The Elliptical Economy

The Elliptical Economy

Adam Kall, Director of Science

7 minute read

A frequent joke between my friends and I is that “money is imaginary and doesn’t exist anyway.” This is typically said after yet another impulsive purchase of a Star Wars-themed Lego set. Besides a desperate justification, I believe my friends are actually realizing a much deeper reality of the economy in general. Money does not do anything on its own, but it can encourage economic activities, like the production, shipment, and sale of goods. Those beneficial activities represent an economy that supports the humans involved in it. As those humans push out into space, they take with them the need for a dynamic space economy. If we want space to have a vibrant economy, it doesn’t mean we want a lot of money in space, it means we want a lot of activity in space. Let’s bring it back to Earth first to discuss an example of a circular economy, which will grow into our elliptical space economy.

A common phrase that gets thrown around in newsrooms and classrooms is the circular economy. What this phrase typically describes is the concept that an economy with only 100 dollar bills in it would be able to produce more than $100 of economic activity, so long as the frequency at which those dollars change hands, known as the velocity of money, is high enough. To walk through a quick example, imagine we have Person A who starts with all $100 in Circleland. They have decided they want flowers planted in their front yard, so they pay the landscaper $100 for the flowers and labor to plant them. The landscaper works up an appetite and decides to take care of their grocery shopping for the week and heads to the grocer, where they buy $100 worth of food. The grocer, having restocked the shelves, decides they are done for the day and they want to relax with a nice massage, which costs them $100, and it just so happens that Person A is the masseuse. So the $100 has flown around Circleland in a single day and paid for $300 worth of economic activity, representing a very high velocity of money.

Let’s add in another factor. Now let's imagine that Circleland exists surrounded by mountains, and there are some daring individuals who will climb those mountains to interact with the rest of the world. If a citizen of Circleland wanted something that wasn’t produced in their country but was produced outside of it, they could pay one of these mountaineers to go retrieve it. This creates the issue that money has now flown out of Circleland, limiting future economic activity until someone from outside Circleland wants to buy an export and thus send money back in. This problem could be abated for a bit by Circleland choosing to print its own currency (probably called something sufficiently mathematical like radii or just pi), but the people beyond the mountains wouldn’t want that currency, so the government and businesses would have to exchange ever more for the dollars they need to trade, leading to rapid inflation of the local Circleland currency compared to the global currency.

So what does this have to do with space? Well, if instead of mountains you have hundreds of kilometers of empty vacuum, and instead of mountaineers you have astronauts and robots, then the principles of Circleland are a way to think about the space economy. However, in space everything has to move in an ellipse, so let's think about the specifics of the space economy as the elliptical economy instead. The first thing to address about the elliptical economy is that being self-sufficient will never be practical. Space represents a very difficult and dangerous environment where each cubic meter is earned through enormous industrial and logistical effort, not to mention the oxygen and water resources cycling through the stations and spaceships, as compared to Earth where those things are often taken for granted. Yet, the elliptical economy still exists and humans still leave the cradle of Mother Earth for the most inhospitable place in the universe, because there is value in space that cannot be found anywhere else.

As of 2023, the elliptical economy essentially consists of three sectors. The first sector is scientific, which many think about as a bottomless pit into which tax dollars are thrown with no hope of return. However, scientific understanding built from experiments in space frequently leads to advancements on Earth, from 3D printing improvements to tennis shoes. The second sector is information gathering and transmission, which includes things like satellite radio and television, Earth imaging, and weather forecasting. Many say data is the new oil, and the elliptical economy in space provides a stream of data-oil that is unachievable by any other means and has led to significant improvements in food production, resource prospecting, customer acquisition, and public safety. The final sector is the defense sector, where space is used to spy on enemies and detect threats before they reach the homeland. Information gathering between Russia and the USA during the Cold War is widely believed to be the reason that we didn’t suffer a world-ending nuclear war because both sides knew what the other was capable of. I can’t put an exact price on “saving the world,” but governments continue to spend billions of dollars expanding and maintaining their defensive space assets.

What all three of these sectors have in common is that the export is mostly non-physical. Since the toll of sending things into space is so prohibitive and the cost of bringing things back down even more so, the elliptical economy has settled into the sectors that allow for value to be beamed back down, increasing the profit for the producers. Because of this, the elliptical economy is currently a mirage, where the money spent “in” it is really spent on Earth between the Earth-based telecommunications company and the Earth-based satellite manufacturer who pays the Earth-based launch company, who, as part of their job description, ensures no dollars are stuck in the fairing before the rocket launches (okay that’s not in their job description, but they would probably still try to stop it). So no money is “in” the elliptical economy, but that may be changing very soon.

The Artemis program is looking at long-term habitation on the moon, the Commercial LEO Destination program wants multiple commercial space stations in low Earth orbit, and multiple ambitious startups want to mine near-Earth asteroids. Call me a robotics pessimist, but I believe these endeavors will require humans in space. Once you have humans staying in space, and especially for the long term, you’re going to have humans who work hard and want recreational activities when they’re done working, which requires other humans who provide those services. Recreational activities will likely be limited, as there won’t be enough available to meet demand, so introducing a local price will ensure only those who really want the service can utilize it. Now instead of the astronauts receiving a promised salary that sits in a bank account on Earth waiting for them to come back to use it, they’ll want a little bit available on the Moon so they can go get a drink from the one space bar that brews from hops and not fermented mushrooms.

 
 

This scenario is now approaching the final steps before a matured elliptical economy is born. Now the elliptical economy has a problem of needing money to transact between space people and space businesses, but the only initial source of money inflow to space is from the sale of information and salaries to astronauts. While significant, these inflows alone cannot make up for the high rate of money outflow for launch costs and general needed supplies. Eventually, the space economy will need to mature enough to produce physical goods, if only to encourage more innovation in how things are moved between Earth and space. If there is value in providing something in space, and there is an enormous cost to bringing things from Earth to space, some brilliant inventors and entrepreneurs are going to figure out a way to directly produce the desired thing in space and cut out the middle-rocket-man. This topic of in-space industry has only just begun to be explored, but already there are high hopes that synthetic organs and extremely high-quality fiber-optic cables can be produced in space, and more importantly, can only be produced in space. Now the elliptical economy needs to meet the demand of the full 8-billion human market on Earth, which as an example, had nearly 150,000 organ transplants in 2021. That’s a lot of organs being produced in space, which need a factory; which needs a whole industrial chain of raw resource collectors, refiners, assemblers, fabricators, and logistics; which each have their own needs for machines, stations, and above all, people to run them; which adds again to the internal flow of the elliptical economy.

And with that, the elliptical economy starts growing itself in a rapid feedback loop. This loop isn’t perfect and there will soon be space recessions and industry bubbles and all kinds of economic events that we find so familiar on Earth. The point is that the elliptical economy will exist, and for the people on Earth who rely on fast internet to stay connected, need an organ to save their life, or require the wide range of potential space products that haven’t been fully explored yet, the elliptical economy can’t come soon enough.

Now I wouldn’t be a very good Co-founder of KMI if I didn’t take the chance to explain KMI’s role in all of this. First and foremost, we are protecting this economy from the space debris that currently exists and is quickly growing. Active Debris Removal will quickly become the main defense spending of the elliptical economy, and by beginning Active Debris Removal now we’re clearing room for that economy to get started. KMI will also help with that start by providing material, as the space debris represents processed material already in space, which is where it is needed to manufacture the new economy. KMI will be able to bring the debris to the stations where processing and recycling can occur to turn problematic debris into valuable commodities. Finally, KMI will assist in moving this recycled material from the refinery to the station or colony where it is needed to expand operations. Space will need these roles, alongside hundreds of others, if humans are to not only survive but also thrive and bring economic prosperity to the spacers working the stations as well as the humans back on Earth who supported getting them there.