The Space Reviewin association with SpaceNews

Asteroid mining mission
Effective commercialization of asteroids and other solar system bodies requires the creation of some kind of a property rights regime. (credit: NASA)

Property rights and space commercialization

It’s time to start thinking about commercialization and colonization of the Moon and Mars. Fifty years after the Wright Brothers, we had global airlines. Fifty years after the invention of the integrated circuit we have a trillion-dollar-a-year industry. Cell phones alone account for tens of billions of dollars of government auction revenue. We need to make the regulatory environment for 50 years after Apollo now. An American private property regime and capitalist economic system can encourage space commercialization and colonization. A utopian property regime and a communitarian economic system will keep out commercialization and leave colonization and exploration in the realm of governments.

Consider what the regulatory environment like when the New World, and later the American West, were colonized. Sovereign authorities granted property rights for would-be colonists. In some cases, these colonists paid a good deal of money for their property rights. While there was plenty of reason to doubt the legal force of many of the land grants, they were nevertheless successful in sparking waves of colonization that created a frontier culture that in many ways facilitated the development of the airplane and integrated circuit. Patent rights were, of course, another critical ingredient to develop these industries.

The current advocates of space commercialization have the mindset of rocket engineers. They primarily focus on technology and usually ignore the regulatory and legal environment.

The Federal Communications Commission has adopted an excellent private property rights regime for telecommunications spectrum. Bidders have tendered tens of billions of dollars for property rights, then spent tens of billions more to deploy systems. By assuring these companies exclusive rights to the spectrum bands, they had the incentive to develop these bands and have created a major new industry.

Consider also some examples of failed attempts at economic development. In the Eastern Bloc countries, private property rights were poor. This directly resulted in little incentive for economic development and ultimately failed economic systems and shrinking GDPs.

These results are intuitive. Who takes better care of a house, an owner or a renter? By having a strong property rights regime, owners will invest in their property and everyone benefits.

The current advocates of space commercialization have the mindset of rocket engineers. They primarily focus on technology and usually ignore the regulatory and legal environment. Imagine a rocket engineer who has an excellent design for an inexpensive Mars base that will use in situ resources such as local water deposits. The rocket engineer proposes to send scouts to look for that water. The rocket engineer puts this proposal into a business plan and goes to potential funders. The funders may say that the engineering is sound, but still no funding comes. Investors do not have sufficient assurance that water found in the scouting expedition will be available when the time comes to build the base. Other Mars missions may extract the water in the intervening time and not pay any compensation to the prospector. On Earth we protect mining claims by granting exclusive exploration and extraction rights. Sometimes these mineral rights fetch a good deal of money in government auctions.

“Pseudo” property rights

In order to facilitate commercialization and colonization, there needs to be a property rights regime established. There are some impediments to private property in space, but they may not be insurmountable. The Outer Space Treaty says some things that the US and other signatories cannot do. The US cannot stake a sovereign claim in outer space. This effectively limits the property rights that the US can grant to its citizens. The Treaty does, however, ask that the US and other signatories closely monitor non-governmental activities, “The activities of non-governmental entities in outer space, including the moon and other celestial bodies, shall require authorization and continuing supervision by the appropriate State Party to the Treaty.” The Outer Space Treaty demands that we do this. Depending on how we regulate activities of US entities, we can bootstrap a private property regime by only granting a single US entity the right to exploit a certain tract on Mars. We will be expanding an American way of doing business into space.

In the United States, we have always monitored and supervised activities using a capitalist system. Here on Earth, we have property rights regimes for real estate, intellectual property, mineral rights, water rights, spectrum rights and airport takeoff and landing slots among myriad property rights that are bought and sold. I propose that we extend that regime into the heavens. A property right is a right to exclude someone from doing something. By excluding US citizens and corporations from doing certain things, the US can create pseudo property rights in outer space for other US citizens and corporations that are not excluded from doing so. These pseudo property rights in outer space would be just like the rights afforded by patents in the US patent system. By filing a patent, a company can exclude all other rocket companies from using a certain novel process or technique. But an outer space pseudo property right is also just like the title deed to a house—the deed gives me the right to exclude others from using my house. Excluding others from using something is creating a right that is tangible and valuable even if it is not technically a property right.

By excluding US citizens and corporations from doing certain things, the US can create pseudo property rights in outer space for other US citizens and corporations that are not excluded from doing so.

While it is not really a property right—since those are forbidden—these pseudo property rights would have the same effect as one if only US entities were in space. If there are two US non-governmental entities that both want to use a particular plot of land or a particular slice of radio spectrum in space, they need to obtain authorization from the United States. If the US only authorizes one of the entities to do so, that authorization could create a transferable property right that could be bought and sold like a US spectrum license or a piece of real estate. That authorization would have the force of law.

Specifically, the US should recognize individual and corporate pseudo property rights. There are a couple of ways the property rights can work. One way is like title deeds that entitle the property holder to non-interference from the United States and all of its citizens in perpetuity. Another way is more like water rights, mineral rights or spectrum licenses that entitle the holder to lease for a specific use for a specific amount of time and require the licensee to undertake development of the lease within a set amount of time or lose the lease.

The US should begin to regulate these pseudo property rights. We should register them. We should hold hearings on them. We should auction them off in some cases where there is contention just like for spectrum licenses or government land. We should hold the money in trust until the international community decides who should get it. The President should establish a property rights regime by executive order that is later written into law by Congress.

The property rights might not be sufficient to spark investment. Having a piece of paper from the United States saying that no US entities may interfere with what you are doing does not necessarily give a US person or business the right to do something. There may be prior claims on the resources and there may be international actors that do not recognize US property rights. However, since there is no proven enforcement mechanism for prior claims, they are unlikely to deter investment if a new strong property rights regime were established.

Regarding international contention, the Outer Space Treaty gives the US the right to ask for a consultation before someone interferes with a US space activity. “A State Party to the Treaty which has reason to believe that an activity or experiment planned by another State Party in outer space, including the moon and other celestial bodies, would cause potentially harmful interference with activities in the peaceful exploration and use of outer space, including the moon and other celestial bodies, may request consultation concerning the activity or experiment.” While this is not as ominous as a complaint through the WTO or NAFTA, it is something. We would hope that the US would undertake to sign reciprocal bilateral agreements with countries willing to coordinate their space activities with us. That is, if we adopt a policy that allows a US business to have an exclusive and defined territory to scout for ice at the lunar South Pole and Australia is willing to do the same, then we can jointly manage the registry of who is authorized to do so. The US should take steps to expand property rights in space with a little of the vigor we use to extend copyright agreements, open skies policies and international telecommunications spectrum standards that we pursue on Earth.

One could interpret Article VII of the Outer Space Treaty to mean that damages might be due if another country’s spacecraft infringed the property of US “natural or jurisdictional persons”. “Each State Party to the Treaty that launches or procures the launching of an object into outer space, including the moon and other celestial bodies, and each State Party from whose territory or facility an object is launched, is internationally liable for damage to another State Party to the Treaty or to its natural or juridical persons by such object or its component parts on the Earth, in air or in outer space, including the moon and other celestial bodies.” While this is not the main meaning of this Article which primarily protects people on the ground from debris, it could become the main meaning as in situ resource utilization gets going to support exploration.

If we do nothing, space will look a lot more like Antarctica than Alaska.

This might not be enough to assure entrepreneurs that their investments will be their property, but don’t let the perfect be the enemy of the good. The US is the center of a good fraction of the global economy and the space economy and if the US leads, other like-minded nations will follow. On Earth, countries that honor property rights are in ascendance. One surmises they will ascend in space as well. If bilateral agreements and the Outer Space Treaty do not provide an adequate regulatory environment for commercialization and colonization, then perhaps the treaty should be amended or the US should withdraw.

Space property rights will probably not spark a space transportation boom that will rival the railroad boom, the airplane boom, or the automobile boom. But there will be no boom if there are no property rights. Leaving the regulatory regime the same is a recipe for continued sclerosis.

If we do nothing, space will look a lot more like Antarctica than Alaska. Without property rights there will not be adequate investment and space resources will be underutilized. Establishing property rights in space will cost millions, not billions, and can be done decades ahead of any commercialization or colonization. It’s time to set the stage to break out of the exploration mode of Columbus and get on with establishing the regulatory regime to lay the foundation for the next Plymouth Rock.