Decision Time for Allocating Resources on the Space Station

Exclusively economic criteria govern the conduct of very few activities, yet there are even fewer activities in which economics does not play at least a part. Resource allocation on the future space station is a case in point.

How best to allot water, energy, communications, the handling of hazardous materials, laboratory space, and a wide range of other supplies and services to nearly as wide a variety of users looms large as an economic problem for the space station. An effective solution to the problem of resource allocation will go far in helping to realize the station's scientific, technological, and economic potential. Moreover, although the station is only now undergoing design, integrating economic considerations with engineering plans—to provide equipment that would meter resource use—may greatly improve the effectiveness of station operation.

Design and purpose unresolved

The overall design of the space station has undergone numerous changes since construction of the facility was publicly proposed by President Reagan in his State of the Union message in January 1984. During early 1987, budget cuts induced modifications that served essentially to halve the originally planned size of the station. Based on the current design, the station would consist of a 135-meter-long, truss-like boom with solar panels at each end to supply electrical power. Two cylindrical modules attached to the boom would provide space for a laboratory and living quarters for the station crew.

These modules would be supplied by the National Aeronautics and Space Administration (NASA), but the station is also envisaged to involve international collaboration. Accordingly, plans call for Canada to supply a movable servicing system and for Japan and the European Space Agency (a consortium of European nations) to attach additional laboratories. The first U.S.-supplied components of the station are scheduled to be launched in a series of shuttle flights beginning in 1994. The station would be intermittently occupied by a crew until 1996, when permanent human occupancy is anticipated.

A consensus is lacking as to what the primary use of the station will be, although discussion has come to center on three general functions: that it would serve as a facility for repair and assembly of space research instruments and observatories; a staging post for missions deeper into space; and a laboratory for research, as well as commercial activity, in biology and materials science.

Much controversy surrounds other, more overarching objectives that are associated with the space station. Like the Apollo moon landing and the space shuttle, the station affords an opportunity to establish human presence in space, and is also intended to assert U.S. eminence in space technology. As was also the case with Project Apollo and the shuttle, however, many space scientists, policymakers, and other observers have expressed skepticism about these purposes and about the use of the station, as now configured, to achieve them.

Some scientists advocate less emphasis on human activity in space, while others seek the use of the station exclusively as a staging base for space exploration. Prospects for the station's enhancing the technological eminence of the United States or its partners are unclear, given the success already achieved in manned U.S. Skylab flights in 1973 and 1974, experience with shuttle-flown, European-built Spacelab missions, and the nearly two decades of experience the Soviet Union has had in conducting its Salyut space station program. That program, begun in 1971, has recently been augmented with the 1986 launch of a third-generation station, Mir. These programs suggest that a new U.S./international space station would not necessarily provide a showpiece for any one of the collaborators.

To realize the possible economic or scientific benefits of a station more quickly, some observers advocate either or both of the following: (1) a more modest station; (2) the provision of a station by the private sector in order to avoid anticipated difficulties with long-term governmental management of the facility's infrastructure. Toward these ends, alternatives have been advanced ranging from the launch of several smaller-scale, unmanned orbiting platforms for automated microgravity research and commercial activities, to the recycling of the space shuttle's huge external fuel tank (normally discarded after use) to serve as an orbiting laboratory.

Despite the uncertainty over the final design and ultimate purpose of the space station, it is widely believed that some type of space station will indeed be built. Furthermore, it is certain that, regardless of station design, resources in the form of supplies and services will be very limited. For instance, of the 75 kilowatts of power expected to be initially available on the NASA-planned station, "housekeeping requirements" such as maintaining the station's orbit are expected to use about 60 percent, and even this estimate has been labeled overly conservative by some experts. Only the balance, then, will be available for experiments, materials processing, and other research and commercial activities.

In addition, power and other limited resources will need to be allocated among participating countries and between public and private-sector uses. This issue is sharpened by the fact that the modules provided by non-U.S. collaborators on the NASA station would depend on the main U.S. laboratory for such services as the provision of power, air, and water; the collection of waste products; and some communications.

Administrative approach

Clearly, then, how the station's resources are apportioned will fundamentally determine how effectively the station is used. Discussion to date has tended to focus on administrative means for rationing the resources: that is, a fixed percentage of use would be assigned to each partner. Under certain circumstances—most importantly, that partners be allowed to trade resources after the initial distribution—such a scheme could eventually lead to efficient resource use.

Yet the wrangling over this matter among international participants, potential commercial users, NASA, and the Department of Defense is testimony to the unsatisfactoriness of relying on administrative methods to set and apply the criteria, such as priority and merit, that would determine who has access to the station. While it may be believed that all are more likely to get their "fair share" under such a system, it is extraordinarily difficult to devise an administrative method of allocation that simultaneously guarantees adequate supplies to users who need them most, distributes the rest in an equitable fashion, and protects the interests of countries and firms making investments in technologies to use these resources.

Past experience reveals the pitfalls of relying solely on administrative methods to ration scarce space technology resources. Administratively assigned priorities for space shuttle uses, for example, resulted in the partial exclusion of planetary exploration missions and of certain space science activities—omissions that since have been viewed by many observers as short sighted.

Another example of the shortcomings of purely administrative schemes is the continuing debate surrounding allocation of the geostationary orbit and the electromagnetic spectrum, two resources used in the communications satellite industry. They, like the space station, attract multiple users—domestic and international, private and government—that need to be accommodated through effective resource management.

The orbit and the spectrum were allocated initially by a first-come, first-serve policy and, more recently, through administrative rationing in the form of various technical requirements for satellite operators. But the resources quickly became scarce under the first policy and are subject to ever-tightening and increasingly costly technical controls under the second. Such political contention, administrative complexity, and costly technical constraints bode ill for using administrative, centralized command and control to manage the space station.

The use of prices to allocate station resources may be the most effective mechanism for allowing station users to assemble the best set of resources in the most efficient quantities and at the right time. The relative scarcity of a multitude of resources can be arbitrated by prices. To take the frequently cited problem of how much to automate station experiments, scientists will be better able to make the right trade-off between automation and human involvement if prices reveal the comparative scarcity of each. A price scheme will usefully and quickly organize a vast amount of information about these and other resources and, in effect, function as a decentralized form of decision making. Moreover, unlike the tendency of administrative rationing to become politicized, prices operate without partisanship.

Over the longer term, prices can also signal the pace and direction for technical change to take in order to economize on what is scarce and to substitute what is comparatively more plentiful. By contrast, nonprice schemes cloud decision making for subsequent station developments. As an example, Congress has mandated that the station make full use of automated technologies as they become available. Despite the mandate, the useful substitution of artificial intelligence for human involvement may well be bypassed if the costs of labor or crew time are hidden.

Exactly how to set charges for station resources is an open question. Research undertaken by John O. Ledyard, Charles Plott, and their colleagues at the California Institute of Technology has indicated the potential effectiveness of an online computer bulletin board by which station users would bid for sets of resources such as power and water and for priority of their availability. The aim of this system would be to determine which of the potential uses are "highest valued" and allocate resources accordingly during the early years of station operation, when the total supply and continuous availability of resources would be most uncertain.

One advantage of this scheme is that resource allocation would take place as the need for it arose rather than as predetermined by the rationing of resources, which could lead either to overallocation or to underallocation. Spacelab experience has proved such immediate shuffling of resources for different uses to be particularly efficient. The bulletin board bidding scheme is now being tested in simulated settings.

Although a bidding scheme could encourage efficient allocation of resources in the shorter term, its ability to communicate signals for longer-term issues such as capital expenditure on additional equipment or appropriate new directions for technical change is not yet clear. Users bidding for immediate resource requirements lack incentives to take into account the longer-term cost of adding to station capacity. An additional charge on resource use would need to be levied to effect this aim. Such a charge, however, also would have the unintended effect of discouraging some users from conducting station activities. Consequently, the question of how best to attain both short- and long-run allocative efficiency on the station remains unanswered.

It should be emphasized that auction-like or price-oriented methods do not preclude direct subsidies to scientific research undertaken for public benefit. In addition, depending on the economics of space station technology, pricing resource use would not necessarily recover either operating or investment costs. Certain provisions, such as the establishment of minimum bids in an auction scheme, could be adopted in an effort to cover costs, but most observers expect the station to need government funding. Within this context, a pricing policy would promote better use of such public resources than would an administrative allocation method.

Barter option

As an alternative to a straightforward pricing policy, the bartering of space station services and resources has also been discussed by NASA and foreign space officials. In this case, free shuttle flights might be exchanged for, say, access to a laboratory. If the number of parties to a debate over what constitutes an equitable barter is small enough, reaching agreement on the "exchange rate" for large-scale services might be quick, although it would also reflect the relative bargaining strength of the parties.

If many parties were involved, however, barter could require inordinately lengthy debate, thus pushing the cost of transactions far higher than if money were used as a medium of exchange. This might be the case particularly if, as is likely, the debate extended beyond the space community to broader government or bureaucratic involvement.

Such a problem has reportedly plagued decision making within the European Space Agency; and, with regard to any such extended interactions involving the space station, Congress has already sought to oversee and restrict the activities conducted by partners from other nations. Over the longer term, these high costs of exchange would likely discourage partners from exercising comparative advantage, which would mean that their expertise in particular technical areas would be withheld from the station as a project in its entirety.

Decisions necessary

Now—while the space station is still undergoing design—is the time to consider resource allocation. If, for example, a pricing system was adopted after the design was completed, adding meters or other monitoring devices could prove extremely costly.

Even more fundamentally, as an unsettled issue the subject of resource management has already tended to undermine the cohesiveness of both domestic political support for and international collaboration on the space station. There has been serious disagreement over the fixed-percentage distribution scheme initially proposed, with critics contending that it fails to reflect partners' contributions of infrastructure. Should contention persist over which approach to adopt for resource allocation, realization of the space station's potential could be seriously undermined.

To be sure, as long as space station activities involve the public sector, the political process will play a role in governing the station irrespective of whether market-like or administrative allocation mechanisms are selected for distributing scarce resources. That policymakers are reluctant to abdicate part of their role to pricing policy may reveal much about their own objectives in seeking to manage the station for political end. The gross miscalculation in this stance, however, is that political, technical, and economic issues are inextricably linked in the case of the station. Unlike the mindsets that linger from Project Apollo, for which an abundantly funded, exclusively technological effort could be marshaled by political forces, new perspectives must be brought to bear in managing the space station's long-lived infrastructure, competing ends, and scarce financial and physical resources.