Celestial anarchy: a threat to outer space commerce?

• Author: Salter, Alexander W.
• Position: Report

The wealth-creating potential of outer space commerce is tremendous. Companies such as SpaceX are successfully providing private sector responses to public sector demands for transportation to the International Space Station. Planetary Resources and Deep Space Industries promise to create wealth by mining asteroids for rare metals and water. And Virgin Galactic and Space Adventures are pioneering the market for space tourism.

The world's first commercial spaceport, Spaceport America, in New Mexico, which cost nearly $209 million to build, is already in use by SpaceX and Virgin Galactic. In addition, high-powered investors, such as Elon Musk (creator of PayPal, now CEO of SpaceX), Larry Page (co-founder of Google, now also involved with Planetary Resources), and Sir Richard Branson (chairman of the Virgin Group, the venture capital conglomerate behind Virgin Galactic), are pouring hundreds of millions of dollars of their own capital into outer space ventures. (1)

Yet an ominous feature of the celestial environment seems to threaten the ability of outer space commerce to achieve its potential: celestial anarchy. Although, terrestrially, governments enjoy the sovereignty over their territories needed for the state to define and enforce property rights in those territories, celestially, things are quite different. In outer space, much as in international space, no government has sovereignty. This fact is enshrined in the 1967 Outer Space Treaty, signed by the spacefaring nations. Article II of the treaty prohibits signatory nations from extending territorial jurisdiction to celestial bodies. (2)

In practice, at least, the same Article prevents even private citizens from using their sovereigns to define or enforce privately held property rights in celestial bodies. (3) As White (2002: 84) points out, "in common law countries such as the United States, legal theory dictates that the government must have sovereignty over territory before it can confer title on its citizens. Consequently, traditional real property rights [in outer space] are inconsistent with this theory."

The problem celestial anarchy seems to create here is straightforward. Private parties who have property disputes when operating in outer space need to settle their disputes in courts of law. But such courts are within the legal domains of national sovereigns. Enforcing private parties' property rights in outer space therefore requires a de facto concession of national sovereignty, running afoul of Article II. (4) As Pop (2000: 281) puts it, because "the Outer Space Treaty prohibits the national appropriation of outer space and celestial bodies, a State endorsement" of private parties' property rights in such bodies "would be interpreted as a means of national appropriation, hence it would be unlawful."

Economists have long highlighted the necessity of private property rights for thriving commercial activity (e.g., Smith 1776, Mises 1949, Alchian and Demsetz 1973, North 1990). Without some means of enforcing claims to mine and thine, individuals have little incentive to risk investing in and growing commercial enterprises. This is as true for celestial enterprises as it is for terrestrial ones. As White (2000: 2) notes, "Implementing [a] real property regime would provide greater legal certainty to investors and entities participating in the development and settlement of outer space." Celestial anarchy thus appears to pose a serious obstacle to flourishing outer space commerce.

But what if private parties sidestepped the problem posed by sovereigns' inability to support celestial property rights by enforcing such rights privately--that is., without reliance on any government? Pop (2000: 281) summarizes the conventional view of this possibility: "Appropriation of land can exist outside the sphere of sovereignty, but its survival is dependent upon endorsement from a sovereign entity." (5) In other words, it is widely believed that a purely private celestial property rights regime is not possible.

This article argues that conventional wisdom is wrong. Celestial anarchy is genuine, but the ostensible problem it poses for the development of outer space commerce is not. Private property rights can and do survive without the endorsement or involvement of any sovereign entity. This suggests that private parties can, if given the chance, enforce property rights in outer space. Economically, at least, celestial anarchy poses no obstacle to the flourishing and hill development of celestial enterprise.

The conventional wisdom's failure to grasp this fact stems from two sources: unfamiliarity with economic theory and unfamiliarity with economic reality. Economic theory demonstrates how private individuals can enforce property rights without reliance on government. And economic reality demonstrates how they in fact do so. There's nothing special about this theory or its manifestations in practice that would limit it to terrestrial property rights.

Our argument does not deny potential political problems associated with private individuals of particular nationalities claiming property rights in outer space when those claims run afoul of sovereigns' interpretation of the Outer Space Treaty. It denies the alleged economic problem of them doing so, upon which the prevailing view that celestial anarchy threatens to undermine outer space commerce is based. In this sense, our article complements existing contributions to the literature on governance in outer space that discuss mechanisms for achieving resource usage (see Weeden and Chow 2012, Cooper 2003, Milligan 2011, and Simberg 2012). In our concluding section, we briefly consider the relevance of our analysis of the economic (non-) problem of celestial anarchy for the political problem such anarchy may pose.

Enforcing Property Rights without a Sovereign in Theory

According to conventional wisdom, a sovereign state--a monopoly authority that all parties must submit to as the final arbiter of property disputes--is necessary to enforce and thus sustain a regime of property rights. To understand this claim it's helpful to consider an analytic scenario that has done much work for economists who study the nature of governance: the Prisoners' Dilemma. Figure 1 depicts this scenario.

Alice and Bob are considering how to behave toward one another in an environment without a sovereign. The rows and columns in Figure 1 depict the strategies that Alice and Bob, respectively, can pursue in their interaction with one another. Inside each row-column box are Alice's and Bob's payoffs--that is, what each party earns by interacting with the other--depending on the strategy they pursue and the strategy the other party pursues. Alice's payoff appears first in each box and Bob's appears second.

Alice and Bob each have two strategies they may follow in their interaction with the other. They choose their strategies simultaneously. Each party can "cooperate" by respecting the property rights the other party claims to have, say by trading with the other party honestly. Or they can "defect" by violating the property rights the other party claims to have by, say, by stealing what the other party claims as his or her own or trading with him or her fraudulently.

When both parties cooperate with each other, both capture gains from trade equal to A > 0. When one party defects but the other party cooperates, the defecting party benefits at the cooperating party's expense. In this case the defecting party earns C > A, and the cooperating party earns B

Without a...