Journal of Economic Perspectives—Volume 32, Number 2—Spring 2018—Pages 173–192
T
he Soviet Union launched its Sputnik satellite in 1957. A year later, the
National Advisory Committee for Aeronautics, a little-known agency that
had played a limited role in pursuing basic research in aeronautics since
1915, was transformed into the National Aeronautics and Space Administration.
The surge of US government spending on human spaceflight through the Apollo
program in the 1960s cemented a public-sector centralized model of the US space
sector, putting NASA at its hub for the next 50 years. NASA set the strategy for explo-
ration and use of space, and it also coordinated the market’s structure, which largely
involved government purchases from prominent aerospace firms. As NASA histo-
rian Joan Lisa Bromberg (1999) wrote of those early years: “[NASA Administrator
James L.] Webb believed that national space policy should not be turned over to
private firms. It was government acting in the public interest that had to determine
what should be done, when it should be done, and for how much money.”
After decades of centralized control of economic activity in space, NASA and
US policymakers have begun to cede the direction of human activities in space to
commercial companies. Figure 1 shows that NASA garnered more than 0.7 percent
of GDP in the mid-1960s, but that level fell precipitously in the late 1960s and then
gradually but persistently over the next 40 years to around 0.1 percent of GDP today.
Meanwhile, space has become big business, with $300 billion in annual revenue.
Recent valuations of innovative space firms like SpaceX ($21 billion), Orbital
ATK ($7.8 billion), and dozens of small startups (receiving $2.8 billion in funding
Space, the Final Economic Frontier
■ Matthew Weinzierl is Professor of Business Administration, Harvard Business School,
Boston, Massachusetts. His email address is mweinzierl@hbs.edu.
†
For supplementary materials such as appendices, datasets, and author disclosure statements, see the
article page at
https://doi.org/10.1257/jep.32.2.173 doi=10.1257/jep.32.2.173
Matthew Weinzierl
