What SpaceX Shares With Facebook and Apple, on the Eve of Its Historic Launch


SpaceX is in the final stages of preparation for its long-awaited Falcon 9 rocket launch on Saturday to boost the company's unmanned Dragon cargo ship on an inaugural flight to the International Space Station. If successful, this will mark the first time that a private company has entered the market for space exploration.

Supporters for government-sponsored research often argue there would be no innovation without it. They remark that space exploration is a particularly huge risk, and private companies likely wouldn't see returns for centuries if their aim is to colonize or mine anywhere in space. They argue that the up-front cost should be borne by government because the costs are prohibitively high. 

Space travel may have high start up costs, but it's not insurmountable. Remember when a guy took space photos with a used digital camera that he bought on eBay and some duct tape? It cost $750 of his own private funds, not hundreds of millions in taxpayer dollars.

Plus, much of the innovation we see occuring in the private sector happens without financial help from the government. Many of the most successful companies didn't get government help to start up. Steve Jobs and Steve Wozniak didn't get any federal loan guarantees when they started Apple, and it's now the world’s largest technology company. Neither did Mark Zuckerburg when he invented Facebook, and it's been valued at $106 billion in its IPO on Friday.

If there is a profit incentive, then entrepreneurs will seek it out.

In striking contrast, the federal government gave Solyndra $528 million in loan guarantees, and it failed dramatically. By no means is this an isolated example; when government picks winners and losers in the marketplace, it invariably picks losers.

It's a problem with incentives. As Nobel Laureate Milton Friedman explained, when businesses spend their own money, they have a strong incentive to spend it smartly. When businesses spend money they got from the government, they don't have this incentive, and they often waste it.