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Opportunity Cost of NASA

January 28, 2012

The eternal question of economists is: compared to what alternatives? If you want to argue that a choice was bad, you must produce realistic alternatives that were better. Occasionally people criticize NASA for being expensive, or for not addressing real world problems. But what are the alternatives?

Signaling During the Cold War
Historically, NASA performed a very critical signalling device which was, in a sense, even more practical than tanks or bombs. During the Cold War, the U.S. was locked in an arms race with the Soviet Union. Neither side wanted to directly attack the other, for fear of massive casualties. In order to prove one’s superiority, both sides had to resort to signaling that if the other side attacked, they would lose. The signal had to be clearly visible and demonstrate clear martial prowess, but at the same time not be misconstrued as aggressive. The weapon of choice in the Cold War was the ICBM, an extremely long-range missile carrying multiple nuclear warheads. To prove one’s superiority, one had to show that they could launch very large payloads a long way accurately. Thus was born the space program. Whoever could put a man on the moon would show everyone that they were the biggest, baddest, most advanced nation on earth. NASA showed the world the power of the United States clearly for a fraction of the budget of the DOD.

The People’s Romance
I view human nature as exogenous to policy. We can’t easily change what people are like, but we can think of inexpensive ways to satisfy their impulses. Humans have a strong desire to be part of something larger than themselves (sorry, but “the human race” just doesn’t cut it). The People’s Romance is a term coined by Daniel Klein to describe the phenomenon that people enjoy collectivizing experiences that make them feel something in common with their countrymen and proud of their nation. Professor Klein is wary of the drive for People’s Romances, and tries to educate others of their downsides.

I think that some level of People’s Romance is unavoidable, and so societies should look into ways to satisfy the impulse without inflicting much harm on society. There are many ways to achieve a People’s Romance feeling among the populace, such as fighting a war, large public works, public schooling, or putting a man on the moon (or Mars). Compared to many of the alternatives, NASA has a great national pride/dollars spent ratio, relatively few casualties, and almost no impact to the lives of those who do not gain utility from People’s Romances. NASA advances science and provides us knowledge of our universe. It’s hard to think of any other government program which provides such a large benefit to so many at so low a cost.

Maybe I’m Kahneman-substituting “How do I feel when I think of going to the stars” with “Is NASA cost effective”. Perhaps I’m trapped in Hanson’s “far mode“. Still, I can’t be the only one who feels a surge of pride when I think about America’s space exploration achievements. In 1,000 years, what will people say of America? The highway system, the quality of our public schools, and hundreds of other government programs will not make the list. The fact that we put a man on the moon will be remembered for all of human history. Looking at pictures from the Hubble space telescope literally brings tears to my eyes as I am blown away by the sheer beauty and grandeur of creation. Surely that’s worth a measly $19 billion a year.

Further reading
Why is Space important?

One Comment leave one →
  1. Mark permalink
    February 15, 2012 8:58 pm

    Hey Azmytheconomics,
    I take your point, Opportunity cost is an economic term that considers the next best alternative foregone. In other words, it is the cost of improperly managing your assets. For example, the cost of not working is the wages that you would have made if you had worked. Opportunity cost is a comparison of how you are utilizing your resources right now and how you should be utilizing them. The difference in revenue is the cost. The whole concept of “opportunity cost” would be better served with the title “the cost of missed opportunity”. Everybody could understand it that way.
    Great Job!

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