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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.
Just flush them out now. Mark me -1 flamebait for this, but this post will bring out the people insisting on the strict superiority of gold over other forms of investment. While in this case, gold in a safe place (or any other precious metal) would be a better choice over a possibly unmanaged and eventually insolvent investment fund, THAT DOESN'T MEAN that gold is always better or what not.
What does this have to do with the price of tea on Trantor?
So if a ship loaded with say, refined titanium suddenly showed up in orbit around Earth, we couldn't buy it because it had been shipped say six thousand years ago from another star system?
First -- if the player is traveling near the speed of light _with_ the cargo, then he won't notice that the people who are not moving have aged. If the cargo is something useful and rare (fusion fuel, perhaps) or from a far-advanced culture (fusion reactors, perhaps) then he's reasonably assured of finding a market upon arrival even if he didn't get a chance to set up a deal ahead of time.
Second -- I'm not sure that a transaction that takes longer to complete than the life of any trader is necessarily impossible. People make investments they know will outlast them, largely because they hope to sell to somebody younger when they need the money. If I set cargo in motion that will return a $100 million payment in 100 years, I know that I'm not going to live long enough to ever see the return. But, in 50 years I can probably sell the right to the value of the cargo for $5 to $20 million, depending on interest rates (see present discounted value). Some young whippersnapper (or an institution with a long horizon, or somebody else who hopes to trade again) would be happy to take the deal. It doesn't matter that I'll personally never see the dividends; if the payment down the line is certain enough then somebody will be happy to buy it from me.
No, I am saying it would not be there in the first place because the people who would have originally made the deal to transport the titanium would be dead already and thus they would not have made the deal in the first place.
If the transporters were "traveling salesmen" who flew around the galaxy buying and selling, they would need to be both long-lived and long-sighted since the demand for product X is entirely dependent upon time. Let's say they were selling a brand new Earth. 6000 years ago, such a thing would not have been necessary, while today it would be quite attractive at the right price. How could those beings know and prepare such a product 6000 years in the past in anticipation of demand 6000 years into the future? It wouldn't be trade so much as gambling.
As an aside, I'd suggest the example of aluminum. 200 years ago, someone might've suggested investing heavily in aluminum. After all, it was one of the most valuable metals in the world due to its scarcity. That person couldn't have seen Alcoa coming along, and the same goes for us and future technology. Who's to say what nanotechnology will be able to do in 200 years?
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
The buyer? Well, he dresses all in white, has a big white beard, talks out of burning bushes...
"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!).
Buy lots of antiques. Travel someplace while lots of time passes for everyone else. Then your antiques are older and worth more. Of course the big risk taken is if someone invents a time travel device and starts dealing in antiques while you're traveling through space.
God spoke to me.
So... you're allowing the trader's society to have sufficient technology and resources to accelerate a shipload of titanium to virtually c, to navigate across instellar voids, and then decelerate again... but you also think that society will not have conquered aging?
That seems far-fetched to me.
And of course, once aging becomes an outpatient condition, then a species' horizon is going open wide again. Thinking in terms of centuries or millenia will not be uncommon.
The Mongrel Dogs Who Teach
Hi my name is Prince Valtor Tazalutium the Third from the distant planet Nigeron 7. I have dispatched the fastest cargo ships in my fleet to Earth filled with the rich treasures of my home planet. However because of the vast distance between our two planets my ships will not reach Earth until I am long dead and therefore will not receive a return on my initial investment. As I have no heirs I am looking for one trustworthy stranger to buy these ships and their cargo en route to your planet. I am willing to sell them for $50,000.00 US DOLLARS. If interested please contact me at valtorlol@aol.com.
There's another subtle joke if you look at the dates on the references. I almost missed it.
... are quite common. We call them "stocks", which are in principle supposed to function in perpetuity, and on the timescales of most investing humans (begin investing at age of majority or shortly thereafter, begin selldown at age of retirement), a suprising number of them are. (Companies older than 80 years old are not terribly uncommon. If you count all the various mergers, divestures, and restructurings that didn't result in common stock investors taking a total bath, there are probably more companies around today that "remember" commitments made in 1899 than there are living people who were alive in that year.)
This is largely just a pointy headed clarification: interstellar trade would be impossible for a host of other reasons. We'll start with "There is nobody to trade with, and finding somebody to trade with would require the 12th century Catholic Church making a deal with Microsoft on behalf of the 28th century Catholic church, without of course knowing that Microsoft exists, what form it takes, or what it values."
Help poke pirates in the eyepatch, arr.
It still isn't working for me. Maybe they blocked non-US IPs?
You'd be better of using the Independence Day model of interstellar economics, where a permanently spaceborne species arrives at a technologically less advanced planet, strips it bare and then moves on.
Indeed I've always thought that that's the way the Federation really worked in Star Trek. All the feel good stuff we see is just propaganda from inside the system like Starship Troopers was. If you really were a primitive species then the Enterprise would arrive for peaceful contact and leave. But it would send your coordinates and description of your planetary defences (i.e. none worth mentioning) back to the Federation. A bit later swarms of starships would arrive and your planet could be turned into more starships and any survivors could be reprogrammed to serve on them, which doesn't seem a very skilled job. People seem curiously inhuman too. My explanation is that they're not really people. Physically they are mostly human with a few aliens, but socially they are more like insects in a hive. They follow orders without question and work without payment and show little concern for their individual interests or safety. If they'd been programmed to do their job without any choice in the matter it would all make sense.
It explains why they don't have money, or politics, or arguments of any sort. In the best 1984 style of course they criticise the Borg for behaving like this because it's always useful to have an enemy. I suspect that it's not really necessary anymore of course since their drones have long since lost even the possibility even considering that the system they are in is anything other than totally benign.
echo -e 'global _start\n _start:\n mov eax, 2\n int 80h\n jmp _start' > a.asm; nasm a.asm -f elf; ld a.o -o a;
This reveals the fundamental flaw in the analysis: it ignores the possibility of the trader living on the ship. considereing only traders that live on one planet or the other (or that travel between, but settle on one or the other).
The time taken to travel in the reference frame of the ship might be short enough to make trade worthwhile.
The best novel I've read that considers interstellar trade seriously is Vernor Vinge's A Deepness in the Sky. The only items proposed as valuable enough for trade are technologies and crewmembers. Mostly, the trade ships would give planets important technologies in return for the ability to recruit new crew, but occasionally a ship would encounter a new technology to acquire.
Socialism: a lie told by totalitarians and believed by fools.
Well, that may even be insightful -- in a wishful thinking kind of way, because nanotech won't work like you assume -- but it still solves the wrong problem entirely.
(And even then it doesn't necessarily solve it completely. A colony of robots can still spend most of its energy and resources just repairing the robots and building new ones, so that cost can still remain. Or worse yet, it may need more goods sent from Earth than some colonists would, because such robots would presumably be high tech and require lots of energy and a lot of different factories to produce. So it might still be cheaper to send a 20km ship full of colonists, which only need a couple of farms to live there.)
But, anyway, the thrust of TFA isn't "how do you build a colony for your people", but rather "how the F-word _do_ you make a profit out of it? Is interstellar trade even viable?" Even with robots, and without having to pay the crew or the producers anything because they're robots, you still face some non-trivial problems there.
E.g., ok, you put an order for, say, uranium from that far far colony. How do you know that you'll even still need it by the time you get it? How do you know that the price will still be OK?
If your colony is at, say, 10.5 light years away on Epsilon Eridani, or 12 light years away on Tau Ceti, and if you travel at half the speed of light average (accelerate to nearly C half the distance, then decelerate the other half), that's 31.5 and 36 light years respectively from the moment you sent the order by radio to the moment it lands on Earth. (10.5 or 12 years respectively for your signal to get there, 21 and 24 respectively for the ship to travel here.) That is, if they already have the mine and the surplus of that resource and everything. Otherwise you might have to wait more.
For farther away colonies, even more.
Historically there have been massive changes in demand within less time. Cloth went from a massive money-maker good to being "meh" to being outsourced to third world countries to produce. Coal was once _the_ fuel for any navy, and sometimes even (explicit or implied) military threat was used to open up markets to buy it from and coaling stations. (See Perry's expedition to Japan.) It took less than 30 years for everyone to switch to oil in their ships, and coal became of much less importance. Or once whale oil was the main lighting fuel, then some guy goes and discovers the light bulb. Grain was _the_ thing to have for millenia, and the wealth and military power of, say, Poland throughout the middle ages was based on being able to produce and export lots of it. Buggrit. Then it took less than a century for the bottom to fall off _that_ market, and nowadays the only countries which still have an agriculture are those who subsidize it. Etc.
It becomes even funnier if you want to build a colony for the explicit purpose of getting some goods from there. Let's say unobtanium wishalloy is the latest rage, you spot some unobtanium in the spectral line of a far away star, and plan to make a living out of it. Now you have the round trip increased by building those robots and waiting for that ship to get there, build the colony, get mining, and some time after 50 years or so you get your first shipment of it even for the nearest stars.
Will it still be needed? Will your company even still exist after so much time? What bank will give you a loan for that kind of thing?
And will your investors want your head rolling for that? Today's capitalism is obsessed by short term results, and thinks in quarters and years. (Maybe even justifiedly so.) Proposing to blow a huge chunk of money, with compound interest (one way or another: even if you have the money and don't take the loan, it must be judged against the interest you'd get if you just put that money in a bank and started _getting_ interest on it) on something which _might_ make you the big bucks in 50 years, will get Wall Street screaming for blood.
A polar bear is a cartesian bear after a coordinate transform.
...that he cited a paper of his from nine years in the future?
1. Specific elements/particles according to supply and demand.
2. Knowledge of what can be done with said elements.
When you have post human super AI and nano-tech then the cost of making things is zero once the elemental materials and energy are accounted for, that folds into just elements because energy is derived from elements (fusion or fission feed stock)
Knowledge can travel at light speed, or perhaps faster if quantum coherence becomes usable over interstellar distances, then the coherence of particle pairs will be consumed to provide instantaneous knowledge over any distance. Spreading particle pairs over such distances will take time but can be done in advance of their use.
The cost of knowledge will be proportional to the computational time required to create it, this will be determined by the size and speed of the logic engines assigned to the task.
Finding a means of trading knowledge for access to QC network bandwidth will be interesting. Perhaps knowledge will be free, but the cost of getting it in real time will not be, otherwise you would need to wait for it to propagate at light speed.
So in the future galactic commerce may be centered around access to quantum coherence bandwidth.
Not once your wife finds out about your girlfriend you won't be.... :)
yes really, there was such a thing and here is an IRC log featuring a complete bunch of idiots and RMS. http://www.after-y2k.com/abacusworldexpo/ircRMS.html
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 )
I remember that one. They somehow completely forgot to factor in that though cryosleep may help in shortening the travel-time to acceptable levels, it'll do nothing to the deprecation of investments, thus the entire thing would never pay off.
I seem to recall that the medical research was a little sloppy too.
I was just reading a piece on economics which termed 1000BC to 1800AD "The Flintstones" and 1800AD to the present "The Jetsons". It's only been a relatively short time period where the economy has grown (hence *changed* in material respects) so rapidly that 50-year investment cycles are hard to fathom.
Yes, it turns out that some forms of economic activity are hard to justify as we charge toward the looming technological singularity. something which _might_ make you the big bucks in 50 years, will get Wall Street screaming for blood Isn't that interesting? We have the attention span of an ADHD mayfly for raising capital, but we're happy to sit on our liabilities for hundreds of thousands of years.
http://en.wikipedia.org/wiki/Yucca_mountain
At some scale, common abstractions break down, such as your broad-brush of "subsidy" to the whole of global food production above. Some human endeavors are larger than the greed-loop in a Wall Street tycoon, who is, after all, merely engaged in a culturally shaped manifestation of his underlying biological drives.
The solution, obviously, is genetic engineering. One must first genetically alter the human population with biological drives compatible with 50-plus year investment cycles. In 50 to 100 years, a suitably modified humanity would support any length of transgalactic investment cycle you might wish to contemplate.
If you started with some Wikipedian root stock (barely qualifying as human as it stands), you could even set things up so that people compete for the opportunity to deliver your goods for free. Just be sure to suppress the "crow" complex, or they'll bring you back a cargo container filled with shiny lumps of carbon.
Since being an interstellar delivery boy would basically mean leaving behind all your friends and loved ones (as they aged and died and you didn't) only the worst losers would be willing to take the job (unless you were going to pay them and their families a king's ransom). Your recruitment pool would basically consist of orphaned slackers, lazy out-of-work robots, one-eyed mutants, alien doctors with no discernible human skills, and grad students. How on earth could you build a delivery service with just that to choose from?
SJW: Someone who has run out of real oppression, and has to fake it.
I didn't miss the point. Just abstract it. Corporations don't have a lifespan but their interests do. Without a forward contract (which is the only way to secure this voyage), no corporation would pay for ore to be mined, shipped over a 100-200 year period and the money shipped BACK over 100-200 years (or wired over 10-20 years). They would just invest in something else shorter term and less risky. Think about it now. If GE (just for example) put billions of dollars into a mars probe, they could get a fothold on a whole new planet and in 200-300 years have all SORTS of new goods and markets. Why don't they begin building that probe RIGHT NOW, because their managers, shareholders and employees all live less than 100 years. AND they are more inclined to take up shorter term, less risky prospects.
No forward contract, no mining. But a forward contract does allow for mining....it just makes it harder to be the first few there.
Actually, that's just a travelling colony so to speak, with the added cost of being able to also bring it all back.
I mean, take the two following scenario:
1. We send a bloody huge colony ship there, and it all stays there. Then all it sends back are some smaller container ships with the ore they want to export.
2. We send a bloody huge colony ship there. But on the way back we have to carry the ore _and_ the same bloody huge colony ship, with all the people and the life support and everything.
Scenario 2 doesn't just involve hauling a lot more weight on the way back (hence bigger engines, more fuel, etc), but also hauling a bigger ship on the way there. Since, you know, it has to also have some space for the ore.
But at the very least, that way back is what really sucks. The same big colony ship which would normally be a one-way trip, now has to do the trip back too.
I also don't think it solves the problem of fluctuating prices. In fact, methinks it makes it worse. Let's look at two scenarios again. Let's say, Tau Ceti in both cases, and as I was saying, an average of half the speed of light for the whole trip, just as example values.
1. Ordering a shipment of unobtanium from a colony. You send a radio signal, it takes 12 years to get there, it takes the container ships 24 years to come here. Total: 36 years.
2. Your corporation-ship "sails" off to find unobtanium on Tau Ceti. The ship takes 24 years to get there, and another 24 years to come back. Total: 48 years.
In the second case, you now have to predict what the prices will be in 48 years from now.
And the whole point was that extrapolation of current trends sometimes doesn't cut it. You can look at the steadily increasing price for some resource over a whole century, and think "man, this thing will be worth a fortune in 48 years." Then you come back and discover that somewhere in the middle of that interval, someone discovered something that made your resource dirt cheap.
Think cloth and the introduction of the powered looms in the 19'th century. You could look at a graph of the prices throughout the 18'th century and think, "man, by 1848, the prices will be sky high. Let's buy the biggest container ships available and go bring some cloth from Tau Ceti." And you'd be wrong, because by the middle of the 19'th century, the price had dropped a lot.
Or look at Aluminium. In 1884 it was selected as the material for the capstone of the Washington Monument because it was a very expensive metal, more expensive than silver. An ounce of it cost more than a worker's daily wage. In just 2 years after that, and actually before that monument was finished, a new production process hit and caused the price of aluminium to collapse. It's just the kind of thing I'm talking about. That was a forecast for the next four years: that when the monument is finished, aluminium would still be, pretty much, a precious metal and a whole capstone made of it would be a thing that makes people go, "wow!" It only took 2 years for that to turn out wrong.
And nowadays it's a bit over a dollar per _pound_. So by the same comparison with a worker's wage, what was once worth a whole day's work, nowadays won't even hire someone for a minute. (Going by the federal minimum wage, anyway.) How's that for a price drop?
A polar bear is a cartesian bear after a coordinate transform.
The "Ender's Game" series, all beyond book 1. Ender is obscenely rich thanks to multiple interplanetary travels.
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