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Tuesday, September 25, 2012

The Economic Impacts of the U.S. Space Program

Some valuable excerpts from this paper.

Economists view technological changes as one of the most significant determinants of the shape and direction of the U.S. economy.

Technological change exerts a particularly important influence on the national rate of economic growth. A number of studies conclude that about 90 percent of the long-term increase in output per capita in the U.S. has been attributable to technological change, increasing educational achievement, and other factors not directly associated with increases in the quantity of labor and capital.....

This technological component of the U.S. space program attracts the interest of economists, because they believe that federal R&D spending generates more powerful economic impacts than governmental purchases of other goods and services....

 each dollar spent on R&D returns an average of slightly over seven dollars in GNP over an eighteen-year period following the expenditure (3). Assuming that NASA's R&D expenditures produce the same economic payoff as the average R&D expenditure, MRI concluded that the $25 billion (1958) spent on civilian space R&D during the 1959-69 period returned $52 billion through 1970 and will continue to stimulate benefits through 1987, for a total gain of $181 billion.....

assuming that $1 billion of federal expenditure was transferred (proportionately) from other nondefense programs to NASA with no change in the size of the federal budget. Chase estimated that the $1 billion transfer would increase manufacturing output in 1975 by 0.1 percent, or $153 billion (measured in 1971 dollars), and would increase 1975 manufacturing employment by 20,000 workers......

Rockwell estimated that the Space Shuttle program generated an employment multiplier of 2.8; that is, direct Shuttle employment of 95,300 man-years in California produced an increase of 266,000 man-years in total employment......

In addition to supplying needed sales revenues for firms during the early stages of growth, space and defense demand accelerated the advance of semiconductor and computer technology. The learning economies that have been so important in the semiconductor industry were not an automatic by-product of production. Such learning economies required deliberate planning. The challenging performance and reliability specifications set by the military agencies and NASA accelerated many of these semiconductor learning economies. In this regard the space program's specifications for the integrated circuitry of the Apollo Guidance Computer provided a major impetus for improvements in the reliability of third generation component technology.....   The new technology which industry acquired from NASA had a significant effect on the industry's cost structure. The annual cost of a satellite communication circuit was $25,000 when Intelsat-l was launched in 1965; the cost had dropped to S719 when Intelsat-lV was launched in 1971. The annual cost of a circuit dropped to $30 by 1976 when Intelsat-V was placed in orbit....   Drawing on four case studies (gas turbines, cryogenic multilayer insulation, computer simulation, and integrated circuits), Mathematica, Inc. concluded that the economic benefits that result from NASA's acceleration of technology are very large. The value of a speedup in technology in those four fields was estimated to be between $2.3 billion and $7.6 billion in 1974 dollars. Mathematica's "most probable" estimate is that the four case studies alone produced savings equal to 6 percent of all NASA R&D expenditures since 1958 (on a discounted value basis).       This mostly relates to the early years of NASA before hardening of the bureaucratic arteries had set in. The cost benefit ratio now is likely to be much less favourable.       On the other hand even at its best NASA spending was unlikely to come close to the effectiveness of X-Prizes which are 33-100 times more cost effective than conventional spending.      So basically society couldn't lose money if we put it into technology X-Prizes if we tried.

  Though I have no doubt that once we have tried it a lot of political parasites, currently opposed, will come along and try to define giving money to the arts, anti-racist industry, windmill erectors and social workers as "prizes" for inspecified "achievements". The Saltire Prize already looks a bit like that since the proze is given only to the entrant that produces most power, not to one that produces a set amount, let alome a set amount at a set running cost.

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