A New Economic Theory for Space Exploration

Abstract

The objective of this paper is to discuss the consequences of space industrialization. Initially, the purpose of space industrialization is to find new sources of energy. If, this quest is successful, there will be an unlimited supply of energy for the planet at prices equivalent to taxes. All aspects of economic activities will be impacted. Supply-demand equilibrium prices, production, labour, wage and capital will be formulated very differently from their conventional definitions.

Full text

British Journal of Economics, Management Trade
12(2): 1-11, 2016, Article no.BJEMT.24191
ISSN: 2278-098X
SCIENCEDOMAIN international
www.sciencedomain.org
A New Economic Theory for Space Exploration
M. M. Khoshyaran1∗
1Economics Traffic Clinic- ETC, 34 Avenue des champs Elyses,75008 Paris, France.
Author’s contribution
The sole author designed, analyzed and interpreted and prepared the manuscript.
Article Information
DOI: 10.9734/BJEMT/2016/24191
Editor(s):
(1) Paulo Jorge Silveira Ferreira, Superior School of Agriculture of Elvas (Polytechnic Institute of
Portalegre), Portugal.
Reviewers:
(1) Onalo Ugbede, Federal Polytechnic, Idah, Nigeria.
(2) Fang Xiang, University of International and Business Economics, China.
(3) Xu Lan, East China University of Science and Technology, China.
Complete Peer review History: http://sciencedomain.org/review-history/13214
Received: 8th January 2016
Accepted: 29th January 2016
Short Communication Published: 8th February 2016
ABSTRACT
The objective of this paper is to discuss the consequences of space industrialization. Initially, the
purpose of space industrialization is to find new sources of energy. If, this quest is successful,
there will be an unlimited supply of energy for the planet at prices equivalent to taxes. All aspects
of economic activities will be impacted. Supply-demand equilibrium prices, production, labour,
wage and capital will be formulated very differently from their conventional definitions.
Keywords: Space industrialization; energy sources; unlimited supply; demand; production; labor;
wages; capital; consumer surplus; producer surplus; added values.
JEL Classification: O12.
1INTRODUCTION
Space exploration will change the established
economic models forever. Modern economic
theory is based on one fundamental element,
demand, [1],[2],[3],[4]. It is to profit from demand
that economic activities start. As resources
become scarce, and demand stays monotonically
*Corresponding author: E-mail: megan.khoshyaran@wanadoo.fr;

Khoshyaran; BJEMT, 12(2), 1-11, 2016; Article no.BJEMT.24191
increasing, due to population increase,
urbanization, proximity, evolution of tastes, a
plethora of choices and many more social factors,
those who see to the demand, profit more
and more. Thus, they create an economic
disequilibrium where consumer pays ever higher
prices and producer gains ever higher profits.
The initial aim of space exploration is to search
for new sources of energy. Imagine that it
is possible to harvest the energy of the sun
from a lunar base and transfer this energy to
earth with no risk for the planet. This would
mean an everlasting energy supply that could
satisfy all the energy needs of the planet. The
whole of economic structure would change. The
fundamental theory of demand and supply in
which the price is at the point of equilibrium
would no longer apply. In the face of infinite
supply, the demand-supply equilibrium point is
the point determined at the level of taxes. The
tax is paid by the population of the planet for the
maintenance, upkeep, and continuation of the
space industry, to ensure the continuation of the
energy supply, [5],[6],[7],[8],[9].
The main beneficiaries of low energy prices are
consumers. Cheap, safe, and infinite energy
source would have enormous consequences
for the society. Demand will no longer be an
incentive for profit based economic activities in
the domain of energy. Economic activities will
be based on producing real values. Real values
are the values of products that advance humanity
towards a world where humanity will no longer
be preoccupied with basic needs such as food,
shelter, health and jobs. Productivity will be
geared towards satisfying these basic human
needs. There will be indefinite supply of technical
jobs, and by consequence every single person
who can work will work. The new labour will be an
intelligent, innovative, dynamic, and resourceful
work force that will open new horizons and new
objectives to reach for. The ideal wage will not
be at the equilibrium of demand and supply of
labour. It will be determined based on the level of
productivity of each economic activity.
Capital will also take a new form. In an
environment of economic security, consumers
will have little incentive to save. There will be a
high propensity to spend. Consumer spending
is equivalent to producer surplus. Producers will
have direct access to capital through producer
surplus. Thus, one can completely bypass the
intermediaries in the form of banks. Direct and
continual flow of capital will assure the smooth
functioning of economic activities. The two
elements of consumer security and continuous
flow of capital will eliminate business cycles as
are experienced today, [10]. In conclusion space
exploration will open the door to a whole new
level of economic theory that is not funded on
demand. Finally, economic thinking can liberate
itself from the frivolity of demand and build a solid
scientific foundation for human development.
2SPACE EXPLORATION:
SUPPLY-DEMAND EQUILI-
BRIUM
In this section the consequences of an unlimited
supply of energy and energy by-products are
discussed. In classical economics demand is
represented by a convex curve where the point
of convexity is usually the equilibrium point of
supply (S) and demand (D). This is shown in Fig.
1.
In Fig. 1, the hyperbola (CC
′) is the consumer
preference curve. (p1) is the equilibrium
price where the supply and the demand curve
intersect. (q1) is the quantity demanded at
equilibrium. At this point consumer surplus is
optimal. (p2)is the maximum price level accepted
by consumer. (q2) is the maximum quantity
demanded. The equilibrium price (p1) is the mid-
point between the origin and the intersection of
the vertical axis with the preference hyperbola
curve (CC´
), (p1=Op2
2). The convexity of demand
is due to the fact that the second derivative
of price with respect to quantity consumed is
positive; meaning that the optimal point of the
curve is the point closest to the origin. This is
shown in the formulation of the coefficient of the
elasticity of demand (λλq). The coefficient of the
elasticity of demand (λλq) is calculated as:
λλq=q
λq
×∂λq
∂q = 1 + λq+q×∂2q(pq)
∂2pq
(2.1)
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Khoshyaran; BJEMT, 12(2), 1-11, 2016; Article no.BJEMT.24191
S
D
O
C
C'
Convex towards
origin
Hyperbola: consumer
preference
p1
p2
p
3
q1 q2
q
3
p
q
pq
Fig. 1. Supply and demand
(λq) is the elasticity of demand. At equilibrium
the elasticity of demand is equal to one,(λq= 1).
At (q < q1), the elasticity of demand is less than
one, (λq<1). At (q > q1), the elasticity of
demand is greater than one, (λq>1). The
2nd derivative of demand with respect to price
is positive, (∂2q(pq)>0), while the 1st derivative
of demand with respect to price is negative
(∂q(pq)<0). Therefore, the fraction ( ∂2q(pq)
∂2pq
<0)
is negative. At equilibrium, the coefficient of the
elasticity of demand (λλq= 1) is equal to one.
Both at (q < q1) and (q > q1) the coefficient of the
elasticity of demand (λλq<1) is less than one
and thus the convexity property of the demand
curve is assured. Demand does increase as
prices go down; but as supply changes demand
will always cross supply at the point of convexity.
The behaviour of demand does not change, when
supply becomes unlimited. This property of the
demand curve will be used later on to calculate
new energy prices. Conventional elasticity of
supply is expressed as (λp=−qs
p×∂p
∂qs), where
(qs) is the quantity supplied. The fraction( ∂ p
∂qs<
0), is negative since the derivative of price is
negative, (∂p < 0), and the derivative of the
quantity supplied is positive (∂qs>0). Therefore
the elasticity of supply is positive (λp>0). It
is reasonable to say that in the conventional
economy supply reacts to demand. Space
industrialization based on energy production,
allows for an infinite supply of energy and energy
by-products, this will render the elasticity of
supply perfect, i.e., (λp=∞), which implies that
supply will be perfectly responsive to demand,
while demand stays convex as before. What
is the consequence of such an evolution? The
answer is given in Fig. 2.
In Fig. 2, the horizontal supply line represents a
perfectly elastic supply that keeps its elasticity in
time. The quantity demanded does not increase
immediately as the price goes down. This implies
that within a short time interval (∆t) the demand
may stay at the same level (q1) as before the
price drop. This eventually changes and demand
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Khoshyaran; BJEMT, 12(2), 1-11, 2016; Article no.BJEMT.24191
O
S
p
*
q*1 q*2
p
q
D1
D2
t

T
Fig. 2. Evolution of supply
O
S
p
*
p
q
Average Cost
Marginal Cost
Producer Surplus
Fig. 3. Producer surplus
evolves in time intervals (∆T) which are longer
than the initial time interval (∆t). This is due to
the elasticity of demand and the convexity of the
demand curve. Supplier sets the price at (p∗).
How is this price level determined? The answer
has to begin with supply. Supply is unlimited and
can see to the energetic needs of the plant. This
was the assumption from the start. At this level
of supply, energy becomes a public good. The
pricing of public goods is called taxing. The price
a supplier can ask for by necessity is at a tax
level. This tax is calculated as follows:
p∗=(p1
4×(1 −ρ))
ρ=p1q1
p1q∗
1
(2.2)
(p1) is the equilibrium price in Fig. 1. (q1) is the
quantity consumed before space industrialization
shown in Fig. 1. (q∗
1) is the quantity consumed
at equilibrium after space industrialization as
is shown in Fig. 2. (ρ) is the tax rate.
This formulation corresponds to the standard
calculations of taxes. Due to the new form of
energy supply, producer surplus is redefined in
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Khoshyaran; BJEMT, 12(2), 1-11, 2016; Article no.BJEMT.24191
O
S
p
*
q*1 q*2
p
q
D1
D2
t

T
C1
C'1
q1
p
1
C0
C'0
pC0
d
1
d*
1
C2
C'2
pC1
pC2
d*
2
S0
Fig. 4. Consumer surplus
a manner shown in Fig. 3. Consumer surplus on
the other hand will keep its traditional form as is
shown in Fig. 4.
After period (∆T) the average and marginal costs
go down while the quantity supplied increases at
a constant price (p∗). This translates into an
increase in producer surplus, (the shaded area in
Fig. 3).
In Fig. 4, the consumer surplus before the space
industrialization is the area (∆(p1d1pC0)). The
advent of space industrialization after a period
(∆t) increases the consumer surplus by the
amount equal to the area (∆(p∗d∗
1pC1)) which
is greater than the consumer surplus before
the space industrialization. After period (∆T)
the consumer surplus will still increase by the
amount equal to the area (∆(p∗d∗
2pC2)) which is
still greater than the area (∆(p∗d∗
1pC1)).
3SPACE EXPLORATION:
NEW PRODUCTION
The main beneficiaries of low energy prices are
consumers. Cheap, safe, and infinite energy
supply would have enormous consequences for
the society. Demand would no longer be an
incentive for profit based economic activities in
the domain of energy. So far it is demonstrated
that if the supply of energy products satisfies
planetary needs, then demand will stay convex
and evolves (shifts to the right) within time
intervals (∆T). A priori this is due to development
of more and more uses of energy source.
Price would be set at a tax level which makes
it possible for all to have access to energy
products. The impact of space industrialization
and unlimited supply of energy redefines
production. Production (P) would be a function of
producer surplus (δσp),consumer surplus(δσC),
and the level of added values created (AV),
(P=f(δσp, δσC, AV )). The function
(f(δσp, δσC, AV )) is non-linear monotonically
increasing function. To explain this, lets assume
that at the beginning of space industrialization,
production is positive at (∆t), (Pt>0).
Production after interval (∆T) is (PT=Pt+
f(δσT
p, δσT
C, AV T)), since production at any time
interval is positive, then production during time
interval(∆T) is positive (PT>0), and since
(Pt>0), then the function (f(δσp, δσC, AV )>0)
must be positive. The non-linearity of the function
(f(δσp, δσC, AV ))is due to the behaviour of
its elements. To justify the new definition of
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Khoshyaran; BJEMT, 12(2), 1-11, 2016; Article no.BJEMT.24191
production and show that production in the space
industrialization era is monotonically increasing,
the following theorem is introduced.
Theorem: Given that in the space
industrialization context a production process
(P) continues in successive states (ϵ0, ϵ1, .., ϵn..)
and that the transition from state (ϵi) to state
(ϵi+1)produces strictly positive consumer surplus
(δσC>0), and producer surplus (δσp>0),
and the added value (AV > 0), then at each
successive state (ϵi),the production process (P)
is at its maximum capacity. Note that a state
is the level of technological advancement of the
production process.
Proof: (P0>0)the production process at the
start, state (ϵ0) is positive. Let the next state
be defined as (P1= sup(P0, P 1)). This is
due to the assumption that both the consumer
and producer surplus are positive(δσ1
C>0),
(δσ1
p>0), and that pricing at a tax level assures
that the added value (AV 1=δσ1
C−δσ0
C= ∆δσ1
C)
stays positive at each successive state. Since
tax level pricing assures positive consumer and
producer surpluses and added value, it can
be concluded that at each successive state
(Pi= sup(Pi−1, P i)), the production process is
at its maximum and thus the production function
is monotonically increasing. 2
Figs. 5, 6, 7 depict the evolution of production as
a function of consumer and producer surpluses
and added value at each state (ϵi). Fig. 5
depicts the production function as a convex
monotonically increasing function of consumer
and producer surpluses. Fig. 6 depicts the
production function as a constricted convex
monotonically increasing function of consumer
surplus and added value. Fig. 7 depicts the
production function as an expanded convex
monotonically increasing function of producer
surplus and added value. (q) is the quantity
produced. The shape of the production
function depends on the relative development of
consumer surplus to producer surplus and added
value.
q
P
p
C
Fig. 5. Evolution of production with respect to consumer and producer surpluses
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Khoshyaran; BJEMT, 12(2), 1-11, 2016; Article no.BJEMT.24191
q P
AV

C
Fig. 6. Evolution of production with respect to consumer surplus and added value
q
P
AV

p
Fig. 7. Evolution of production with respect to producer surplus and added value
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Khoshyaran; BJEMT, 12(2), 1-11, 2016; Article no.BJEMT.24191
4SPACE EXPLORATION:
NEW LABOR AND WAGE
So far it is established that in the new age of
space industrialization, supply of energy products
are unlimited. It is shown that unlimited supply of
energy after space industrialization, transforms
this resource into a public good. In this situation
the price of energy as a public good has to
be similar to a tax. An unlimited supply does
not automatically translates into an increase in
demand. It takes time for demand to react to this
form of supply. Demand increases incrementally
during each period(∆T). Production evolves
from state (ϵi) to state (ϵi+1), and it is shown
that this evolution is optimal during each interval
(∆T). The optimality of production is the result
of strictly positive and monotonically increasing
consumer and producer surpluses, (δσC>0),
(δσp>0). The added value (AV) is the difference
in the level of consumer surplus between two
intervals (∆T), (AV τ=δστ
C−δστ−1
C= ∆δστ
C)
for each (τ∈∆T). The added value (AV)
is positive from one period to another. In the
context of space industrialization the supply of
labour can be defined as a function of added
value (AV), (Li= Φ(AV i)), where (Li) is the
quantity of labour used in production during state
(ϵi). The unit of labour defined as a function
of added value (AV) is the number of labour
hired per added value(AV i) during each state
(ϵi). Let the quantity of labour at the beginning
of space industrialization (ϵ0)be given as a
positive quantity (L0>0). After the start of
the space industrialization,(ϵ1), labour can be
formulated as (L1=L0+ Φ(AV 1)), and the
same formulation applies to other consecutive
states (ϵi+1), (Li+1 =Li+ Φ(AV i+1 )). Given
that the added value (AV > 0)is strictly positive
and increasing after space industrialization,
the function (Φ(AV i+1)) is a monotonically
increasing function. The non-linearity of
(Φ(AV i+1)) is due to the fact that the added
value (AV) evolves within time interval (∆T). Fig.
8, represents labour (L) as a non-linear function
of added value (AV).
Wage (W) corresponds to the new definition of
labour. Wage represents the value of labour.
Wage is defined to be a function of producer
surplus (Wi= Ω(δσi
p)), where (Wi) is wage,
L
AV
Fig. 8. Labour as a function of added value
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Khoshyaran; BJEMT, 12(2), 1-11, 2016; Article no.BJEMT.24191
W
p
W*
p
Wmax
Fig. 9. Wage as a function of producer surplus
and (δσi
p) is the producer surplus and the
function (Ω(δσi
p)) is a non -linear monotonically
increasing function at state (ϵi) of production.
The function (Ω(δσi
p))is monotonically increasing
since it is shown that the producer surplus is
strictly positive and increasing at each state (ϵi)
of production. The non-linearity of the function
(Ω(δσi
p)) is due to the behaviour of producer
surplus (δσi
p). The unit of wage is the price
of labour per unit of producer surplus. Let
(W0) be the wage level at the start of space
industrialization,state (ϵ0) of production then at
state (ϵ1) the wage is formulated as (W1=W0+
Ω(δσ1
p)). Consequently, wage at any state (ϵi+1)
is formulated as (Wi+1 =Wi+ Ω(δσi+1
p)). Fig.
8, depicts wage (W) as a function of producer
surplus (δσp). In the lower segment of the graph,
wage increases as producer surplus increases.
At any state (ϵi+m) for any positive (m > 0),
producer surplus reaches an optimal limit which
defines a limit for the wage level. (δσ∗p) is the
limit or the optimal level of producer surplus,
which corresponds to (W*) the wage limit or
optimal wage. In the upper segment of the graph
the wage level (Wmax) corresponds to producer
surplus equal to zero (δσp= 0) since this wage
level does not correspond to producer surplus.
Once the correspondence is established, as the
producer surplus increases wage drops to levels
that correspond to producer surplus.
5SPACE EXPLORATION:
NEW CAPITAL
Traditional capital is defined to be the function
of savings of both consumers and producers.
Savings vary as a function of interest rates.
Given the new economic background, and
the assurance of continual positive surpluses,
consumers spend more and save less, and
producers are encouraged to invest rather than
save and thus the overall level of savings will
go down. The downward trend in savings
will render the notion of interest rate obsolete.
Thus savings will be inelastic with respect to
interest rates. Since producers have no real
incentive to save due to the possibility of infinite
demand and continuous supply, they are more
inclined to invest their surplus into production
to assure the continuity of supply by improving
technological requirements. In the context of
the new economic environment mainly the space
industrialization, capital can be redefined as as
function of producer surplus, (Xi= Λ(δσi
p)),
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Khoshyaran; BJEMT, 12(2), 1-11, 2016; Article no.BJEMT.24191
X
p
Fig. 10. Capital as a function of producer surplus
where (Xi) is capital, and (Λ(δσi
p)) is a non-linear
monotonically increasing function of producer
surplus at state (ϵi) of production. Let capital
at the beginning of space industrialization, (ϵ0)
be positive (X0>0), then at state (ϵ1), capital
is formulated as (X1=X0+ Λ(δσ1
p)) which is
similar to wage and labour formulation. Since
it is assumed that capital at each state of
production is positive, then capital at state (ϵ1)
is positive,(X1>0), and thus the function
(Λ(δσ1
p)>0) is positive. Therefore capital is
monotonically increasing. As the formulation of
capital is recursive, then at all consecutive states
(ϵi+m, m > 0), capital (Xi+1 =Xi+ Λ(δσi+1
p))
is positive and monotonically increasing. The
non-linearity of the function (Λ(δσp)) is due to
the nature of the producer surplus and the way it
evolves during each interval (∆T) and each state
(ϵi). Fig. 9, depicts the evolution of capital with
respect to producer surplus.
6CONCLUSION
The aim of this paper is to open the way to a new
way of economic thinking. Present economic
laws are based on one fundamental concept,
and this concept is demand. In the conventional
economy demand is the incentive behind all
activities. Supply has one main function, and
it is to accumulate profit by satisfying demand. In
fact for almost all products and natural resources
supply is limited. Finite supply makes for
fierce competition among producers. Though
the outcome of competition is beneficial for
consumers as it pushes prices to equilibrium,
it is observed that in the majority of cases, the
prices stay at relatively high levels. For the most
part, only a fraction of the worlds population has
access to products that are essential for survival.
In this paper the hypothesis of unlimited energy
supply due to space industrialization is explored.
If it was possible to have an infinite supply
of energy sources, and energy by-products,
what would be the consequences for the world
economy? An answer is provided under the
context of solar energy exploration from a lunar
base. The consequences for the economy
would mainly be the dominance of consumer
surplus which in turn triggers producer surplus.
Significant consumer surplus and positive
producer surplus translates into the creation
of added value. Capital which will depend
on producer surplus due to the production of
goods with real economic values is perpetually
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Khoshyaran; BJEMT, 12(2), 1-11, 2016; Article no.BJEMT.24191
replenished and there is no need to rely on
savings and interest rates. Lunar based energy
exploitation will open a whole new horizon for
humanity with the possibility of human evolution
beyond imagination.
COMPETING INTERESTS
Author has declared that no competing interests
exist.
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c
⃝2016 Khoshyaran; This is an Open Access article distributed under the terms of the Creative Commons
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reproduction in any medium, provided the original work is properly cited.
Peer-review history:
The peer review history for this paper can be accessed here:
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