something in it for everyone
who puts something into it. As long as what people will get out of
it is at least as valuable to them as what they would have gotten
after the same delay by leaving their money in a leveraged index
fund with the same risk characteristics, you've got a deal as long
as you have a means of making sure everyone holds up their end of
it. At that level of abstraction it doesn't matter whether you're
talking about widgets on the ground or pie literally in the sky. To
show it won't work, you need to show that one of those components is
irremediably missing.

--- In spacesettlers@yahoogroups.com, "victoriatangoman"
wrote:
>
> --- In spacesettlers@yahoogroups.com, "Dan Wylie-Sears"

> wrote:
>
> > If malcontents on earth want to move to a new colony,
> > there will have to be something in it for the people on the old
> > colony. One option is debt: the new colony is obligated to pay
the
> > old one.
>
> In what currency will the debt be issued? Transposing Earth-based
> financial assumptions to orbit is tricky. If I gave you 1,000 North
> Korean Won, what would you do with them (starting a campfire
doesn't
> count)?
>
> So, let's say that this group promises to pay you a Billion dollars
> per year for the next 40 years. You Habitat of 10,000 does import
> items from Earth but will they need a Billion dollars of goods or
> services per year in addition to what they are already buying with
> their own export earnings? In the meantime, the cost your Habitat
> incurred in building that other Habitat that you sold to the buyers
> had to be paid for and salaries and fuel costs in orbit, etc also
had
> to be paid for. Where did that money come from?
>
> International trade works pretty well on Earth because most
currency
> instruments are fungible and liquid. If you have a surplus of Euros
> and you have had your fill of Frnch wine and cheese, you can sell
that
> currency in exchange for Japanese Yen and buy some Playstations
then
> sell the remainder of Yen for Dollars and buy some Intel CPUs. The
> buying and selling of currency works because goods and services
can be
> shipped across borders quite easily. Now take a country like North
> Korea which is striving to perfect autarky. It has closed its
borders
> to trade. Now somehow you've gotten a hold of 1,000 NK Won and you
> don't want them, so you try to sell them. Who wants to buy them?
Maybe
> the person lucky enough to go on their dream vacation to Pyongyang
but
> there are no businesspeople out there looking to buy NK Won because
> they need to pay a bill for importing NK sports cars. The trade
flow
> between NK and the world is quite restricted so that makes NK
currency
> illiquid.
>
> A Habitat is orbit will have transportation costs that are far far
> higher when it imports goods from Earth than any two countries on
> Earth trading between themselves or through intermediaries.
>
> So, we hope that the first Habitat will be selling SPS power to
Earth
> customers and thus earning currency in exchange. It will also be
> importing stuff like nail polish, hard drives, etc. These items
will
> be expensive because they are limited by shipping costs and
shipping
> capacity. Alongside this import/export economy will be one that is
> entirely domestic. Someone will fix plumbing and use their chits to
> buy an apple pie and the baker of the pie will use the chits to pay
> for his kid's haircut, etc. Give one of these people a US dollar
and
> what can they do with it? They can trade it amongst themselves
until
> it finally reaches some group that is needing to import something
from
> Earth. Those Earth goods will be expensive, no matter how efficient
> the shipping methods become.
>
> So, there is a limit to how dominant a role imported goods will
play
> in the economy. Everything can't be sourced from Earth. The
incentive
> to develop the domestic economy to produce substitute goods will be
> immense. The efficiency of the industry producing import-
substitution
> goods need not equal that of the Earth-based manufacturer. All that
> the orbital industry need do is sell a good for less than the cost
of
> the Earth good + shipping. That shipping is going to be a killer no
> matter how low launch costs fall. Remember we're not shipping just
to
> LEO here, but to somewhere in cislunar space and the delta-v from
LEO
> to higher orbits is not as insignificant as the cost of shipping
via
> ocean freight from Singapore to Los Angeles. Therefore there will
be a
> foreign exchange account of either surplus or deficit developing.
If
> you accumulate way too much foreign capital and can't find a way to
> translate it into the domestic economy then the Earth money you're
> holding devalues.
>
> So, back to the original question. As you're building your
> Habitat-for-sale you have to pay for your orbitally sourced raw
> materials, your orbitally sourced human resources, your orbitally
> sourced manufactured goods, your orbitally sourced incidentals,
etc.
> What good is there in fronting $25 Billion of goods and services
from
> your domestic economy in exchange for a promisary note of $1
Billion
> per year for the 40 years after you sell the Habitat? Where will
they
> generate the $1 Billion per year? Where will you come up with the
$25
> Billion in domestic wealth to front the costs of construciton?
Sure,
> we can get into banking theory here, but that just reduces the
scope
> of the problem and introduces some other complications, but it
doesn't
> eliminate the problem.
>
> Maybe you think the $1 Billion per year payment will be paid in
> domestic chit and that a portion of the future productive
capability
> of the 2nd Habitat will be devoted to wealth transfer from one
Habitat
> to the other. I'll address this lower down in this reply.
>
> > Yet another possibility is that some of the residents
> > of the old colony will move to the new colony, in a better
> > socioeconomic position than they held in the old one, while both
> > colonies receive an influx of indebted new immigrants.
>
> This scenario makes much more sense to me than the alternative I so
> often see floated of Habitats coming off an assembly line and being
> sold to groups so that they can all form independent social and
> government experiments.
>
> If the initial group that built the first Habitat had to develop up
> the torturious bootstrapping curve and build up the entire
industrial
> infrastructure in orbit they've effectively created a HUGE barrier
to
> entry for competitors. If some other group wants to build SPS or
> Habitats, or whatever, and they don't secure the cooperation of the
> group already in orbit, then they've got to lay down their own
launch
> initiative (or contract for it), their own presence in LEO, secure
> their own orbital fuel and oxidizer, their own source of raw
> materials, their own source of oxygen, their own source of food,
their
> own source of power, their own source to refine, their own source
to
> fabricate, etc. Basically they've got to lay down a duplicate
> infrastructure. That's a huge impediment to competition. Let's just
> say that they do undertake the effort to establish themselves in
> orbit. What can we expect at the end state? Competition, and this
will
> put downward pressure on key export industries possessed by the
> initial Habitat, such as SPS. That's good for the Earth based
> consumers of SPS but not so good for the two Habitats that need to
> maximize their export earnings to offset the costs they incur in
> importing goods.
>
> So, what can the initial group do to discourage a rational actor
that
> wants to set up a competitor? They can try to raise even higher the
> barriers to entry, but that might be hard to achieve. More likely
> though, they can lower the expected gains that can be achieved from
> selling SPS by expanding their own capacity from their already,
> partially or fully, amortized orbital infrastructure. They can
build a
> 2nd Habitat for far less than the competitor group can build their
own
> Habitat by duplicating the whole orbital infrastructure
arrangement.
> This means that they can lower the price that they sell SPS units
or
> power from the SPS. This will certainly lower the gains to be
achieved
> from independently building a 2nd Habitat.
>
> The difference here though is that they still remain the monopolist
> with respect to SPS and only need price it competitively against
> terrestrial substitutes. Further, rationalization of industry can
be
> achieved across the two Habitats so that they aren't duplicating
> processes and ignoring others. The key here is that political-
societal
> control of the two Habitats is unified. This small orbital country
is
> growing without "breeding" its own competitors who, once in orbit,
and
> having bypassed the intimidating barriers to entry, would have an
> easier time duplicating an independent sourcing of materials and
> refining/fabricating capacity and going after the export earnings
of
> the first Habitat.
>
> What rationale can be offered to the first Habitat to set up, by
> selling a 2nd Habitat, a competitive and independent nation? Why
> wouldn't the 1st group simply build a 2nd Habitat for themselves,
> under their control, and expand the industries, especially those
> needed to grow the domestic economy, so as to prevent disruption to
> their big export industry? This of course doesn't imply a wholly
> controlled economy because the domestic economy can grow in a
> completely unplanned organic fashion, but it does imply that "new
> political units" that would compete with the first group won't be
> aided in establishing themselves.
>
> Sorry for the long ramble, but I too often see assumptions taken
from
> Earth-based situation being translated to our orbital deliberations
> without any thought as to whether the concepts translate well at
all.