Florida's 150 acre launch complex

Our text book, written by Ivan Png and Dale Lehman, describes managerial economics as "...the science of directing scarce resources in management of a business..." and highlights the efforts  of Boeing vs. Airbus as an example. Well, another fascinating display of managerial economics in the aerospace industry is being played out in Florida.

With the retirement of NASA's Space Shuttles, demand did not go away. If anything, demand has risen due to NASA's role in the ever expanding ISS (International Space Station). Over the past year, the only source of "space travel supply" has been furnished through Russia's space program at, true to economic form, a steep cost. However, with the successful flight of the Falcon rocket, SpaceX has pioneered a new market in private supply missions to the ISS. And as is consistent with any new or successfully emerging markets, new entrants are not far behind (affecting long run supply curves).

Florida has a long standing relationship with NASA and is not interested in being passed over in a new space race by Texas. Instead, Florida is battling for SpaceX's attention (and other potential entrants such as Virgin Galactic and Spaceship Company) by purchasing 150 acres of land (located at the Kennedy Space Center) from NASA. Although Florida officials have not empirically stated that this land purchase is specifically for SpaceX's use, they nevertheless have plainly spoken about their desire to build a commercial launch complex. It will be very interesting to observe whether Texas responds to this move and how this will affect the efforts of other commercial startups.   

1 comment:

Dave Tufte said...

Dominick: I see a misuse of a word, so 94/100.

Here we go again ... another blog post with an unqualified claim that some trend is "ever expanding". You folks all sound like journalists instead of MBA deep thinkers. ;)

As I write this, about 8 hours after Dominick did his post, the news reports are that the orbital insertion after this launch failed, and that it is a total loss.

This post touches on a broader microeconomic topic that is not usually covered in managerial economics classes. It's call Tiebout Sorting. It's fascinating stuff about how localities will entice businesses with freebies, and eventually businesses will sort themselves out accordingly.

In this case, the Space Coast of Florida has already separated itself from other localities, and looks to be differentiating itself from Texas too.