The new space race is being driven by private money — just as it was in the 19th century, when billion-dollar-scale observatories were funded by Rockefeller and Carnegie. Today the global space economy is roughly $500-650B a year, dwarfing NASA's $25B budget, and orbital AI data centers are the hottest new frontier — but there's still no global space traffic coordination mechanism, meaning near-collisions between satellites are being resolved via UN diplomats' personal phones.
Key Moments
Alice McDonald
“He initially thinks about building a large pyramid for himself that he can be buried underneath like the pharaohs. Eventually some astronomers get on to them and say, "Well, you know, sir, you could actually build the first ever mountaintop observatory."”
McDonald is telling the story of James Lick, the richest man in California in the 1870s, to illustrate the long history of wealthy private funders in space science.
“Currently there is no global space traffic coordination mechanism. The Chinese operator through their governmental entity would contact for example the state department in the US and that often takes quite a lot of time because we're talking about SpaceX. It's a commercial entity.”
Hoffman is answering Levitt's question about what happens when a Chinese satellite risks colliding with a SpaceX satellite.
“I was on the way back from a mission I did in Ghana last June helping Ghana draft their national space law. I had a stopover in Brussels and my phone was being called by the Malaysian space regulator saying that a satellite in low Earth orbit, one of their only satellites, is about to crash into a satellite owned by North Korea.”
Hoffman shares a real incident to illustrate how dangerously informal the current space collision-avoidance system is.
“Goddard's primary funer is the Guggenheim family. Von Braun's primary funer is the Vermach, the German army. The Guggenheim family says that's great keep going but we're keeping the funding the same. Whereas essentially the German army commits to a billion dollar development of an entire research facility.”
McDonald is explaining why the US fell behind Germany in rocket development in the 1930s despite Goddard and Von Braun achieving equivalent milestones simultaneously.
“Spaceflight is largely in many ways the result of enough people believing in that story that they dedicate their labor to making it happen. And for me that's something that fundamentally I'm not sure we've really fully accounted for within economics.”
McDonald is arguing that an 'inelastic supply of labor' driven by belief — not economic incentives — is what actually built the foundations of rocketry.
Freakonomics Radio explores the hidden side of everything through an economic lens. This episode is hosted by Steve Levitt, co-author of Freakonomics, and is part two of a series on relocating AI to space. It features Alice McDonald, the first chief economist at NASA, and Rosanna Hoffman, head of space law and policy at the UN Office for Outer Space Affairs.
Takeaways
1
No one is in charge of space traffic There is currently no global space traffic coordination mechanism. When a Malaysian satellite nearly collided with a North Korean one, UN staff had to personally phone North Korea with hours to spare. With hundreds of thousands of new objects expected in orbit, this gap is critical infrastructure that doesn't yet exist.
2
Orbital data centers: regulatory arbitrage, not just solar power The appeal of putting AI data centers in space isn't only cheap solar energy — it's that there are no land-use requirements and very different (currently lighter) regulatory regimes in orbit. McDonald sees initial deployments happening for edge-case on-orbit data processing even if the full Project Suncatcher vision remains uncertain.
3
Inelastic belief-driven labor built rocketry Goddard, Von Braun, and Russia's Tsiolkovsky collectively contributed 50-100 years of high-technical labor to rocketry largely independent of financial incentives — driven by science fiction they read as teenagers. McDonald argues economics has no good model for this 'inelastic supply of labor' powered by belief, yet it explains why modern space programs can recruit top talent at below-market rates.
4
NASA's commercial contracting model unlocked private capital By switching to fixed-price milestone payments for the Human Landing System — buying 'astronaut delivery to the lunar surface' rather than owning the hardware — NASA caused SpaceX and Blue Origin to bring private investor capital to cover development costs the government no longer pays. This is the core economic innovation of the Artemis era.
5
Space economy is 20x NASA — telecom dominates The global space economy runs $500-650B per year versus NASA's $25B budget, and roughly 75-80% of that is telecommunications — satellite TV and Starlink-style broadband. Everything people find exciting about space (exploration, human spaceflight, defense) is a relatively small slice of the actual commercial pie.
6
Treaty-making in space stopped in 1984 The last major space treaty was ratified in 1984 and only has 17 signatories, versus 118 for the 1967 Outer Space Treaty. Since then, states have shifted to non-legally-binding guidelines because space technology changes faster than treaties can be negotiated — leaving a growing governance gap as private actors flood low Earth orbit.
7
Private space funding isn't new — it's ancient 19th-century observatories funded by Rockefeller, Carnegie, and James Lick cost the equivalent of hundreds of millions to low billions of dollars in today's money. The current wave of Musk, Bezos, and Google money follows a centuries-old pattern of wealthy individuals bankrolling the frontier of astronomy and space science.