Academic journal article Economic Inquiry

The Theory of Interstellar Trade

Academic journal article Economic Inquiry

The Theory of Interstellar Trade

Article excerpt


Many critics of conventional economics have argued, with considerable justification, that the assumptions underlying neoclassical theory bear little resemblance to the world we know. These critics have, however, been too quick to assert that this shows that mainstream economics can never be of any use. Recent progress in the technology of space travel as well as the prospects of the use of space for energy production and colonization (O'Neill 1976) make this assertion doubtful; for they raise the distinct possibility that we may eventually discover or construct a world to which orthodox economic theory applies. It is obvious, then, that economists have a special interest in understanding and, indeed, in promoting the development of an interstellar economy. One may even hope that formulation of adequate theories of interstellar economic relations will help accelerate the emergence of such relations. Is it too much to suggest that current work might prove as influential in this development as the work of Adam Smith was in the initial settlement of Massachusetts and Virginia?

This article represents one small step for an economist in the direction of a theory of interstellar trade. It goes directly to the problem of trade over stellar distances, leaving aside the analysis of trade within the Solar System. Interplanetary trade, while of considerable empirical interest (Frankel 1975), raises no major theoretical problems since it can be treated in the same framework as interregional and international trade. Among the authors who have not pointed this out are Ohlin (1933) and Samuelson (1947). Interstellar trade, by contrast, involves wholly novel considerations. The most important of these are the problem of evaluating capital costs on goods in transit when the time taken to ship them depends on the observer's reference frame; and the proper modeling of arbitrage in interstellar capital markets where--or when (which comes to the same thing)--simultaneity ceases to have an unambiguous meaning.

These complications make the theory of interstellar trade appear at first quite alien to our usual trade models; presumably, it seems equally human to alien trade theorists. But the basic principles of maximization and opportunity cost will be seen to give clear answers to these questions. I do not pretend to develop here a theory that is universally valid, but it may at least have some galactic relevance.

The remainder of this article is, will be, or has been, depending on the reader's inertial frame, divided into three sections. Section II develops the basic Einsteinian framework of the analysis. In Section III, this framework is used to analyze interstellar trade in goods. Section IV then considers the role of interstellar capital movements. It should be noted that, while the subject of this article is silly, the analysis actually does make sense. This article, then, is a serious analysis of a ridiculous subject, which is of course the opposite of what is usual in economics.


There are two major features distinguishing interstellar trade from the interplanetary trade we are accustomed to. The first is that the time spent in transit will be very great since travel must occur at less than light speed; round trips of several hundred years appear likely. The second is that, if interstellar trade is to be at all practical, the spaceships that conduct it must move at speeds that are reasonable fractions of the speed of light.

Because interstellar trade will take so long, any decision to launch a cargo will necessarily be a very long-term investment project and would hardly be conceivable unless there are very extensive futures markets. I will assume, then, that future futures markets are, well, futuristic in their development. In fact, I will assume that investors, human or otherwise, are able to make perfect forecasts of prices over indefinite periods. …

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