prior probability

Below is an excerpt from my work-in-progress “Outer Space Auctions“; I have lightly edited this extended excerpt for clarity and have placed the footnotes and scholarly citations below the fold:

It is tempting to see space congestion as a form of market failure or as what economists call an “externality”. In reality, however, the tragedy of the outer space commons–the increase in space congestion and the risks posed by orbital debris–is the result of legal failure: the longstanding treatment of outer space as a commons and the resulting lack of well-defined property rights in outer space. Broadly speaking, there are three types of legal failure or regulatory impediments to trade: (i) uncertainty about the legality of a transaction or activity, (ii) the prohibition of a purely voluntary transactions or activities, and (iii) lack of property rights. Why do I label these three types of legal barriers to trade as “legal failures”? Simply put, because these legal impediments prevent mutually beneficial and voluntary agreements from taking place.[1] Below is a brief survey of each type of legal failure:

First off is legal uncertainty: when the law itself is either uncertain or unclear about what transactions or activities are legal.[2] A textbook example of this type of legal failure (i.e. legal uncertainty) is the longstanding uncertainty regarding the legality of the purchase and sale of blood.[3] From a purely economic perspective, legal uncertainty is suboptimal because it makes the outcomes of legal cases difficult to predict and prevents would-be buyers and sellers from planning their transactions in the shadow of the law or settling their disputes peacefully out of court.

Next is prohibition: when the law criminalizes, prohibits, or otherwise impedes trade altogether in a given good or service. Textbook examples of this type of legal failure (i.e. prohibition) include draconian drug laws that make it illegal to buy or sell certain drugs and laws prohibiting adult prostitution.[4]

The last type of legal failure is the lack of well-defined property rights: when the law fails to define or enforce property rights in a contested resource. Textbook examples of this type of legal failure (i.e. lack of property rights) include common-pool resources such as ocean fisheries, public roads, and waterways.[5] Many economists, however, often confuse this legal failure with so-called “market failures,” or situations where markets on their own are unable to produce efficient outcomes.[6] Air pollution, traffic congestion, and now orbital debris are often listed as textbook examples of market failures. But in reality these bad outcomes are often the result of the law’s failure to define property rights in resources such as air, roads, or orbits. By failing to define such rights, a market for clean air or for uncongested roads or for safe space orbits is unable to exist in the first place. Simply put, without property rights, mutually beneficial and voluntary agreements won’t be able to occur in the first instance.

This third type of legal failure is the one most relevant to the subject matter of this paper: the increase in space congestion and orbital space debris. Simply put, because international space law defines outer space as a commons, the tragedy of the outer space commons we are now witnessing should come as no surprise.

That is the title of my latest work-in-progress, which I posted to SSRN over the weekend (see here). Below is the Introduction to my paper (footnotes omitted):

“Are there too many or too few satellites and spacecraft in outer space? What is the optimal number of spacecraft in Low Earth Orbit, for example? Currently, the number of satellites in orbit is 9,000. This number is likely to increase to more than 60,000 by 2030. This increase in space congestion is a cause for concern for three reasons: (i) greater space congestion can interfere with ground-based observations, (ii) space congestion can also generates greater amounts of orbital debris, and last but not least, (ii) an increase in orbital debris can increase the risk of a catastrophic collision in outer space. Some estimates show that there are already more than 100 trillion untracked pieces of old satellites circling the planet, so space congestion is a real problem.

“Space congestion thus threatens the sustainability of the commercial space industry in Low Earth Orbit, but in the absence of an effective method of shared governance, what is to prevent this domain from becoming another “tragedy of the commons,” to borrow Garrett Hardin’s haunting phrase? This paper contributes to the literature on outer space governance by presenting a Coasian solution to the problem of space congestion: orbit auctions. The remainder of this paper is thus organized as follows: Parts I and II will provide some relevant background information: Part I contains a taxonomy of spacecraft in orbit today, while Part II surveys the nature of the outer space problem: space congestion. Next, Part III compares and contrasts legal failure and market failure and identifies the main cause of the space congestion problem: the fact that outer space is an open-access commons under existing international law. Last, Part IV concludes by presenting a simple Coasian solution: space launch auctions or property rights in space orbits.”

I will be travelling to Santiago de Chile next week to meet some of my fellow Adam Smith scholars from South America and attend some workshops; in the meantime, I will have more to say about my proposed outer space auctions in the days ahead.

Ian Hacking was an intellectual giant in the philosophy of science and in other fields. Among other things, Professor Hacking wrote an influential work on the history of probability (see here). Here is his Wikipedia page, and here is a memorial notice from the University of Toronto, where Hacking was professor emeritus.

Happy Mother’s Day! I am including two versions of this beautiful ballad by Luis Enrique: an acoustic guitar version from 2017 and the original 1989 version from the album Mi Mundo:

The eight-minute video below takes the viewer on a tour of all the different bridges of the USS Enterprise:

In addition to a plethora of scholarly papers and sundry blog posts, I am reading the following three books:

1. Parfit: A Philosopher and His Mission to Save Morality by David Edmonds. (I am not a big fan of Derek Parfit or his work, but I just ordered a copy of this book on the strength of this book review.)

2. Adam Smith as Student and Professor by W. R. Scott. (This tome was published in 1937 and is the best book on Adam Smith that I have read thus far.)

3. The Physiocrats and the World of the Enlightenment by Liana Vardi. (I am reading this work to learn more about François Quesnay; the book cover is pictured below).

While I was out of town I proofread and made substantial revisions to both of my Adam Smith works-in-progress: Die Adam Smith Probleme and The Balliol College Conspiracy. Enjoy!

What is the opposite of Death by PowerPoint? The tweet pictured below by Gokul Rajaram, which is worth clicking on and reading in full, describes former Google CEO Eric Schmidt’s unconventional but thought-provoking approach to PowerPoint: eliminate the use of words!

Today marks the end of my travels … for now! I will be visiting the University of Glasgow in Scotland (the fourth-oldest university in the English-speaking world) and la Universidad del Desarrollo (UDD) in Chile in a few weeks!