Catching Air Without NASA: How Will We Regulate Commercial Space Flight?

Catching Air Without NASA: How Will We Regulate Commercial Space Flight?

June 23, 2011
Originally published in Forbes blog

What if having a vibrant space program requires bypassing NASA?  There exist great pressures for change despite NASA’s signature successes.

The private experimental launches of Elon Musk’s SpaceX and forthcoming low-earth-orbit Disney rides (such as Sir Richard Branson’s Virgin Galactic) are awesome and vitally important.

No one should look at these as joyrides or tinkering; rather, they lay the groundwork for humanity’s next evolution in transportation, even if one is skeptical (as I am) about manned flights to asteroids or Mars. Future generations’ ability to deliver goods or hop from New York to Tokyo or Sydney in the time it takes to ride the D.C. Metro today could utterly change the world yet again.

But while it’s still early in the game, we should strive to keep regulators earthbound.

The FAA calls low-earth orbit flight risky; pioneers like Branson say they’ll be safer than government-manned space flight. Advances here will inform the more scifi-ish imponderables like a space elevator, and asteroid- or moon-mining.

We’ll inevitably need to revisit the global Outer Space Treaty that forbids or undermines commercial development of the moon or asteroids. In the 1400s, Spain, Portugal and England weren’t about to agree not to cross the oceans. A treaty-replacement “Homestead Act” type mindset encourages leaps forward, spurring advances in robotics, communications and nanotechnology.

Subsidies should be discouraged, though, as is overemphasis on business-government partnerships like that between Elon Musk’s SpaceX and NASA. Dependence on government will mean cronyism and stagnation, as well as potentially more pointless experiments in zero-gravity. Technologies need to advance in a logical supply-and-demand-driven order rather than the fits and starts of porkbarrel science.

Commercial space’s real hurdle, if it can avoid entangling alliances with government, is dealing with inevitable dangers in a grown-up way by fostering the right risk-management institutions.

Basically, industries that don’t exist yet aren’t over-regulated yet, and thus have the potential to create extraordinary wealth. We must lay the groundwork for the fundamental risk-management-market institutions that enhance safety better than tossing everything to regulators. Indeed, succumbing to or encouraging eager NASA or FAA intervention is not “regulation” at all, but undermines it.

Over-regulation can easily cripple this industry while making it more risky. Political “regulation” can undermine actual regulation and governance — the as-yet-nonexistent market risk control institutions the industry most desperately needs — and hobble the commercial space industry for generations to come.

So the industry will need to work with advocates of free enterprise to articulate an alternative model.

Many values we want — privacy, safety, security, access, environmental amenities, cleanliness — are actually forms of wealth that must remain within the competitive rubric to advance. We need to create “safety wealth” in commercial space endeavors like low earth orbit, and foster the institutions like insurance and liability standards that escalate that value over time and allow for maximum innovation and wealth.

Don’t call it “self-regulation” though; that term has no place in debate. It is a misnomer in free markets since business partners and suppliers, investors, insurance companies and Wall Street all regulate and discipline errant behavior if their role is not otherwise dampened by “regulation.”

Regulators also likely will attempt to “help” the industry with waivers of liability (or conversely, undermine the ability to contract away liability like the waiver I had to sign to fly a powered parachute).  Taking that path means the commercial space industry future shall be one of regulation of the kind that doesn’t actually regulate and discipline and that hampers progress, and leaves us with a few big players who capture the regulators. Thanks to the immunity granted by the Price Andersen Act, we have no way of knowing whether nuclear power is viable in a free market, and one cannot envision that industry’s emergence from hyper-regulation; let’s not do that to the space industry

The right kinds of “immunity” instead emerge from contracts between the informed passenger and the flight company, for example. New kinds of business insurance/liability products as well as safety engineering itself should emerge more aggressively if not given an out with careless immunity.

A recent Washington Post story noted that the first colonists of Mars would likely agree to never return — that they’d remain as permanent settlers.  This represents the extreme case, but we can handle it. Still, the legal institutions required to allow someone to contract to embark on such a trip and likely fatal endeavor seem not to exist and need to be bolstered. No one wants any injury whatsover, and we certainly will not tolerate what society used to withstand in the late 1890s when one lineman in two were killed on the job. But we can cope with and allow adventure and the right to explore new frontiers.

So we have much work to do.  One hopeful notion is that the industry will come to recognize it can manage risks by extension from the management of traditional aviation risks; there are insurance instruments (and future hybrids) available there. This represents an entirely new business opportunity and engine of wealth, rather than the problem some perceive it as.  And investors and firms will likely join together in pools to cover costs if insurance is initially prohibitive.

Let’s try to remember that competition works to create wealth not just in the engineering innovations and products, but in the contractual, insurance, and liability instruments by which we govern the inevitable risks of of world-changing innovations.