Promises of a Future Utopia
In recent years, the prospect of a thriving space economy has captured the collective imagination of investors, entrepreneurs, and policymakers alike. Headlines are abuzz with predictions of an industry set to skyrocket to over $1.4 trillion by 2040, painting a future where space tourism, asteroid mining, and moon colonies are as commonplace as smartphones and internet services are today. This vision of exponential growth in the space economy is exciting, but it’s essential to approach these predictions with a healthy dose of skepticism.
While advancements in technology and increasing interest from private corporations have indeed catalyzed the space sector, the pathway to a trillion-dollar industry is fraught with challenges that often get overlooked amidst the enthusiastic forecasts. From daunting technological hurdles to regulatory and economic uncertainties, the future of the space economy is far more complex than the headlines might suggest.
This article encourages the reader to scrutinize the lofty projections of the space economy’s past and future growth, examining the assumptions underlying the estimates and forecasts and considering the reasons for caution. It’s time to take a step back from the exhilaration of space exploration and consider the reality of building an economy outside our home planet. The journey to the stars may be the next frontier, but like any frontier, it comes with its fair share of risks and unknowns.
For a comprehensive list of space economy estimates and forecasts see this article Global Space Economy Size: 2005 to 2045.
The Difference Between Estimates and Forecasts
Estimates and forecasts, though sometimes used interchangeably, carry different meanings, especially when it comes to discussing the size of the space economy. Both are used in economic analyses, but their use and implications vary.
Estimates provide a basis for understanding the current state of the space economy, while forecasts help stakeholders anticipate future developments and make strategic decisions accordingly. Additional details are provided in the following sections.
Estimating the Space Economy Size
Estimates typically refer to educated approximations of a given quantity using available data and assumptions. In the context of the space economy, estimates involve the calculation of the current or recent-past size of the space economy. This is done by gathering data from all space-related industries, such as satellite communications, earth observation, global navigation satellite systems, space exploration, launch services, etc.
However, estimates are often constrained by the availability, accuracy, and timeliness of data. For example, if there’s limited information about a particular space project’s financing or the revenue from a newly launched satellite service, the estimate might need to be based on partial data or assumptions, making it less accurate.
Estimates can also be affected by the methodology and criteria used for what constitutes the “space economy.” From a criteria perspective, some might only count direct space-related activities like satellite production, while others might include indirect activities like the creation of satellite television content.
From a methodology perspective, there are several methods which are used to estimate the past size of the space economy. These include gross value added, gross output, investment, employment, and imports/exports. Each method has its strengths and weaknesses, and the choice of method can significantly influence the resulting estimate.
One of the most common approach used is the gross output approach, sales are collected for each producer/industry in the space economy, such as satellite manufacturing, launch services, and satellite services. However, the method can be complicated by businesses that are not fully dedicated to the space economy. For example, a telecommunications company might generate a significant portion of its revenue from space-based assets but also have substantial non-space-related operations. Also, the output of one producer might become the input to another producer’s product or service, which can result in double counting. For example, satellite components or GPS chips.
Criticisms of Space Economy Size Estimates
Past space economy estimates have faced criticism. One of the main criticisms is the overestimation of the size of the space economy. Some studies have been accused of double-counting between categories, or including products and services not directly related to space. For example, some organizations have included high altitude balloons in their estimates.
Forecasting the Space Economy Size
Forecasts involve predicting the future size of the space economy based on trends, projected technological advances, proposed missions, government policy, investment flows, and other factors. They attempt to extrapolate from current and historical data to make predictions about the future state of the space economy.
Forecasts often use economic modeling, including statistical methods and scenario analyses. They may provide a range of possible future outcomes rather than a single figure, reflecting the uncertainty involved. They may also break down predictions by industry, for example, forecasting growth rates in areas like space logistics, commercial human spaceflight, asteroid mining, or satellite broadband services.
Forecasts inherently involve uncertainty. Market analysts face several challenges when making forecasts for any industry, and the space economy is no exception. These challenges include the unpredictability of technological advances, economic fluctuations, regulatory changes, government policy changes, natural disaster’s, space-related mishaps, market demand, market competition, and the nascent stage of many space-related businesses/markets.
The Bottom Line
It’s difficult to predict with certainty the growth trajectory of the space economy. While there are reasons to be optimistic—such as recent technological advancements and growing interest from private companies—there are also significant hurdles and uncertainties. It’s also worth noting that “exponential” growth is a very high bar; even if the space economy grows robustly, it might not grow at an exponential rate. As with any economic forecasting, predictions about the space economy should be taken with a grain of caution.