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What are possible economic systems for use within a space-based industrial settlement? The different approaches are to be weighed by the competitve advantages they offer to their respective communities.

Many science fiction stories are written about the space industrial settlement or colony as a “company town”, owned by an all-powerful corporation. Often workers are portrayed as oppressed wage slaves. My idea is to have a background that specifically prevents that, and instead encourages small independent companies.

This is a future where heavy industry has moved into space, with asteroid mining, settlements on various moons and other planets, in-space habitats, and shipping liners. An Autonomy Accord exists, preventing big companies from owning and being dictators over these various communities. Rather, each one must be owned and governed internally, by the people living and working there. So a big conglomerate might be a creditor, but cannot be your boss. What you have, in effect, is a federation of micro-nations.

Now any kind of industrial mining, shipping, or manufacuring concern will have a huge shared infrastructure. You can’t just have each person own his own tools and a little homestead. Not only that, but they must maintain a space-worthy habitat with life support systems.

So, in a pure capitalistic system you will need a labyrinth of contracts and stocks to provide for individual ownership of a logical piece of group property. But some communities noticed the whole “the workers own the factory” narrative as a parallel of the Communist movement that came out of the original industrial revolution, and decided to simply go with communism internal to the community.

Ocasionally writers will be more original: for example, the novel 2312 refers to a Mondragon worker cooperative system.

I'm asking about the internal economy of a “town” where workers can’t really go elsewhere after work; not about the political system of the “town” or the management of the company. Certain rights will be guaranteed by the federation, so we can’t have workers exploited by a resident ruling caste. Getting that sorted is not the scope of this question. I'm asking about how the community will distribute and share resources internally.

What is a possible (good) system, and how will adopting your suggested system provide the entire community (company) with an externally visible competitive advantage or disadvantage?


More information

Each settlement is a member of the federation which exists to facilitate trade, provide for common defence against piracy, and establish international law for contracts, claims, and disputes. We assume it is aggressively capitalist, so the individual companies need to compete for business and value. There may be layers of politics, alliances, and preexisting deals in place, but long-term it’s safe to say it’s capitalism where the best deal gets the business.

As the off-Earth industry grows, buying and selling to each other becomes a larger part of the market.

Settlements have great variety in their self sufficiency. As more niches spring up, they can offload more non-core functions to other settlements. E.g. they can buy from a farming community if the logistics make it practical rather than shipping adding to the cost. In crowded Lunar L4, you will see a lot of narrow specialization. Prospectors will patronize outfitters before setting off to remote destinations, but need to keep onboard vats for basic food calories, fix their own equipment, etc.

Are the settlements designed to be self-sufficient? What is the variation in population of these settlements? Are there nation-state or larger groups out there, interacting with these settlements?

Note that the settlement “doing better” must translate into more bounty to the individuals. People who feel oppressed can just leave, and a large number of dissatisfied among the population can force a recall of the leaders — the trade federation backs up the principles of the autonomy accord whose main tennant is to prevent oppression.

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  • $\begingroup$ I'll leave the sandbox notes and original comments visible for a while. $\endgroup$ – JDługosz Jun 11 '17 at 11:13
  • $\begingroup$ Can we assume there is an external capitalist system, whereby the products of the settlement are sold to other settlements (via a marketplace or some kind of middleman) in exchange for money or goods required by the settlement? Are the settlements designed to be self-sufficient? What is the variation in population of these settlements? Are there nation-state or larger groups out there, interacting with these settlements? $\endgroup$ – Pak Jun 11 '17 at 13:11
  • $\begingroup$ @pak I updated the post to include this information. $\endgroup$ – JDługosz Jun 11 '17 at 13:40
  • $\begingroup$ I'm not 100% what you are asking. Are you interested with technicalities of maintaining some colony system internal currency / vouchers? Or techniques of determining price when dealing with semi-monopolistic relationship? $\endgroup$ – Shadow1024 Jun 11 '17 at 17:31
  • $\begingroup$ @Shadow1024 colony internal systems. Currency and vouchers would be used by some possible methods. $\endgroup$ – JDługosz Jun 11 '17 at 17:38
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Each employee is being paid in two currencies:

  • galaxy wide credit (GWC)

  • colony currency (CC)

GWC is to have some portable, long term savings. And to be able to buy the newest game console online.

CC is used to distribute scarce goods and services within the local economy. Because of a lack of portability or flexibility there is a general idea that they more or less should be used within some time frame and possibility of saving is limited. (Demurrage actually may be fine, depending on the conditions of the colony.)

CC and GWC are freely convertible, but the colony does not guarantee exchange rates.

Within the colony things like food, electricity, water, computer power (if someone wants to play Quake on the colony mainframe), rent for quarters, data transfer with the outside are being metered and priced in real life. A computer system tries to emulate the market equilibrium price that would clear the market. In the case of services provided only by single community members there would be some system of price controls, possibly with compensation for just being ready to provide some service.

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  • $\begingroup$ To explain "CC to GWC exchange rate": it would be entirely driven by the local market. One guy wants to get some GWC so he buys it from a guy who wants to get some local-CC. The more people in the local economy wanting to go in one direction, vs. the other, the higher the exchange rate goes. This is how currency exchanges work today. $\endgroup$ – Draco18s Jun 13 '17 at 20:29
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    $\begingroup$ How does this solve anything? Venezuela 2.0 won't be any more efficient than Venezuela 2017. Price controls don't produce anything, they just distort markets and waste resources. And an extra currency that's freely exchanged only adds overhead. It doesn't stop any transaction, but the complexity from exchanges is wasteful. Finally, demurrage or inflation on the currency of wages is a tax for the poor, adding to complexity and inequality. This plan would already be abysmal on earth. In space, where you cannot skimp on efficiency without deadly consequences, it might be even worse. $\endgroup$ – Vandroiy Jun 15 '17 at 11:39
  • $\begingroup$ @Vandroiy Not price controls as such, but prices that are clearly out of market equilibrium distorts market. The problem is that on such base the conditions would be quite far from perfect market - some times not only monopoly, but even bilateral monopoly for which from models there is no equilibrium market price. Thus in such situation having some fixed price market like price, may be better than having monopoly abusing power or deadlock in bilateral monopoly $\endgroup$ – Shadow1024 Jun 15 '17 at 14:39
  • $\begingroup$ @Vandroiy The extra currency allows for maintaining price stability within internal economy. The alternative is huge fluctuations of local prices based on market price of its main export commodity. (Without own currency if the ore that local colony produces suddenly become more expensive, the next day, everyone is rich, but all prices of locally provided services just went up accordingly because of being absolutely inflexible...) $\endgroup$ – Shadow1024 Jun 15 '17 at 14:54
  • $\begingroup$ Why would price stability be a goal? And zero elasticity is unrealistic. If the colony can stabilize the volatility internally, there's no problem. If not, it creates an incentive to make storage, freighters, financial instruments, or other means to utilize the times of high purchasing power. Where's the value in attempting to suppress the market's proper reaction? (A bilateral monopoly is a different topic; but it's not clear why whatever solution the traders come up with would be worse than one a regulator comes up with. In any case, it also has no need for an extra currency.) $\endgroup$ – Vandroiy Jun 15 '17 at 16:13
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The biggest problems with running a capitalist system in a confined space are waste and greed. Communism equally has its problems in such situations.

The best way to run it is like an oil platform or military operation. Everyone has their job, they do their job, the company hierarchy provides everything they need while on base. They do their tour, whether 2 weeks or 2 years with everything laid then go home. You could run a "2 weeks on 2 weeks off" system if transport is cheap or "6 months on 3 months off" if transport is more expensive, perhaps even just a 2 year tour, then apply for another position after an abused minimum rest period in full gravity if you want something more dystopian.

There's no reason whatsoever for the company town model to be a dystopia apart from the fact it makes a better story.

The model you've created here, while maintaining the autonomy of the individual, is going to actively prevent any economy of scale and place the risk and cost of the operation either on the individual or on the sponsor. While they may not be wage slaves, they are going to be debt slaves probably bound to sell their goods to one purchaser with no option to get a better price selling directly onto the open market. Not because the resource or person is controlled but because the transport is controlled. I can see a far worse situation arising from your model than from a well run company town.

The well run hierarchical company town in fact acts as an idealised, miniturised, meritocratic (with a hint of gerontocratic) commune. Where the members are directly rewarded for work done and punished from the outside for civil disobedience with no kickback to the other members of the commune.

The Spacing Guild ultimately controls them all unless you allow the corporations to become big enough to control their own transport.

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  • $\begingroup$ What do you mean by “no kickback” at the end? $\endgroup$ – JDługosz Jun 15 '17 at 14:02
  • $\begingroup$ @JDługosz, whenever a community has to censure one of its members there's always residual bad feeling within the group between those who felt they had to take action and those who were friends of the person action was taken against. If that action is taken by an external power the resentment is aimed outside rather than within the group. $\endgroup$ – Separatrix Jun 15 '17 at 14:18
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If the number of people is pretty high then you need local currency to distribute goods (like all communist countries did). Even if the number of people is low and we have barter we can still talk in terms of currency. So who gets what amount of money?

The answer is that it all depends on the political system inside a micronation. In USSR the salaries were planned and the distribution was in hands of people who ruled the country (the leaders of the party). Everyone got almost the same salary, but some people had access to cheap cars and others did not. I believe that even with small amount of people the systems remains mainly the same, but the cheating significantly reduces (no cheap cars for special people). So everyone will receive almost the same salary. Highly qualified specialists will not like the system and will try to find jobs elsewhere.

Another variant are corporations according to German laws (Aktiengesellschaft, AG). They are partially controlled by workers (the CEO reports to people who invested the money and to people who work in the company). This way the specialists still get high enough salary, but the workers go on strikes and have higher salaries than in ordinary corporations.

Also it will be very hard for the international community to check if the workers are not exploited, because they are very far away.

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I think a defining difference between living in modern day Earth and living in space will be isolation. The size of any colony or collection of colonies will define a lot about how people interact.

I would look at examples like east indian colonies in the 1800s, Pacific island military outposts in WWII, the American Wild West or the bases on Antartica. A key element of that life is waiting for the next shipment. In a fairly isolated colony there will be few surprises. The arrival date and manifest will be known to all - with the exception of contraband or other secret cargoes.

I think it would be rare that any colony could produce every good that it needs. Some external cargoes will be basic needs. A reasonably sane colony will distribute these based on need. Luxury items are different. Any colony will have businesses that are doing well vs others that are struggling. Distributing those items will be up to the community and your political process.

You can go a long way toward understanding this kind of economy by looking at travel times between colonies and defining the amount of trade. You can also look at how many colonies can produce different kinds of basic needs. Every colony will likely produce enough air, water & food. Few will produce higher quality goods like coffee, medicines or specialized hardware like the rubber seas on air locks or cryogenic hydrogen tanks.

So the average independent business operator will go about his day dealing with the limitations of the available materials. When there's a system failure, she will order parts that may take 6 months to arrive. Then negotiate with neighbors or neighboring colonies to get the parts early in exchange for something else.

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  • $\begingroup$ «Distributing those items will be up to the community » but that's what I'm asking about! $\endgroup$ – JDługosz Jun 12 '17 at 0:14
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IMHO you are trying to reconcile two things that are not reconcilable.

In order to have small "free" communities you have to make them self sufficient and that means they should own their own equipment, otherwise they will always be dependent on whoever (literally!) own the air they breath.

OTOH, once you stipulate spatial and temporal separation (long and somewhat dangerous travels) you will almost automatically get competing individuals/small communities. Dropping transport costs (goods, people and information) inevitably leads to "globalization" where larger companies will always have an edge on smaller ones.

Multiple competing "firms" can only exist in a fragmented world. No amount of legislative effort can prevent people from doing what is economically favorable for extended periods of time. In a system where travel/transport costs are low there is space for very few entities occupying the same niche.

I suggest You have a situation where colonies were started via unmanned, auto-replicating factories that replicated so well (before their owners would realize the danger) that certain basic commodities are essentially free so colonists could concentrate on developing higher return products which can be traded over long (and somewhat dangerous) routes.

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Government, Hard Mode

What are the most important differences between this kind of colony and a country on Earth?

  • Your colony must be extremely efficient to survive in space.
  • Depending on the colony's position, transport costs and times may be very high.
  • Law and order are extremely important, as individual destructive capabilities are high.

In other words, you took the job of running a nation and cranked the difficulty up to eleven. You need to do what governments do, but without the flukes and failures. Or else, your station dies off in one of various possible catastrophes. A hull breach, fire, or just a fluke in the supply chain could all lead to a cascade of failures that ends the station. Unlike on Earth, terrorists could be an extreme threat. If someone destroys anything that's required for station integrity or operation, and it can't be replaced in a timely manner, you're doomed.

This said, you already got the context right. You need to ensure security and prevent monopolies, but anything not limited by these constraints could be hardcore capitalist. The market makes sure that every little bit of resource usage is properly paid for.

Hardcore Is Correct

In today's rich countries, we're living in excess. We worry about topics like supporting people who aren't productive enough to life a decent and healthy life. Mind you, these people struggle with life down here, where oxygen is free and life can be supported with just soil and access to a river. And we struggle to stay on budget, even though we have much to spare.

The per-capita productivity required to survive in space is big, and the margin for destructive errors is tiny. Unless you have a lot of technology that is vastly superior to ours today, your station will kill off not just those who would be poor on Earth, but also everyone who isn't notably productive. You can't just feed people in prisons or pay an interplanetary ticket for them, nor do you want any crime problem. I wouldn't be surprised if a petty theft verdict becomes a death sentence under such circumstances.

Hardcore capitalism is very different from both anarchy and crony capitalism. When you're tight on resources, you really want people to keep their contracts. A "mere" delay in delivery might already cause big penalties, and any attempt to avoid fulfilling a contract would warrant police action. Unreliability, both from incompetence and fraud, reduce efficiency and must therefore be penalized. Neither being rich nor being disadvantaged should allow for any special powers; sympathies take a back seat and the contract rules supreme.

So, all in all, the system

  • focuses on providing security and legal clarity.
  • utilizes (and enforces!) laissez-faire capitalism as much as possible.
  • tries to cut any costs that aren't vital to the above. (There are some corner cases of spending on a capitalistic system, see below.)

As another argument why this solution is correct, think about violating each of these rules. The first one has been handled before: without security, criminals can degrade or break the colony for personal profit, which usually isn't to the whole station's profit. The second is based on economic theory: people can sell their goods for the highest price they can negotiate. Any other solution would clearly be a competitive disadvantage. And violating the third, cutting costs, would be directly represented in taxes, which are directly taken from profit margins. Unless you have some reason to believe that government spending can offer a bigger competitive advantage than direct profitability, running costs don't improve the situation. The only exceptions are where the assumptions of capitalism don't hold, like education that improves individual decision-making, or the breaking of a monopoly that the market can't deal with in a timely fashion.

Seen From Inside

To an individual inside a colony, this means a lot of agency about their trades and actions. There would be tight competition on all sides, including job offers. I imagine a lot of market-like situations, with auctions, varying prices, and short-term offers. If a delivery runs late, some prices may spike. If the station is low on certain specialists, their job offers and associated salaries will explode until more arrive. Speculation, prediction, and storage would be much more important than on Earth, since the effects of a shortage are much more severe. Insurance would likely be a common tool to assess risk, as it ensures that those making false predictions have to pay for them. "Safety concerns? Did you see the insurance claim sizes? Joke's on them if they messed up."

In everyday life, it wouldn't be that different from local capitalism as we know it. People get paid depending on the value of the goods or services they sell, and everyone is looking for good deals. Just at high productivity and with a general consensus that any kind of fraud or deception is not okay.

An interesting aside is that these "spacers" would generally earn a lot compared to what we're used to. Since the baseline of their income can pay for around-the-clock life support in a space colony, those who have any disposable income would probably be considered quite rich in our terms. Anything that can be efficiently produced in the colony would be very cheap to them, and all but the poorest could support families on Earth with ease. And still, they might worry about food shortages or hull breach risks for themselves.

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  • $\begingroup$ This seems more about government than economics. Can you strengrhen the tie-in? $\endgroup$ – JDługosz Jun 15 '17 at 13:50
  • $\begingroup$ @JDługosz What are you wondering about specifically? I added a section about what this might mean for inhabitants, but I'm not sure if that's what you mean. It's hard to make specific predictions, especially without detailed colony information. For example, how specialized and dependent colonies are depends heavily on their orbits, relative proximity, transport costs, etc. I'd assume that storage costs drop with station size, so the question for self-supply is, for each resource, whether local production is cheaper than transporting it there. The asteroid belt might allow a colony network. $\endgroup$ – Vandroiy Jun 15 '17 at 15:41
  • $\begingroup$ How are goods and profit divided up within that factory? How is mutual ownership formalized? And, how does that choice make them more profitable as a group? (Replying to comment, not considering edits made after my first comment) $\endgroup$ – JDługosz Jun 15 '17 at 15:54
  • $\begingroup$ @JDługosz Goods and ownership are divided according to individual contracts. Wherever the Invisible Hand applies, this optimizes resource allocation and therefore total productivity. It would be a zoo of small companies, of which the owners can trade shares. It's just basic market economics, which is the most productive, efficient, and profitable system known. It makes the group most profitable because we don't know of a more profitable system; also see the paragraph "about violating each of these rules". $\endgroup$ – Vandroiy Jun 15 '17 at 16:27
  • $\begingroup$ That should be central to your answer. $\endgroup$ – JDługosz Jun 15 '17 at 16:58

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