Space and Economic Value

From wired.com, http://www.wired.co.uk/news/archive/2009-08/11/why-didnt-britain-win-the-race-to-the-moon

This morning at 11:03am, GMT, a British astronaut will be launched into space for the first time.

The Treasury, the part of the UK government that is all about spending and revenues, has taken the opportunity to laud the UK space industry and its support for it on Twitter. Indeed there’s a new National Space Policy, the first such thing to exist here in the UK.

The Tweet, and the policy blurb emphasise that the space industry is “worth £11.8 billion” to the UK economy. Where has this number come from?

One of the first things we’ll be doing next term is thinking about is numbers like these – where do they come from? With an industry like the car industry it’s much easier to work these things out, since people buy cars at a particular price, and we then assume that that price reflects the value we as a society place on that good (a debatable assumption, but an assumption nonetheless).

But with space? Who buys the produce of the space industry? Hence, if there is no end consumer in the same way as most industry, what do we do? The answer is we value by the value of the inputs that went into the process. What was the value of the labour, capital and land inputs that went into production in the industry?

If you’re starting to raise objections about this, that’s fair enough; it’s far from a satisfactory approach.  For example, given this the government could simply give all employees a pay rise to get a GDP increase. However, it’s hard to know what else could be done instead, if we wish to measure things like national economic activity. Some defence can be mounted; the amount paid to the factors of production employed in the space industry must be market rates – if the UK space industry paid too low, then their experts would seek employment elsewhere – space agencies overseas, or other areas of manufacturing, say, in the private sector. As such there is some basis in what we value as a society in these calculations, even if it’s not as direct as in, say, private sector manufacturing.

In addition, the methods employed by the UK when calculating national income are the same as other countries around the world use. Hence at least if our measure is bad, it’s only as bad as what everyone else is doing, and still affords us a basis for comparing between countries.

UK growth slows

The BBC’s “UK GDP growth” picture

Hidden beneath the ongoing furore over tax credits, the Office for National Statistics (ONS) this morning released the last UK growth figures: growth of 0.5%.

What does this mean? This is a number for how much more was produced in the UK economy in the months between July and September 2015 compared to the same months in 2014, in real terms (controlling for changes in price levels).

Overall, more was produced (and although 0.5% may seem small, UK GDP was US$2.7tr (trillion) in 2013 hence 0.5% of that is still a healthy US$135bn), but the number is slightly lower than was to be expected (apparently 0.6% was expected).

Additionally, growth wasn’t evenly spread over different parts of the economy: the manufacturing sector produced less, as did the construction sector (which had a large fall), although the service sector produced more.

Here’s plenty more “LIVE” commentary from the Guardian: http://www.theguardian.com/business/live/2015/oct/27/uk-gdp-growth-figures-george-osborne-live-updates

Here’s the actual data release from the ONS: http://www.ons.gov.uk/ons/rel/gva/gross-domestic-product–preliminary-estimate/q3-2015/index.html

We’ll spend time thinking about GDP growth and what it means early in the Spring Term, after Christmas.