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Paul Krugman's 1978 Theory of Interstellar Trade
jerryasher recommends Paul Krugman's blog at the NYTimes, where he introduces a paper he wrote, The Theory of Interstellar Trade, with tongue very much in cheek. Some packrat academician was kind enough to send him a scan, because "back then academics did their work with typewriters, abacuses, and stone axes." Abstract: This paper extends interplanetary trade theory to an interstellar setting. It is chiefly concerned with the following question: how should interest rates on goods in transit be computed when the goods travel at close to the speed of light? This is a problem because the time taken in transit will appear less to an observer traveling with the goods than to a stationary observer. A solution is derived from economic theory, and two useless but true theorems are proved... This paper, then, is a serious analysis of a ridiculous subject, which is of course the opposite of what is usual in economics."
Just some thoughts:
On a note, I recall reading that section of the book. It comes at the end of "island in the Sky", a remarkably sober book about colonizing space (sober in light of crazier scifi/colonization books). For some reason I read it first and the pessimism of the article stuck with me, setting the tone for the whole book. That's not bad--our views about space travel and the future need pessimism, but I felt that it was the overriding theme.
In the end, there is no free lunch. While you could predict that interstellar travel would change time preference for some, there are a few caveats to make here:
1. Perhaps travel is so expensive that the change in time preference for some doesn't impact the market as a whole. If you have a vanishingly small group of people pushing the discount rate down, does it affect the prevailing rate? You could argue that the income effect of the billionaires of the world might be analogous. While Bill Gates may have the latitude to spend more money on small purchases than they might be worth to him systematically, that does not do much to change the price I pay for those same products.
2. Travellers will face a STEEP opportunity cost. There isn't any other way to describe it. They may (as the article in "islands in the sky" suggests) spend their wealth ENTIRELY on acclimating themselves to a radically different world or insulating themselves from that new world. In other words, this would be like taking a trip from ancient greece to the Soviet Union. You don't speak the language, you don't understand the culture, the medium of exchange, almost everything. You would be lucky if you weren't put in a circus or a museum.
3. In the longer term, risk dominates. Inflation risk and default risk historically rise to 1.0 as time marches on. There are vanishingly view equity or debt instruments that are still valid from 200 years ago. they exist, most notably in the low countries and england, but they are few and far between. What happens in the event of hyperinflation, panics or fraud (although the last one could be accounted for given a persistent third party overseer)?
4. Adverse selection. This is a corrolary of the risk argument. What bank would be likely to write a contract to make an astronomical payment in the far future? A bank that is likely to be solvent that whole time (assuming the bank knows with certainty) might, but would be FAR less likely to do so than a bank who might default on the contract.
5. Explicit cost. While this might eventually become a non-issue, we have to be real about what is at stake. A long term space voyage is basically one way in the eyes of the company chartering the craft. Unlike a 767 from NY to London, when the space ship returns, it will be obsolete, or at least at the end of its viable life. Each trip presents a large fixed cost for the charter company. This may not translate directly as a large enough cost to a consumer if the flight manifest is big enough, but it isn't trivial.
Just some thoughts.
I just got nailed with an interstitial ad when trying to go to this article!
/. reader for me.
/.! Please don't go that route...
Wow, maybe I have been lucky before but that's a first for me. Also possibly the beginning of the end as a
Bad, BAD
"Can we agree that the plural of abacus is abacii?" Bonus points for where this quote comes from (or else hand in your geek card!).
There's another subtle joke if you look at the dates on the references. I almost missed it.
i recall seeing a documentary about this sort of stuff, but they skirted around most of the economic theory along the way.
interstellar mining operations where the crew went out on multi-year tours, lessening the effects of time with deep sleep/hibernation.
i beleive it was called 'aliens' and revolved around the working day of one 'lt. ripley' aboard the cargo/mining ship 'the nostromo'.
a difficult hitch-hiking insect problem too IIRC.
anyway, it was an earth -> deep space -> earth round trip over a prolonged period, with long-lived corporate interests footing the bills ( and reaping the profits from bulk cargo & some medical research on the side )
It gets better.
Now, I have a bit of land where I have planted a small forrest (3000 m - a very small forrest).
Consider one my mighty oaks out there (barely taller than me at this point).
In 200 years time it will be mature and can at a price of p. But that means it can be sold "on the root" in 199 years time at a price of p(1-r), where r denotes interest.
Or in general in 200 - n years time at a price of p(1-r)^n. That is, it has a value today of p(1-r)^200
The point is (and I think it's akin to the point you were trying to make) that it matters not one whit whether I'll be alive when the tree is finally felled. My tree already has a value because of it's future value (to others).
Worse yet, if the deprecation-rate is 5% a year, will $1 invested towards bringing unobtanium from that distant star bring more of it than investing $11 here on earth, or in this solar-system ?
Deprecation means that if something takes a long time, it must be VERY productive to pay off.
The "Ender's Game" series, all beyond book 1. Ender is obscenely rich thanks to multiple interplanetary travels.
45 5F E1 04 22 CA 29 C4 93 3F 95 05 2B 79 2A B2
In the Qeng Ho business, there's no "ordering" and not necessarily a trip back. If a trip takes 24 years, then you only need to predict prices 24 years into the future, not 48. You load up your ship with things that you think are going to be valuable at the destination. You go. Then, when you get there, you make decisions about what to trade and where to go next.
And yeah, if your ships are full of stuff that the destination doesn't consider valuable, you're screwed.
Though in Vinge's stories, there are some points in your favor:
You're just as likely to be trading technology as commodities. Your destination might have all sorts of raw materials (e.g. they're not particularly interested in buying Uranium) but not certain technologies or the industrial base to build the things they want. Earth 1700 has all the raw materials needed to build spaceships, but can't actually do it. Sell spaceships to Earth 1700. Earth 2008 is probably a great market for nanotech. And so on.
Vinge's stories suggest the existence of a higher level social science than we have right now. People know how to abstractly summarize entire civilizations. (e.g. "That civilization is a typical tyranny, and that group of solar systems is a Class 2 Perversion.") Perhaps practitioners of this science can make better guesses than we can imagine, e.g. "I bet those guys have great surveillance nanobots for us to buy, but low genetic tech so we can sell them text-to-DNA fabs."
In addition, there's likely a bio market everywhere. Assuming all colonies are founded by earthlings, then everyone probably has roses and cattle. But Tau Ceti does not have Centauri's fungus lifeforms or anything based on its interesting secretions. And Romulan Ale is valuable everywhere; it's made from grains and hop-like-things that you just can't get anywhere else. Also, even when seeds/DNA/etc get shared, environmental conditions (soil, weather, and so on) make it hard to really copy the other guys' stuff. Take some DNA-identical Tettnanger hop rhizomes from Germany and grow 'em in America, and the resulting hops just don't taste and smell the same. Some things contain subtleties that keep them from ever really becoming commodities. Tau Ceti will probably always want Northwest-America-grown Cascade hops. :-)
Damn, I totally have beer on my mind right now.
Hmm.. but I think I see where I'm going with this: for intersteller trade, don' deal in commodities. Deal in very unique things. Somebody on Tau Ceti might pay quite a fortune for the bragging rights of having the only Van Gogh painting on the whole planet.
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