The genius of SpaceX
By Owen Kamphuis
web posted September 30, 2024
SpaceX. Doubtless you've heard of Elon Musk's revolutionary company. SpaceX is built on the belief that commercial companies can survive in the predominantly government-agency dominated domain of space travel. SpaceX's existence depends on its ability to launch for much cheaper than NASA.
Strangely enough, NASA is actually SpaceX's largest employer while previously being a rival. NASA wisely realized what it could save much of its ever-smaller budget by taking advantage of the drop in the price of a substitute to its rockets: SpaceX.
At the height of the Cold War in 1966, NASA took up a staggering 4.4% of all US federal spending at an adjusted $55.7 billion. However, since then NASA has consistently taken less of a prominent role in the US budget and it's 2024 budget amounted to $26.8 billion. Although of course still a massive number, NASA has needed to carefully consider where to allocate their limited funds because of the high costs of space travel.
NASA spent a large part of the early 2000s and 2010s developing the Space Shuttle because it was supposed to be a more cost-effective way to reach space due to its supposed reusability. Despite costing $450 million per launch, when adjusted for how much designing of the rocket also cost, most sources estimate the cost of a Space Shuttle Launch at $1.6 billion per flight. This was supposed to be the cheap, sustainable version of a rocket!
SpaceX now charges $62 million per launch for its reusable Falcon 9 rocket. For the launch of its Falcon Heavy rocket, it charges $90 million per launch. Because of its mission to explicitly focus on cost-reduction, SpaceX successfully utilized investment to run at a loss for a few years, finally turning out a $3 billion profit in 2023. Because of this investment, SpaceX can now launch for much, much cheaper than NASA can.
Although it may seem as if NASA would attempt to compete with SpaceX for military commissions and government grants, the opposite occurs. Of NASA's $24 billion budget in 2022, $2 billion was spent directly on contracting SpaceX. This is a smart move from NASA because it shows understanding that since the price of a substitute to their pricy missions went down, they should purchase the substitute. As a government agency, NASA also has no incentive to sink SpaceX, even if it could. NASA understands that if the private sector can provide space travel and transport loads for cheaper, then it should be used.
Through saving money on certain tasks (such as giving SpaceX an $843 million deal to create a vehicle to disassemble the International Space Station) that NASA can hire SpaceX for, NASA can focus on other sectors such as Mars missions. NASA's utilization of a cheaper substitute makes the agency more cost effective, as well as boosting the private sector, showing that understanding the principles of economics can save government agencies large amounts of money and bolster the overall economy. 
(c) 2024 Owen Kamphuis.
