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A scientific economic estimation

Posted by: Ekkehard Augustin - Sun Dec 05, 2004 6:15 pm
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A scientific economic estimation 
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Post    Posted on: Mon Jun 06, 2005 8:43 am
campbelp2002 wrote:
alt-space people look like a bunch of weirdoes living in a fantasy world.

Um ... they are ... for now at least. That's the problem with trying to predict the future, even the immediate future.

DKH

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Post    Posted on: Mon Jun 06, 2005 8:48 am
I am not sure if I have been adressed and if I really should answer but from the historical view the following should be said at least:

- in the 1970s the storage capacities of PCs were far below 20 MB, the speeds of PCs were far below 50 Mhz and only tapes could store amounts like current CD-ROMs can

So no Computer Fluid Dynamics could have been run and so weren't developed and unavailable and people like Burt Rutan would have had to use real wind tunnels which would have kept their development costs several orders of magnitude higher.

- in the 1970 the business idea were there yet. Simply there were nobody who had the idea. One of the causes may have been the situation described above.

- I don't know when the composites became so advanced that they could be used for SSO but as far as I know they weren't in the 1970s.

- nobody had the idea to use composites for manned spacecrafts

- ...

The major factor will be the fact then simply nobody had the idea to struggle privately for achieving the moon by a private vehicle.

...



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Post    Posted on: Mon Jun 06, 2005 11:21 am
Found just this moment (this is an update to the already quoted numbers only):

The article "Space Tourism: Marketing to the Masses" ( www.space.com/adastra/050606_isdc_tourism.html ) is quoting Rich Pournelle, director of business development at XCOR Aerospace, as follows:

Quote:
Ultimately, a passenger’s ticket price for a suborbital spree will come down after several hundred people have flown, Pournelle said. He pointed out that in 1990 a T-1 connection to the Internet cost $1 million a year. Now the equivalent service is $19.99 a month.


“Don’t think something like that can’t happen to space transportation,” Pournelle advised. If space tourism is to be successful as a business, he said, there’s need to move successful programs to having successful products.


1. Pournelle says that ticket prices will come down after a few hundred people have flown.

2. Pournell mentions the price drop for internet access. $1million a year = 83,333.33 a month in 1990 for a T-1 connection compared to $19.99 a month now = a factor of 4,168.75.



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Post    Posted on: Mon Jun 06, 2005 3:14 pm
Ah, I see now. This is once again a matter of semantics.

Those of us who have studied Engineering mean something different when we say "estimate." In fact, a fair amount of time is spent early in the Engineering curriculum teaching folks how to do estimations based on real-number mathematics, Euclidean geometry, and Newtonian mechanics. It is how we are trained to make rapid analyses about the practicality of ideas and to determine the value (or lack thereof) of investing additional resources in pursuing a particular solution.

It seems that for Economists, it means making a numerical guess about the trending of a particular commodity based on the history of market forces and the like. I suppose that works within the context, but this really is a case in which the market forces by themselves cannot account for the changes depicted by the estimate in question.

That is to say, according to my engineering estimate, by every means of storing, generating, and transferring energy available today and concievable within 25 years, the ENERGY REQUIRED to place 100KG onto the lunar surface and return it to earth in a profile necessary to support hominid life will cost more that $20000 US. Thus, in spite of the method used to do so, and regardless of the scale and/or infrastructure available to any such enterprise, it will not be commercially feasible to offer tickets for lunar excursions at $20K per seat in 2030. This is based on the laws of thermodynamics, which are about as absolute as the universe gets.

It is possible that someday cheaper energies may become available, and certainly if there are thousands of lunar-capable craft in service the cost of going to the moon will go down; however, absent some bizzare super-valuation of the dollar or the development of some heretofore unknown but technologically simple method of producing cheap energy (like washtub fusion), not one person reading these words today in 2005 AD will ever be able to pay $20K US to travel to the moon.


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Post    Posted on: Mon Jun 06, 2005 5:20 pm
The attached paper is a study of costs for reaching LEO and comes to the conclusion that achieving a cost of less than $1000 per pound is highly unlikely and argues the reasons why this is so. This equates to $220,000 for the 100kg discussed in this thread, if LEO costs this much how can a Lunar trip come down to $20,000 (even in 25 years)?

http://www.transterrestrial.com/uploads ... ACCESS.doc

Despite Ekkehard's robust argument that Economic calculations predict that $20,000 is possible I find it difficult to believe that this can be true when we have seen no similar decreases in cost over the last 30 years, as Peter pointed out. Of course it must be pointed out that I have an engineering background, not economic but IMO the attached paper makes some good economic points.

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Post    Posted on: Mon Jun 06, 2005 6:18 pm
Very cool, Andy! Thanks very much.

That article actually cites Collins as saying (in 1997) that a large-scale enterprise would result in a ticket price of $20K to LEO, NOT A LUNAR FLIGHT!

...it also refutes the possibility as being based on speculation. There are some busted links to the spacefuture website, but by digging around in that site I found a more recent article bearing Dr. Collins name which placed the number at $25K for LEO.

That seems marginally more feasible. Still very unlikely, but I probably wouldn't say that nobody reading this today could never go to LEO for $25K; there may be a literate 4-year-old and a renegade DARPA scientist getting ready to roll out some fantastic new high-temp material somewhere out there.

In the interim, I expect to have to re-finance the house if I want to travel in space in my lifetime, and if my children are lucky, maybe they wil be able to just take out a home equity loan.


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Post    Posted on: Mon Jun 06, 2005 6:32 pm
Andy Hill wrote:
Despite Ekkehard's robust argument that Economic calculations predict that $20,000 is possible I find it difficult to believe that this can be true when we have seen no similar decreases in cost over the last 30 years, as Peter pointed out. Of course it must be pointed out that I have an engineering background, not economic but IMO the attached paper makes some good economic points.


I suppose the given article only incorporates 'conventional' rockets and not with leaps of technology. Or at least leaps or changes that brings down the cost of a 'launch' significantly. **cough** elevator **cough**. Imo the only way to get to that $20,000. Rocketfuel is not going to be any cheaper, unless they can use grass or something.


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Post    Posted on: Mon Jun 06, 2005 9:43 pm
Stefan Sigwarth wrote:
I suppose the given article only incorporates 'conventional' rockets and not with leaps of technology.


Yes. I dont see how you can make any accurate estimations based on anything other than the technology we have at the moment and extrapolations based on what has happened over the last few decades. Elevators, nuclear thermal rockets and even fusion reactors might all have an impact over the next 3 or 4 decades but what that will be or their effect on costs is impossible to determine. I prefer estimations based on what we know and what is possible now rather than what might be possible in the future. I know that sounds boring but I have found that it is the best way to avoid disappointment when things dont go as fast as one thought they would.

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Post    Posted on: Mon Jun 06, 2005 11:28 pm
Andy Hill wrote:
Awesome Andy! Now THAT is what I wanted to see when I asked for details on how the $20,000 figure was determined.


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Post    Posted on: Tue Jun 07, 2005 6:32 am
Hello, SawSS1Jun21,

you have recognized the difference between what's estimation in Economics and what it is in Engineering correctly by far. In German the estimations done in Economics are called "Schätzung" while the estimations done in Engineering correctly are called "Abschätzung". Estimations like those done in Engineering I myself often have to do at my job - but these estimations Collines has not done.

Both kinds of estimations - "Schätzung" and "Abschätzung" - are based on completely different data, informations and methods. Their results can't be compared.

Sigurd was right in what he said.

The article I quoted was an article of the last year - Collins is speaking of lunar flights. If someone is interested I will send it per e-mail or post it here.



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Post    Posted on: Tue Jun 07, 2005 6:41 am
Hello, Andy,

I had a close look into your link but will have to reread later.

The introduction and the pages following the introduction contain arguments for economies of scale - but the document doesn't seem to analyse or investigate the economies of scale.

Economies of scale never can occur at a concrete given vehicle or machine - they only can occur and be observed at changing from one vehicle to another or by comparing them. To see economies of scale a comparison of one of Virgin Galactic's five vehicles to SSO is required. This is valid too concerning the equipment to produce those vehicles, to produce nozzles, engines, wings, propellants and so on.

The link adds costs that are no costs of vehicles or propellant - insurance for example. I think that Collins did concentrate on vehicle costs and propellant costs because of the data available to him as well as Rutan is doing I suppose. Virgin Galactic may have included insurance because it will be their task - but it's not Rutan's task.

But most essential - the document is considering vehicles and flights - Collins is NOT. Collins is considering tickets, passengers customers accoridng to the article I quoted in the initial post. To get numbers comparable to Collins' 10K per suborbital flight or 20K per lunar flight the costs per flight must be divided by the number of passengers the vehicle can carry - I didn't read something like that in the linked document.

So the numbers in that document mustn't be compared to Collins' numbers - it would be a comparison of flights of vehicles to tickets and passengers.

It is clear to me that engineers concentrate on vehicles and flights - that's no problem, it is required and responsible...: but it never can lead to convincing and valid arguments against Collins' numbers and estimations because he isn't considering vehicles and flights.

An Economist's look to a future 25 years away mustn't be based on estimations like those engineers apply because vehicles change, machines change and so on. By "change" not a change in technology is meant but change in scale. A omnibus has large economies of scale compared to a Honda Civic - but both are cars and both use an Otto-motor... A ticket to go by the bus is much cheaper than all the passengers to go by there own cars...

The development of omnibuses is a change of the vehicle. The bus itself is much more expensive than a Honda Civic - but for the passengers to go by bus is cheaper.

So your posts and your look on it is positive - you see the economic look and the engineering look, respect both and favor the engineering look yourself.



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Post    Posted on: Tue Jun 07, 2005 6:46 am
Hello, Stefan,

I don't know if you referred to the article I quoted in my initial post or to the link Andy Hill provided. Collins refers to SSO and the competitors. If desirted I look after the date of the article quoting Collins again.



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Post    Posted on: Tue Jun 07, 2005 6:52 am
Hello, Peter,

I seperated my answer to you, SawSS1Jun21, Andy Hill and Stefan Sigwarth into four posts because I supose you won't look for an answer to you personally in such a post simply because you refuse to read long posts or much words.

Collins has based his estimations NOT on the link posted by Andy Hill. Collins did NOT determine his estimation of 20,000 dollars for a lunar trip this way - look closely to the date: Copyright 2005 - Collins estimation is dating from before 2005: 8th of June 2004. Andy Hill's document didn't exist then yet.

If that was what you ave been asking for you simply have asked the wrong questions and were completely misunderstanding.

To understand what Collins has done you should read the .jpgs urgently.



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Post    Posted on: Tue Jun 07, 2005 9:32 am
I'm sorry Ekkehard, I'm having difficulty in understanding what the purpose of the Collins estimation is, other than trying to sell the idea of cheap space to ordinary people.

I think most people's idea of an estimate is something akin to the paper I linked to which is based on current figures and costs with reasonable arguments backing up any assumptions. I think that if Collins based his estimate on economic formulas that are only really understood by economists it was misleading of him to tout it to the general public as a true estimate as most people will have taken the figures at face value but not understood how they were derived (I include myself in this) but assumed that it was arrived at in a more "conventional" way.

Please dont take offence at my view of Collins' work, I'm sure it has value for economists, but for people like me who dont normally deal with economic calculus it appears to be just another far fetched claim that creates more disbelief in the space industry. I'm afraid I am a product of my engineering training and background which does not let me inhabit a Tolkienesqe world created by mythical equations that lead to predictions that may or may not become reality. :)

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Post    Posted on: Tue Jun 07, 2005 12:39 pm
Hello, Andy Hill,

I never felt offended by your view of Collins' work - you are talking positively in your post about it. You are sounding as if you say that you can't find any mistake in it or any argument against it but have more trusts to papers like those you posted the link to. You argue why you make up your decision like this and don't try to urrge anyone else to take over your decision.

There are two papers in parallel now and that's no problem - in opposite, it's positive. And the link you posted really contains arguments for Collins' estimation.

In Germany people in general have an idea of "Schätzung" or estimation like that of Collins.

I have done estimations, "Abschätzungen" like those in that paper too. They are required to find out how high the budgets for the commercial informatics projects have to be that I am working on at my job.

That last issue alread prepares the answer to your question after the purpose of Collins' estimation. Estimations like those of the paper you linked to prepare decisions about projects and tell the chief of a project as well as the people working on the project what ressources are required and to be provided. They can use it as argument to urge other people to get them these required ressources - in short words: such estimations are the base for a project plan.

Of course that's my description from the economic view - but what it really menas is that the paper you linked to is an estimation for purposes of Enterprise Economics. Enterprise Economics are different from Political Economics but those both are in close vicinity to each other and have a common core.

Collins' estimation doesn't have the purpose to prepare decisions, to tell the required amounts of ressources and can't (and mustn't) be used as arguments to urge other people to deliver ressources. The only purpose of estimations like that Collins has done is information for the interested public.

There may be people in the public who really would be interested to have a suborbital flight but don't know that it's going to be possible, what it will cost and so on. They may have a wrong image and think it would cost tens or hundreds of millions of dollars eternally. On the other hand the journal "Wirtschaftswoche" is a journal for people dealing at the stock exchange too and thus for entrepreneurs and economists - and a new market or new industry is an important thing for them.

Another purpose isn't there. Economical policy couldn't be based on it.

The estimation can increase the number of customars for Virgin Galctic, Rocketplane, Starchaser and other teams without being PR because Collins has included the whole market despite he isn't talking about the market really.

The paper you linked to really fits into Collins' estimation because it considers the situation of 2005. One of the serious mistakes Peter has done or is doing is to take the situation of 2005 as if it necessaryly and unpreventable will and must be the situation of 2030 too. And really that is wrong. The situation of 2005 can't be used as base to estimate the situation in 2030, 2020 or 2008 - simply because changes in number of customers necessaryly cause in changes in costs. For this reason estimations like that Collins has done must be based on economic theories like that about economies of scale which is really complex.

In Economics formulars can't be used or exist to calculate something - except in Enterprise Economics where the size of actual real existing machines, stores etc. is known. But Collins' estimation isn't Enterprise Economics but Political Economics.

I can provide some mathematical cost functions here if desired or required - they will look a little bit strange perhaps but may make it better understandable for engineers. But they mustn't be used for real calculations. The complexity of the topic could be seen better by them. Do you wnat the functions?



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