SpaceX's Successful Launch a Triumph for Private Industry and NASA

With the recent launch of SpaceX, many seem to be rejoicing that the free market has finally arrived in space. To these people I say: don’t pop the champagne bottle.

Anyone looking objectively will see that saying that free market economics have now triumphed would be stretching the truth quite a bit. You’d have to look past the massive amounts of government funding that went into the building of SpaceX’s dragon capsule – a number tabbed at $381 million. We’re also cheering the private industry for doing what has technically been done by the U.S. government since the 1960’s.

Finally, like all companies, SpaceX is not doing this out of some deep-seated desire to help humanity, but rather to make money. This is not a bad thing. The strict rules that came with NASA funding have kept the product to a reasonable budget – but it also mean that SpaceX is doing this for a purpose; namely to win the vast majority of a $1.6 billion contract NASA is awarding companies to taxi people and supplies to the International Space Station. In fact, this whole project has been done at the behest of the U.S. government. If not for NASA funds, there would be no profit to be had from this venture. Manned spaceflight. as of now, simply has no practical market purposes, other than perhaps billionaire tourism. The profits for private companies in space’s free market come from satellite launches, and the largest deal ever signed in this industry (also involving SpaceX) is dwarfed in size by the NASA contract.

What should be celebrated then is that NASA has had the good sense to contract out to private industry, a practice that has never been free market (nor ever will be), but still is able to use the private industry motive of profit to benefit. This practice can help keep down costs, drive innovation, and allow NASA to focus on projects they consider more important; mainly research and development.

In summary, we are celebrating a private company who, with heaps of government cash, managed to launch a space capsule in the hopes of eventually becoming a government contractor.  This is very good news, but let’s remember that this in the end will more resemble the work of Lockheed Martin than some Randian vision of free markets overcoming government hurdles.