New Frontiers

New Frontiers Podcast with Akhil Rao
EPISODE 4

C.T.
From the Rohatyn Center for Global Affairs at Middlebury College, this is New Frontiers. I’m Charlotte Tate, associate director of the Rohatyn Center. New Frontiers podcasts highlight research undertaken by Middlebury scholars and others, on matters of international and global concern. Everything is fair game—from big tech, environmental conservation and global security—to religion, culture, and changing work patterns.

In this episode, economist Akhil Rao joins Mark Williams—director of the Rohatyn Center—to discuss a global problem that’s literally out of sight—the congestion and debris in outer space—and why an economic approach to address this problem could help manage it successfully.
M.W.
I'm really pleased to be joined here on New Frontiers, by Akhil Rao, who is an assistant professor of economics at Middlebury College. Some of his research is focused on the economics of infectious diseases—certainly a hot topic during this COVID pandemic—as well as the field of computational economics. But today I'm going to be asking Akhil to help us understand what for me is a somewhat unusual realm of economic study and research, and that realm is outer space. In particular, we’ll spend some time talking about an article he co-authored, that was recently published in the Proceedings of the National Academy of Sciences. It's all about the space industry, its growth, and how economic tools, rather than technological fixes, might better address some of the problems that have been created by a growing private sector space industry. The article is titled “Orbital Use Fees Could More Than Quadruple the Value of the Space Industry.” Akhil Rao, thank you so much for stopping by today and welcome to New Frontiers.
A.R.
Thanks for having me here, Mark.
M.W.
We're glad you're here. Your research here is in outer space and I mean, you know, you’re not a physicist. You are not an astronomer. You are not even an engineer. You're an economist. So let's start at the beginning. How did you become interested in studying the economics of outer space? What triggered your curiosity about space and economics?
A.R.
So I grew up in Northern California and south India and exchange rates were something that really fascinated me when I was a kid. Like, I didn't understand why the paper in one place meant different amounts of paper in the other place. And so that got me kind of interested in economics to begin with. From there I started thinking a lot about water. And so when I went to graduate school, I wanted to study water resources. Southern California, where I went to undergrad has severe water problems, south India, where I grew up also has severe water problems. So it just seemed kind of like a natural thing to focus on that, like, here's this scarce resource, here's this science of scarce resources, let's study scarce resources. But I went to grad school at Boulder and Boulder does a lot of aerospace. And so at some point I was walking around and I saw a lot of space-related stuff. I was reading some short stories and I saw some things about space debris, and you know these two just kind of connected. And I thought, well, I wonder if anybody's written about the economics of orbital space.
M.W.
Interesting.
A.R.
Started looking into it. And I thought, well, you know what? This is kind of like water stuff. It's a scarce resource. It needs to be allocated, not a lot of folks have written about it. Maybe I'll write like a one article about it, right? Like how much could there really be to say about this? And it's just kind of been what I've been doing since.
M.W.
So this developed for you, the convergence of economics and outer space, developed while you were in graduate school.
A.R.
That's right. So I think it was sometime in my first or second year of graduate school when I really started thinking about this and then got good feedback in brown bag seminars and stuff.
M.W.
Looking for a dissertation topic and so forth, and perhaps this might be it?
A.R.
Yeah, that's, that's pretty much how it went. You know, I really didn't think that it would be that big a topic, but the more I looked into it, the more questions I found. So now this is the thing that I work on.
M.W.
Space is a pretty big place. Well, before we really dive into your article and the argument that you make, could you help us understand a bit more about the private sector and outer space? I think a lot of people might have heard something about the Blue Origin’s New Shepherd Flights. Blue Origin, being the aerospace firm that's owned by Amazon founder, Jeff Bezos, and the new Shepherd Flights, being those commercial space tourism flights that have taken a handful of incredibly wealthy people and celebrities into outer space as tourists. But when your article talks about the space industry, you're not really talking about space tourism, you talking about some other aspects of that industry, is that right?
A.R.
That's right. That's right. So what we're really talking about are satellites and the supporting infrastructure that makes satellites work. So we're talking about rockets, we're talking about receiver stations on the ground that transmit signals to and from satellites. That's what we're talking about. The space tourism business is interesting and it certainly captures the public imagination, but if you think about this in terms of shares of value that it generates it's tiny. It's probably a decimal point, but it's not much bigger than that yet.
M.W.
So the number of people who are benefiting from the satellites far exceeds the number of people who are benefiting one way or another from space tourism.
A.R.
That's right. And I mean, to get a sense of the magnitudes here, the people who are benefiting from space tourism in sort of the direct sense to the folks who go up, if you want to be a bit more generous, you can say, well, there's folks who work at the companies and, you know, they get paid and they get revenues, so they're benefiting too. But it's hard to go much farther than that. If you think about satellites in orbit though, there's a ton of people. So anyone who's ever used remote sensing imagery, or who's ever benefited from some decision making somewhere, having access to a satellite picture. You can think about folks who in the California wildfires in 2020—folks getting evacuated had some benefit from space-based tools because the U.S. Forest Service used satellite imagery to coordinate their responses.
M.W.
Anyone who's looking for their best friend's new house when they're trying to drive to it.
A.R.
Right. That's right. That's right. Google maps. And you know, now, if you think about Ukraine well satellite imagery is playing a huge role in the conflict. So the number of folks who benefit from satellite imagery alone, that’s one product that a satellite can produce, is easily on the order of millions of people. That's a different ballpark than people going to space.
M.W.
We're talking about orders of magnitude difference. Can you clarify a bit more about what's been going on in outer space right now and especially why economists or others should be concerned about things that they can't even see in terms of how corporate actors and states have been using outer space? What's wrong with the status quo?
A.R.
So what's been going on over the last 50 years is a buildup of junk. So we can kind of describe this more scientifically and technically, but like at a very basic level, we've got a bunch of folks showing up at the campsite and not cleaning up after themselves and leaving a bunch of junk behind. And that's what humans have been doing in orbital space since the dawn of the space age. So there's a bunch of stuff like dead satellites, bits of rockets. So when you launch a rocket, there's this upper stage that inserts the satellite into the target orbit, it does kind of those last adjustments. That gets left behind. That's a pretty big thing per launch. There's nuts and bolts from satellites. There's bits of fuel that have leaked out of satellites. There's tools that astronauts have lost on space walks. There's a lot of junk that's up there. And so there's just been this ongoing buildup of junk.
M.W.
Okay. As I was reading your article, you say that the buildup of debris, or junk, is kind of a classic tragedy of the commons problem. And for all of our listeners who aren't really familiar with this concept or maybe haven't thought about it in some years, could you briefly explain what the tragedy of the commons is and why it poses a unique type of problem?
A.R.
So the tragedy of the commons, that term is referencing an article by Garrett Harden, I think in Science, in the 1950s and the argument in the article was that if you have a scarce resource where users of the resource are not in some way coordinated and are able to use it—I'm putting air quotes here—unchecked that they're going to really spoil the resource and mess it up. So this was Harden's argument and he was applying it in a pretty racist way to people having kids and the natural resources of the world. And I should note that the fundamental argument that he makes about like pastures in England, that's something that historians and others have found many issues with. So it's not clear that Harden's argument goes through on the historical merits. And it's not clear that his arguments really describe the general situation of all resources in the class that he was focusing on. But what his arguments do describe, which we focus on here is the case of a resource, which is in fact uncoordinated.
M.W.
By uncoordinated, you mean by the users.
A.R.
By the users, that's exactly right. So what we in economics would call an open access commons. So a common pool resource in economics is a resource where my use subtracts from your use and vice versa. And we don't have the ability to secure excludable rights to the resource. So you can think about these water bottles that we have on the table. I drink the water in this bottle. You can't drink it. But we do have some notion of excludable rights where I can say, look, this is my water bottle. You can't drink from this one. And you can say the same thing about a different water bottle. Now, imagine a case where we couldn't say that. Where, you know, you're free to just grab my water bottle at any time, and I'm free to grab your water bottle at any time. And there's no sort of notion that we would say this is yours or mine. Well, then in that case, we might expect that we would end up drinking more water or depleting the water bottles faster than we otherwise would. That because I'm unable to have some sense of security in the notion that the water will still be there in 20 minutes, I'm going to drink more faster than I otherwise would, because if I don't drink it, it's gone. So to economists this term open access is a really important modifier on the term commons. The term commons is used across many disciplines and it refers to, broadly speaking, some kind of communally held property. But what's really important to economists are the institutions that govern the use of that property. And so open access is one particular institution under which anyone is free to use the resource in any way they see fit so long as they have the ability to do so. So think of open access as a formalization of what people usually mean when they use a term like “the wild west.” So outer space right now has characteristics of an open access commons. As a side note, I think that Harden's article is maybe better understood as describing the tragedy of open access rather than the tragedy of “the commons” broadly. So, in outer space, because we have these open access institutions to use orbital space, my co-authors and I argue that we are seeing something like what Harden was describing in his article happening there.
M.W.
I'd like to sort of pull the discussion back towards a way that you described the issue, the problem in outer space. You said that there's a lot of junk, space junk, up there. Okay, I'll play devil's advocate. Come on. Let's be, let's get real. How much stuff is really up there as space is a huge place? How much of a problem is this in reality?
A.R.
You may have seen this recently. Elon Musk had a claim that there's room in orbital space for billions of satellites. There's no issues at all with any kind of congestion up there. And I think that, you know, there's some, there's a grain of truth to that, space is big, that's for sure, unquestionably true. Right now, in orbit, there's on the order of 27,000 officially cataloged pieces of debris floating up there. Most of those are about 10 centimeters, softball roughly or larger. That's to do with the limits of our tracking systems. So we can't really detect things smaller than that in most locations in orbital space. And so there's probably a bunch more stuff that's smaller than that. Almost surely there is, we just can't really see it. So we don't really know how much there is or what the distribution overs sizes is. But coming back to the question like space is big. Why is this a problem? I mean, the American west is huge. Los Angeles still has traffic jams. People want to be in places where there is value. And often that means that people are going to cluster in the same places. So there are regions in orbital space in low earth orbit, the region from sort of zero to 2000 kilometers above the mean sea level. I should probably say closer to 100 to 2000 kilometers above the mean sea level. There are regions there that are fairly congested. So you could think about the particular orbital paths, the sun synchronous orbits that remote sensing satellites use. These are very special orbits because they ensure that shadows are always in the same place when a satellite crosses over a patch of the earth every day. So if you've got a satellite and a sun synchronous orbit, that's passing over this building, it'll always pass over this building at the exact same time, so that the shadows look the same so that you can start to do some inference on what's actually there without worrying about shadows getting in the way. So that's a really valuable orbit. There's a ton of remote sensing satellites that all tend to cluster in sun synchronous orbits.
M.W.
Because those orbits would be most beneficial for the function of the satellite.
A.R.
That’s exactly right. That's exactly right. So that's the issue. It's not that there isn't space, it's that the space that we want, there's only so much.
M.W.
Sort of like real estate in San Francisco or Boston. Well, this sort of brings up a housekeeping question that I have, when you think about housekeeping for outer space, who keeps track of this debris, this junk that you're talking about? If a company or a nation state wants to launch a satellite, where do they turn to find out whether the proposed orbit that they're contemplating is one that's safe or not?
A.R.
So there's a bunch of layers in the question that you asked that I'll try to answer in the appropriate order. So at one level there's a UN registry of objects. If I launch a satellite, then I'm going to, I should at least, tell the registry that, “hey, I've put this satellite in this orbit and I'll keep you updated on what happens with it, if I move it somewhere else,” or what have you. That's an entirely voluntary disclosure. And so there are a bunch of objects, many of these objects presumed to have a military function, which are not on the registry.
M.W.
And the registry is only for satellites? Or for other debris?
A.R.
It's for satellites. And so to the extent that a piece of debris was once a productive, active satellite, it will also be in the registry. But to the extent that there's, you know, bits of fuel that leaked out, that's not going to be in the registry
M.W.
And discarded.
A.R.
Discarded nuts and bolts, or what have you. That's not really going to be it.
M.W.
Components and so forth.
A.R.
For that stuff, just physically tracking it, there's a network of sensors. There are several networks of sensors, actually. The one that is widely regarded as the best is operated by the U.S. Department of Defense. And so this is a military network work of sensors that tracks objects in orbit. The U.S. makes this data publicly available, again, up to certain restrictions. So, U.S. military satellites, for example, do not often show up in this record. And they make this available as sort of a public service. They're also a number of companies that are starting to offer tracking services. So there's one called Leo Labs that's doing this. Steve Wozniak one of the Apple founders started a new one called Privateer that is also trying to do this.
M.W.
I wonder if they have the capacity at this point to measure as much debris as say DOD does.
A.R.
I don't know. I really don't know. I think that they're working towards that capacity and DOD itself is actually looking to offload some of this function onto commercial partners. So one of the things that the Trump administration did was pass a series of space policy directives. They were actually very active in the space policy realm, and I think it was space policy directive two, or maybe it was three, that said that the space situational awareness function should be moved from defense to department of commerce. And that eventually that should be handled by some private actors.
M.W.
Interesting. Okay. Well, it sounds to me as if there's a type of a traffic management problem going on in outer space. And your article seems to suggest that this traffic management problem is also really an environmental policy issue. And how would that be? Why might we rightly classify it or categorize it in that fashion?
A.R.
I think there' a few ways to get to that conclusion. One is to say that it's an environmental policy problem because outer space is an environment that humans use. And because it's an environment that humans use, we should think of this region in the sort of lens that we use for other areas that humans use.
M.W.
We shouldn't pollute it.
A.R.
We shouldn't pollute it. Right. That's one way to think about it. One way to get to that conclusion. Another way is to say that, look, this is an environmental policy problem, because it has the characteristics of one. There's a productive activity that humans do, there. That product activity produces a residual, a pollution product, debris. And that's what happens with lake management. That's what happens with atmosphere management. So why shouldn't we fit orbit management into that same bucket.
M.W.
Okay, great. Thank you. Let's get into the heart of your article itself. You talk a lot orbital use fees in the article. Can you explain to the listeners what an orbital use fee is, and how would it work?
A.R.
Yeah, so I think the easiest way to think about an orbital use fee is going back to that camping analogy. If you want to go to a campground, you're going to pay a fee to use it. If you litter at the campground, then presumably you clean up after yourself. And if you don't, you pay a fine, and that fine is meant to deter littering. And it's also meant in some part to cover some of the cost of cleanup. That's kind of the idea of an orbital use fee. That when you put a satellite into orbit, you're going to pay a fee that grants your satellite the right to access the site. That fee is also going to go towards incentivizing you to keep the site clean. If you pollute more, if you create more debris, you pay a higher fee. If you reduce the amount of debris you generate, you pay a smaller fee. And so in that way, it's really trying to align your incentives with an environmental sustainability incentive, to keep the orbit clean.
M.W.
Who would the fee be paid to? To whom?
A.R.
So there's many ways that you could implement this. Sorry, I'm going to go on a brief tangent here about space law. Objects in outer space are regulated by the state in which they were launched. So the launching state is the authority for the object. So if I launch a satellite from the U.S., the U.S. is the state that holds authority over my object. And so in one version of this orbital use fee, I would pay my O.U.F. to the United States. I think that that's probably an easier way to make it work than to build an international orbital use fee collection agency in the UN or something like that. But, you know, in theory, you could do that too. There's nothing really in the theory that we discussed that we laid out that requires you to pay the fee to one or the other specific entity. What's really important in getting the orbit users to use the resource right, is that they pay the fee.
M.W.
Is the fee a one-time fee? Is it something that is paid annually? How would that work?
A.R.
So it's a recurring fee. Every let's say year, you could cut it into finer increments. That's fine too. Every year that your satellites in orbit, you're going to pay this fee. If you want to stop paying the fee, pull your satellite out of orbit.
M.W.
Interesting. You and your co-authors refer to something called the Kessler Syndrome. What is that and how does this concept influence the way that you analyze orbital use?
A.R.
So the Kessler Syndrome is this idea that came about in the 1970s. A NASA scientist named Donald Kessler and another one named Burton Cour-Palais, they wrote this paper talking about what would happen if the debris in orbit built up to a density where debris can start colliding with other debris. So one thing that we haven't really talked about here is why we should care about debris in space. And the issue is that stuff in space goes really fast. There's a common, I think, sense that you go to space by launching a rocket that pushes you upwards. And that's only half true, partially you're going upwards, but partially you're also starting to fall and continuously missing the earth. So you're also going sideways. And you're going sideways at a tremendous speed, something on the order of 17 and a half thousand miles per hour. So when stuff in orbit collides, like it's going really fast and it's not going to come out of it in one piece. That's bad because if it doesn't come of it in one piece, now there's a whole bunch of other fragments that are also going very fast, that can also hit something else. And, you know, to the extent that we want our satellites to keep functioning, we should maybe not want them to get hit by junk. Seems like a thing we might want. The Kessler Syndrome is this idea that what if there was so much debris that debris can hit other debris and generate new debris in a kind of self-sustaining cascade without any human intervention required. Like we could wave a magic wand that pulls every single productive satellite out of orbit, and there's still enough junk left up there to keep producing new junk year over year for, I don't know, the next century or something like that. So that's the idea of the Kessler Syndrome. You can think of it as analogous to run away climate change. If enough carbon gets into the atmosphere, then it triggers some mechanisms like, you know, permafrost melts and methane gets out of the clathrates and that triggers more greenhouse gas release and so on and so on.
M.W.
The Kessler Syndrome posits that there is a tipping point at some point.
A.R.
That's right. And so this has been verified in a number of analytical and simulation studies. To the extent that we're able to observe this happening, it seems like it's already begun in some orbital regions. So there's the 750 to 850 kilometer region. There was a missile test there in like the 2007, 2008 timeframe around then, the Chinese government blew up one of their own weather sensing satellites to show that they had the capacity to blow up satellites. So that anti-satellite missile test is widely understood to have generated enough debris there to have kept a cycle of debris production going. Now, it's important to note that this is not like, if you’ve seen the movie Gravity, this is not like that. This is not like all of a sudden two days from now all of orbital space is totally unusable because the cascade started and it just goes like a flash. This is a slow-moving catastrophe. It's probably going to take 30 to 50, maybe even 100 years for, you know, some of those regions to become fully unusable.
M.W.
Thank you. You know, I have never really heard to be honest about an orbital use fee for outer space. Perhaps that's because I'm just, ill-informed on the topic. As far as I can tell it's something that's never been tried before, in outer space. So I'm curious, are there some other examples, perhaps from other sectors where environmental policies analogous to an orbital use have been tried, and if there are, what's been the result? How well have they worked?
A.R.
Yeah. So an orbital use fee, I think you should understand this as one among a suite of policies that are, in some sense, equivalent. These are what I call natural capital pricing policies. So these are policies that say we have some kind of capital that nature has given us. It's currently available in a way where folks can use it without having to pay a market price. So, you know, you go chop down some trees, you go out into the high seas and you grab some fish, things like that. And the idea here is really just that, well, you know, if you had to pay a price for it, you're going to think a little bit more carefully about your use than if you didn't have to pay a price for it. And so there's many different implementations. You can think about a cap-and-trade system. That's a kind of natural capital pricing policy. So in a climate change context a carbon tax is maybe the thing that's closest to an orbital use fee. But it is in some sense, equivalent to a cap-and-trade system. It's just that the international legal situation is such that property rights for orbital space seems like a far more distant prospect than taxes for using orbital space.
M.W.
And if we were to focus on the efficacy of these analogous policies in other policy realms can you speak to that?
A.R.
Yes, they seem to work. There are issues. So let me get into some examples here. The EU has an emissions trading system. So this is the EUETS. It's a cap-and-trade kind of carbon market. So firms can buy permits to emit carbon dioxide in the EU. They can trade these permits. Year over year, the total number of permits rachets down slowly, and firms either pay a higher price for each permit, or they choose to not get a permit and then reduce their emissions so that they're in compliance. The EUETS seems to have worked. It seems to have brought emissions down. Now I'm saying worked, but I should put a caveat here, which is that it's worked at achieving its own goals. So the EUETS says that it'll achieve an X percent reduction, it achieves an X percent reduction. Now you can say, well, you know, an X percent reduction, isn't what we need. We need like a 10 X reduction. Sure. And by that light, if you say, well it hasn't achieved a 10 X reduction. You could say it hasn't worked. But as far as meeting the goals that it sets goes, it's done that job. The California cap-and-trade market is another example of this. California has a market for capping greenhouse gas emissions. It has successfully blown past the target that is set for itself.
M.W.
So is this why you also said that the orbital use fee was part of a suite?
A.R.
That's right. So you could think about an orbital use fee as literally tax, you could set it up as a tax with some kind of rebates and some kind of tradeable permits. Maybe it makes sense for the tradable permits to be for actors within one administrative unit, like the United States, maybe not. There's lots of flexibility that system designers have here in implementing the policy.
M.W.
So another question that comes to mind given what we've been discussing is the extent to which using orbital use can ameliorate the totality of the problem that's there. Debris that has been there for quite a while. I would imagine some of this stuff is pretty old stuff; it's been up there for a long time. Perhaps even put up there by actors who no longer exist, like the Soviet Union. How does one rectify that aspect of the problem? How do you address the environmental fallout of space junk by using orbital use fees, particularly the legacy debris problems?
A.R.
So the legacy debris problem is an interesting one because a fee isn't going to do anything about that directly. It's just not, and that's not what it's trying to do. Now it will affect it indirectly through a couple channels. First, we have really robust evidence across a number of different sectors that when you put natural capital pricing policies into a place you incentivize clean innovation. So when we start charging power plants for emitting carbon into the atmosphere, pretty soon, they get pretty good about reducing the amount of carbon they emit into the atmosphere, whether that means taking innovations that were kind of on the fence, hadn't really been deployed yet and deploying them, or whether that means putting money into R and D to develop new innovations that will let them stay in compliance and reduce their costs. So an orbital use fee would have the same effect, we think, for orbital space. That it would incentivize the development of clean technologies. And we really need these clean technologies, because right now there is no scalable system for removing debris from orbit. There’re some companies that are trying to develop things, that'll remove large pieces of debris. There are some folks who are talking about ways to remove small pieces of debris, but there is no one yet who has both a technology and a business model that will let them pull this stuff down.
M.W.
So if given the correct incentive structure, then firms, presumably states as well, who are operating and putting satellites into orbit will become more conscious about littering.
A.R.
That’s right.
M.W.
And then in the aggregate over time, while you may not be decreasing the legacy debris, you won't be necessarily adding to it, at least not to the same rate.
A.R.
You won't adding to it, and you'll be developing the technologies that you need to remove it. And once you've got those technologies, removing the legacy debris actually helps reduce your orbital fee liability because it reduces the risk of a collision on orbit. Now what's really important with this orbital use fee is to get the numbers right. So we spend a lot of time in the paper figuring out how to calculate these numbers. And, you know, it's an order of magnitude approximation, but it's still, as far as we can tell the best numbers that are out there. You want to charge a fee that gets people to internalize the amount of the cost that they're pushing onto others. To put it a bit differently, we don't want a fee that’s so large that it starves the space industry, that it kind of kills it in the crib. We don't want that. We don't want a fee that's so small that people don't pay attention to what they're doing. We want a fee that's just right. So that people can say, “Hey, I'm going to do this thing. And this thing is going to have all these impacts on all these other folks. Let me factor that into my bottom line. Let me see whether the thing that I'm doing passes the cost benefit test once I add all of the costs that I'm imposing on others into that calculation.” And so part of those costs is the risk that a piece of debris that you put up there, or that your defunct satellite contributes to a cascade of collisions and generates more debris in the future. Well, if we remove all that legacy debris that reduces that risk, that reduces your fee liability.
M.W.
Pretty interesting, actually. I just thought of another question, maybe perhaps a vexing one. If countries really do start taxing, regulating their satellite sectors, like you and your co-author suggest, won't the private companies just sort of pack up and leave for less strict countries. I mean, isn't the solution that you're proposing really unworkable until orbital use fees are more broadly adopted by most states in the world.
A.R.
This is what we call the leakage problem in economics. And it's a real problem, right? Like it's a real thing that people worry about. I mean, I guess I'd address this in two ways, right? One is you can look at this by analogy, right? There's a very clear analogy to tax rates and wealthy individuals that, you know, if you raise the capital gains tax, then folks are going to leave and stop innovating in the United States. They'll go elsewhere. I mean, if that were actually true, we would see almost all wealthy individuals concentrated in whichever country has the lowest tax rates. And eventually pretty soon, we'd see all countries racing to the bottom for a zero tax rate. That's not what we see. To some extent, there are wealthy individuals in countries, despite high tax rates who stay there despite high tax rates. I mean, really what I think is going on here is that there's other things too, the taxes, aren't the only things in the calculus. If you're a company that wants to, you know, do space stuff, broadly, launch some satellites, provide imagery, provide some value-added services on top of the imagery, machine learning on the imagery, whatever. You need access to a talent pool. So you need to have a bunch of engineers who can do stuff. Many of these goods are what are called dual use goods. They can be used for military purposes as well. So again, this imagery is a great example, right? You can use satellite imagery to detect fires and respond to wildfires. You can also use satellite imagery to detect troop movements and position your forces accordingly. So these dual use goods are very, very tightly regulated and pretty much every country around the world. If you’re in the U.S., and if you want to serve the U.S. market, you have to jump through a whole bunch of regulatory barriers. All of which are more onerous than paying, like, I don't know, 0.1% of your profits in a tax. That in some sense is the easiest barrier that you have to jump through because you just send the money off, you send the check off and you're done. You don't have people coming in and checking that you're in compliance that, you know, you don't have foreign nationals with compromised allegiances working for you or whatever they get worried about.
M.W.
Trying to manage orbital use for the good of everybody. That seems like an inherently global problem. It's a really large problem. And I wonder if you would agree with that. And I think you just did but doesn't it then follow that trying to push for orbital use fees before there's global cooperation or an international treaty, isn't that like putting the cart before the horse? Don't you need to get the cooperation first? Don't you need to get a consensus amongst the states who would be collecting these fees?
A.R.
I think that's a good question. I think it's actually an open question. I don't know what the answer is. I don't know what the right sequencing of events is. I guess I'll say this, there's some in the space community who say that we shouldn't worry about environmental policy until there's a big debris event. And then there's some that take a, maybe more, realist take that we aren't going to end up worrying about this stuff until there's a big debris event. Which are two different positions. I think we should worry about space policy before there's a big debris event precisely because it's so rare to have a chance to get ahead of an environmental problem when we know good policy tools. We almost never have that opportunity. But to your point about international agreements, I mean, I don't know, maybe if the U.S. starts implementing these orbital use fees, that's the seed that's necessary to start building these agreements. The field of space law is a very active field. There's a ton of folks in it. And broadly, when I talk to space lawyers who work in this area who are trying to negotiate agreements and norms of orbital space use, they say that, you know, things are deadlocked. The UN is the body that things have to go through. There's UN COPUOS, the committee on the peaceful uses of outer space. Nothing really happens there. Folks spend years and years arguing over like details of language in an agreement. And, you know, that's just not at the time scale that we need for these agreements. And so, I mean, I think if someone can move faster, if the U.S., for example, can set the example through a tax policy route, they don't need to go through the UN for that. And if they can get folks to agree, then they can get folks to agree. And that's like any other multilateral or bilateral set of negotiations. It can go faster.
M.W.
Let me ask you this. Are you relatively optimistic that we will see something akin to what you and your colleagues are advocating? That we will see some type of environmental policy adopted to address the problem of space junk? First, if you're optimistic about that, and second, given that there's a variety of forms that this might take and different ways it might be achieved, what do you see as the most likely route that this will happen?
A.R.
Yeah. So I think someone will do something. I think people are trying to do things.
M.W.
A state?
A.R.
A state. So, focusing on, I guess, the U.S. and the EU right now. The EU, I think is a leader in regulation, broadly. I think that they have of the European Space Agency has put a lot of resources into building the technical tools that are necessary to provide these types of natural capital pricing policies and other environmental policies. Now they don't have the same kind of market for space services that the United States does, and they don't have the same kind of supply side that the U.S. does. There's just not nearly as many companies trying to build rockets, for example, in the EU, as there are in the U.S., trying to build satellites in the EU, as there are in the U.S. Now, the U.S. has also been trying to do stuff, so recently, in 2020, the FCC issued a notice of proposed rulemaking that they were thinking about asking for a kind of a bond, a performance bond, they called it. So this is like, you launch the satellite, you pay this bond into the FCC account, you deorbit the satellite, you get the money back. And, you know, this was kind of a napkin sketch of an idea that they put out there. And the industry very quickly came out and said, you know, no, no, no, we don't need this. We don't need anything that would increase our costs. Which, that's exactly what I would expect. So that's not really surprising and that didn't really go anywhere. But more recently, the office of science and technology policy at NASA has been putting together efforts to study the problem more. I think that we'll probably see something happen in the U.S. that is more than just, we recommend you follow these guidelines.
M.W.
Do you think that it's likely that there will be serious cooperation and coordination amongst the states most likely to be utilizing satellites? I'm thinking of China perhaps along with the United States, will that type of interstate cooperation in this global commons be something that would be realized?
A.R.
I don't know, because I think that, you know, the U.S. and the EU can cooperate. The U.S. can cooperate with Canada. Sure. I don't see how the U.S. is going to be successful at cooperating with Russia, for example, in the next five years on these issues. I think it would be great if they could, but I don't know that they would, and similarly, I think there's real challenges that have nothing to do with space involving U.S.-China cooperation. So I don't know. I mean, you study this stuff, like, do you see U.S.-China cooperation happening?
M.W.
I see it as being in the broad, general good, but states have their own distinct interests. And those interests in the best of times they align so that great powers can cooperate and coordinate their actions, toward the greater good. But those are infrequent. And I don't see a lot of that happening. And so that comes back then to the question of how feasible is this proposal, if a major player, I don't mean to be picking on China, but I'll use China as a major player, is not part of the game?
A.R.
I think that's a great question. So there's two pieces here. The first is that partial implementation is better than no implementation. And so to the extent that the U.S. is able to do things as a big market, if the U.S. implements something where it's like, you’ve got to pay this fee, you’ve got to post this bond, if you want access to the U.S. consumer market. I mean, that's a pretty big lever.
M.W.
Yeah. I'd agree.
A.R.
You know, I can't think of a single satellite internet constellation that has an actual commercial business plan that is even remotely close to viable without access to the U.S. consumer market. So that's, I think a big lever there.
M.W.
Akhil, this has been a really, really fascinating discussion. As someone for whom the stars have always intrigued me since I was a boy, but has never studied the economics of outer space, this has just been a fascinating discussion. I appreciate you spending time with us today. Where's your research leading you next? What are you working on now that our listeners may want to keep an eye on down the line?
A.R.
Yeah. So there's, there's two questions here, I think, that maybe of interest to folks listening to this. One is exactly that question that you raised earlier, what's the right sequencing of these measures? To what extent does an orbital use fee policy, for example, make an international treaty to pull a bunch of debris down or keep debris from crossing some level become more or less likely? So this is work that I've been doing, actually, with a student at Middlebury, Aditya Jain, he's graduating this year, phenomenal student, he's going off to University of Chicago to do amazing things at a pre-doctoral program.
M.W.
That's wonderful.
A.R.
So, this I think, is really important research and I think this will help us understand the right order of operations for doing these kinds of policies. The other is studying the effects of events like missile tests on collisions in orbit. Now at a very granular level satellites maneuver out of the way when they think there's going to be a collision. There's a lot of uncertainty involved. It's a very technical thing. It is, as I say, literally, rocket science.
M.W.
Sounds like it's not easy to do either.
A.R.
Not easy at all. And you know, when you do this, it's like, I guess, think about like you're driving on the road and someone throws a, I don't know, a bottle out the window while you're on the freeway and you're going pretty fast. You might swerve to dodge it. And if you do that, if you're on a busy enough road, your swerving is going to make someone else have to swerve. It's going to make someone else have to swerve, and on and on. There's a cascade here. And so I'm trying to study whether or not these cascades occur, when they have occurred, and what we can learn about them.
M.W.
Interesting. Interesting. We have been talking with economist Akhil Rao about outer space, the private space industry, and why adopting orbital use fees might be a great way to address the growing problem of space debris, or as he terms it space junk. Akhil, thanks very much for stopping by and talking to us today on New Frontiers. Really appreciate it.
A.R.
My pleasure.
M.W.
Bye-bye.

Student
Professor Akhil Rao grew up in southern India and northern California. He picked up snowboarding as a graduate student in Colorado, and during Vermont’s beautiful winters he enjoys snowboarding the slopes at the Sugarbush ski resort. When time permits and he’s not lesson prepping, teaching, or conducting research, Professor Rao is an avid gamer. Outside the classroom, students might spot him hustling to class, roving around the library stacks, or at some of his favorite hangouts in town like the Mad Taco restaurant or the Otter Creek Bakery.