Old Space, New Story

The canonical or “go-to” quote questioning the accuracy of easy answers has to be this one from H. L. Mencken: “For every complex problem there is an answer that is clear, simple, and wrong.” Keeping that bit of wisdom in mind, should I question the generally accepted story that credits the 21st-century expansion of the space industry to new private players—especially SpaceX—who disrupted a stagnant, government-dominated sector? It’s a tale of heroic entrepreneurship that appeals to my bias, that’s for sure. A new NBER paper from Ruben Gaetani (University of Toronto) and Alexander Whalley (University of Calgary), “ Old Space, New Space: A Commercial Revolution in Innovation? ,” suggests a rethink wouldn’t be the worst idea. Yes, they acknowledge that commercial players have helped drive down launch costs and accelerate private investment after the mid-2000s. But their analysis of patent data tells a less entrepreneur-centric story about who actually generated the innovation underlying the modern space economy—and when it happened. The economists find that the largest surge in space-related patenting predates SpaceX by a decade, dating back to the 1990s, and was dominated by incumbent aerospace firms—large, established contractors such as Boeing and Lockheed Martin—rather than scrappy newcomers. Their explanation centers on the US government playing a key role as market architect. A series of policy moves in the 1980s and 1990s—the Federal Communications Commission (FCC) opening up radio spectrum for commercial satellites, new laws creating a legal pathway for private launches and commercial satellite imagery, and licensing rules that allowed satellite constellations to operate—helped construct profitable markets where private firms could earn a return on their R&D dollars. From the paper: “Government’s most consequential role in space innovation may lie in constructing appropriable markets rather than directly funding technological development or enabling entrepreneurial entry.” The most important role of government wasn’t inventing rockets—it was creating markets that made rocket-adjacent innovation worth doing. I’m not disputing the important role of government here, as expertly and accessibly explained by Gaetani and Whalley (the latter of whom I interviewed for my pro-progress newsletter, Faster, Please! , back in 2023). They’re probably right that it’s an underappreciated part of the story. Rules and regulations simply aren’t as sexy as rocket launches. Still, the decline in launch costs remains an innovative phenomenon that’s underappreciated by the general public and the non-space mainstream media. Launch costs hovered around $16,000 per kilogram from 1970 to 2010, a four-decade plateau spanning precisely the 1990s patent surge the authors celebrate. Then SpaceX’s Falcon 9 arrived in 2010 at roughly $2,500 per kilogram, followed by Falcon Heavy at $1,500—a simply massive improvement over the Space Shuttle era, per a 2022 Citi analysis. Citi projects another 95 percent decline by 2040. (Citi pins the cost collapse on reusability above all—boosters, then upper stages, then the nose cone that shields the payload during ascent. Also key to the vastly improved economics: A broader shift to a more commercial, cost-focused model that broke from the legacy cost-plus, government-driven approach.) So much has flowed from that ongoing cost shock: Starlink, the small-satellite boom, the credibility of orbital manufacturing as an investment category—not to mention serious talk and planning for Moon and Mars colonization. None of it pencils out at pre-Falcon launch prices, or even comes close. AI isn’t the only technological revolution happening right now. The post Old Space, New Story appeared first on American Enterprise Institute - AEI .