Artist’s rendering of X-37B releasing satellite: Boeing
By Alexander William Salter,
Published by Space News, 29 August 2025
President Trump’s recent executive order promoting commercial space competition highlights America’s unique advantage in the final frontier: our dynamic commercial space sector. American companies such as SpaceX, Planet Labs and Sierra Space are rewriting the rules of space access and operations. But as we celebrate these achievements, we must acknowledge a difficult truth: the United States lacks a coherent, economically informed strategy for allocating responsibilities between the private and public sectors in space.
This is a high-stakes issue. Our commercial space dominance creates extraordinary opportunities for economic growth and bolsters national security. Yet this very success makes us comparatively more vulnerable to strategic rivals who understand that targeting our space capabilities could cripple our economy and military effectiveness. China and Russia are actively developing counterspace weapons precisely because they recognize our dependence on space-based infrastructure.
As economists understand, there are no solutions; only tradeoffs. We must embrace the power of markets while using wise policy to shore up the attendant vulnerabilities of commercial reliance.
The promise and peril of commercial integration
The Space Force’s Commercial Space Strategy explicitly calls for integrating commercial partners into national security operations, recognizing companies like SpaceX as effective national champions. Up-and-coming firms like Firefly and Axiom Space represent the next wave of this commercial revolution. This partnership offers tremendous benefits: rapid innovation, cost reduction and an entrepreneurial vigor that rivals simply cannot match.
But this raises an uncomfortable question: In a confrontation with peer competitors, will commercial operators risk their expensive space assets to support U.S. national interests? This is a classic case of what economists call ex-post opportunism. The government makes investments and purchases based on the assumption that commercially produced assets will be available during conflicts with rivals like Russia or China. Yet in such scenarios, there is a fundamental tension between commercial operators’ fiduciary duty to shareholders to preserve valuable space hardware and their obligation to help achieve U.S. security interests.
Peacetime and wartime offer very different financial prospects. Today’s commercial satellite operators happily provide services to the Pentagon. But would they maintain those services if it meant risking billion-dollar satellite constellations to enemy attack? The economic incentives suggest caution, even when national interests demand boldness.
The solution isn’t to abandon commercial partnerships — it’s to design smarter contracts and institutional arrangements. We can combine commercial efficiency with reliable government access through pre-negotiated agreements, the discipline of repeated transactions, insurance and indemnification support and coordinated public-private exercises.
The Space Force has begun implementing some of these principles through programs like the Commercial Augmentation Space Reserve (CASR), but we need to think more systematically about harmonizing private and public interests. With smart contract design and equitable risk-sharing, we can capture the benefits of commercial space capabilities while minimizing the costs of unavailability when we need those capabilities most.
The economics of space resilience
America remains the world’s premier space power, but that dominance is also a source of vulnerability. Our space-augmented strengths necessarily imply space-deprived weaknesses. Rivals understand that undermining our space architecture represents their best chance to level the playing field. One response is proliferation: deploying so many commercial satellites and space assets that it becomes prohibitively expensive for adversaries to target our entire space infrastructure.
But proliferation comes with its own costs: orbital debris, spectrum congestion and the challenge of managing increasingly crowded space lanes. We need economic frameworks sophisticated enough to assess the attendant tradeoffs rather than assuming more is better.
Conventional welfare economics, which emphasizes optimal taxes and subsidies, isn’t adequate for space policy. Nearly every space asset is dual-use: Civilian satellites can generate military intelligence and commercial communications networks can support defense operations. These overlaps make it extremely difficult to align private incentives with social or national security benefits using fiscal and regulatory tools. And even if we could, the implied goal — economic efficiency — is not the right one in a contest among nations.
We can do better by incorporating the economic concepts of robustness and resilience into our space strategy. Robustness means finding policies that work well despite imperfect information and weak incentives. Resilience means deliberate redundancy, which economists can model as an option value. Maintaining multiple pathways to critical objectives is worthwhile even when some appear superfluous.
Robustness and resilience require us to adopt a balanced strategy for the space supply chain. Here are three possibilities. First, the Space Force could implement systematic diversified supplier requirements, mandating that critical capabilities like satellite communications, Earth observation and space situational awareness come from at least three independent providers. Second, the Department of Commerce could spearhead the creation of government-backed insurance cooperatives that small and mid-sized space companies can join to share catastrophic loss risks. Third, the Space Development Agency could fund parallel technology pathways beyond their current tranche programs, supporting both quantum-encrypted communications and traditional RF backups, multiple satellite manufacturing approaches and diverse orbital architectures simultaneously.
Undoubtedly there are many other options. What matters is designing these programs to reflect best practices for deliberate excess capacity. There are several terrestrial analogues for celestial redundancy. For example, the Civil Reserve Air Fleet (CRAF) allows the government to use private aircraft during a crisis. Commercial airlines have incentives to participate because Washington pays to use the planes and offers participants preferential status in procurement. This program was crucial for the Biden Administration’s Afghanistan evacuation efforts. Both the successes and failures of programs like CRAF should inform policies to promote robustness and resilience in space.
Playing to our strengths
Economic reasoning helps us get the most of a commercially reliant space strategy. The key is dividing private and public responsibilities to maximize the strengths of each. The government’s comparative advantage lies not in producing space capabilities but in setting national goals, coordinating policy and disseminating critical information. Meanwhile, commerce — driven by the power of the profit motive — excels at transformative innovation and ruthless cost-cutting.
One of the government’s crucial tasks is pursuing international agreements. So far, we’ve had notable success with the Artemis Accords, a cooperative framework for exploring and using space that also promotes commerce and property rights. We should continue building international consensus around a business-friendly space environment. This plays directly to America’s comparative advantage. Space governance frameworks that facilitate commercial development help the United States because our private sector thoroughly outclasses Russia’s and China’s.
The ultimate goal is convincing our rivals that it’s in their interest to compete on our terms through innovation and economic development rather than destructive conflict. We have a short window of opportunity to set the stage to our liking. With China experimenting with reusable rockets and planning to deploy thousands of satellites in the next decade, the competitive balance could shift before we are fully prepared. There is no time to lose.
A path forward
An economically informed space strategy suggests several actionable policy steps. First, we need institutional arrangements that balance commercial efficiency with strategic reliability. This means expanding programs like CASR, developing new mechanisms for ensuring commercial availability during crises and embracing hybrid architectures that integrate government and commercial capabilities without blurring their respective functions. This requires capable management at the highest levels of government. Fortunately, it looks like policymakers are coming around. The recent elevation of the Office of Space Commerce within the Department of Commerce signals recognition that commercial space policy deserves cabinet-level attention.
Second, we must resist the temptation to hamstring our commercial sector with pleasant-sounding yet burdensome regulation while rivals race ahead. Preserving the integrity of orbit is a worthy goal. We should pursue it. But in a multipolar world, we cannot afford to be the only nation concerned about sustainability if it means losing the next space race.
Third, and most immediately, the relevant agencies must implement Trump’s executive order in ways that streamline commercial access while maintaining strategic oversight. This requires understanding when markets or governments should take the lead — exactly the kind of economic analysis that should inform our space strategy. Means-ends thinking is indispensable. But policymakers must not fall into the trap of reducing ends to the common denominator of economic efficiency. Instead, economic reasoning guided by statesmanlike prudence recognizes that national priorities have value even if they can’t be priced.
The next few years’ policy choices will set our trajectory for decades. America’s space dominance isn’t guaranteed. But by applying rigorous economic thinking to the division of tasks between public and private sectors, we can build a space ecosystem that preserves our competitive edge and keeps the final frontier both profitable and peaceful.
Alexander William Salter is an economics professor in the business school at Texas Tech University and a research fellow at TTU’s Free Market Institute. He also holds fellowships with the Independent Institute in Oakland, California, and the American Institute for Economic Research in Great Barrington, Massachusetts.
See: Original Article
