The Economic Impacts of the U.S. Space Program


Jerome Schnee
Business Administration Department
Rutgers University

I. Introduction

Economics analyzes the production, distribution, and use of material goods and services. Economics thus focuses on the activities of the millions of business concerns, farms, workers, and households that produced and consumed almost $3 trillion worth of output in the United States in 1980. As Adam Smith said, economics is "an inquiry into the nature and cause of the wealth of nations."

The Gross National Product (GNP) measures the total output of all production units in the economy. GNP aggregates the productive activity in a particular country during a certain period of time. GNP represents the best single answer to the question, "What did we produce in the United States in 1980?" (1)

NASA's budget totaled less than 1 percent of the GNP during peak activity years in the last half of the 1960s. Why then have economists devoted considerable attention to a governmental program that represents a negligible proportion of national economic activity? Professional interest in space program economics is attributable to a growing awareness of the economic significance of technological change. Economists define technological change as an advance in industrial-related knowledge that permits, and is often embodied in, new methods of production, new designs for existing products, and entirely new products and services (2). Economists view technological changes as one of the most significant determinants of the shape and direction of the U.S. economy.

Technological change exerts a particularly important influence on the national rate of economic growth. A number of studies conclude that about 90 percent of the long-term increase in output per capita in the U.S. has been attributable to technological change, increasing educational achievement, and other factors not directly associated with increases in the quantity of labor and capital. The results of such studies are rough, but they do confirm the substantial effects of technological advances.

Technological change has spurred the growth of new industries and altered the competitive balance within industries. A successful new product or process can transform a firm into an industry leader. In contrast, less innovative firms may suffer economic setbacks or, in the extreme, bankruptcy. As more and more firms have recognized the importance of technological progress, outlays on research and development have increased at a rapid rate. In fact, the expansion of industrial research and development ranks as one of the most dramatic economic developments of the last three decades.

Because the U.S. government traditionally has financed a large proportion of the nation's research and development (R&D), federal programs have played a vital role in promoting technological change. The Department of Defense typically accounted for 50 percent or more of all federal R&D expenditures, while NASA and the Atomic Energy Commission ranked as the second and third largest spenders. In some years, these three agencies financed almost 90 percent of federal R&D expenditures.

This technological component of the U.S. space program attracts the interest of economists, because they believe that federal R&D spending generates more powerful economic impacts than governmental purchases of other goods and services. Consequently, the effects of space program expenditures have been the subject of several studies.

Since its inception, NASA has supported a variety of impact studies of the space program. By sponsoring such reviews, NASA has fulfilled the mandate of the 1958 National Aeronautics and Space Act, which directed NASA to conduct long-range studies of the potential benefits arising from the utilization of aeronautical and space activities for peaceful and scientific purposes. NASA-supported studies have examined the economic, technological, scientific, management, and social impacts of the U.S. space program.

This paper concentrates on: the relation between space program expenditures and economic growth; NASA's impact on the total U.S. economy and the local communities; the effect of the space program on industries; and a case study of NASA's economic impact.

II. NASA's Influence on the U.S. Economy

Analyses of the macroeconomic effects of the U.S. space program attempt to identify and measure that portion of economic growth attributable to technological progress. A Midwest Research Institute (MRI) study of the relationship between R&D expenditures and technology-induced increases in GNP indicated that each dollar spent on R&D returns an average of slightly over seven dollars in GNP over an eighteen-year period following the expenditure (3). Assuming that NASA's R&D expenditures produce the same economic payoff as the average R&D expenditure, MRI concluded that the $25 billion (1958) spent on civilian space R&D during the 1959-69 period returned $52 billion through 1970 and will continue to stimulate benefits through 1987, for a total gain of $181 billion.

Chase Econometric Associates conducted a second econometric investigation of the relationship between NASA expenditures and the U.S. economy (4). The first phase of the Chase study employed the 185 interindustry input-output model developed at the University of Maryland to analyze the short-run economic impact of NASA R&D expenditures. Simulations of the input-output model were undertaken assuming that $1 billion of federal expenditure was transferred (proportionately) from other nondefense programs to NASA with no change in the size of the federal budget. Chase estimated that the $1 billion transfer would increase manufacturing output in 1975 by 0.1 percent, or $153 billion (measured in 1971 dollars), and would increase 1975 manufacturing employment by 20,000 workers.

The second phase of the Chase study considered the long-run effects of NASA R&D expenditures. Using a production function which related NASA R&D expenditures to the productivity growth rate in the U.S. economy from 1960 to 1974, Chase concluded that society's rate of return on NASA R&D expenditures was 43 percent (MRI's estimated social rate of return was 33 percent). The Chase second phase also estimated the effects of changes in NASA R&D expenditures on economic growth and stability. Overall, these long-term estimates confirmed the significant positive effects of NASA R&D expenditures on national productivity and employment levels.

The Space Division of Rockwell International conducted a third study of the macroeconomic impact of NASA R&D programs. Rockwell investigated the relationship between NASA's Space Shuttle program and employment in the state of California (5). Using an econometric model developed at UCLA, Rockwell estimated that the Space Shuttle program generated an employment multiplier of 2.8; that is, direct Shuttle employment of 95,300 man-years in California produced an increase of 266,000 man-years in total employment.

In each of the econometric studies the investigators qualified their conclusions by noting several conceptual and data limitations associated with an aggregate quantification of the returns to the economy of R&D investment. A major limitation of all three studies is the assumption that each dollar of NASA R&D spending‹whether spent on basic research or development‹is equal.

III. NASA's Influence on Local Communities in the 1960s

The acceleration of manned spaceflight programs, which began in 1961, prompted both a significant expansion of existing federal facilities in Florida and Alabama and the establishment of three entirely new NASA facilities in Mississippi, Louisiana, and Texas. In the early 1960s, NASA organized the Marshall Space Flight Center in Huntsville, Alabama; the John F. Kennedy Space Center in Brevard County, Florida; the Manned Spacecraft Center in Houston, Texas; the Michoud Facility in New Orleans, Louisiana; and the Mississippi Test Facility in Hancock County, Mississippi. Because NASA's manned spaceflight activities have been concentrated in a "southern crescent" along the Gulf of Mexico, the space program has had an important influence on this region (6).

The significance of space employment varied greatly among the five manned spaceflight communities; NASA's share of local employment was far greater in Hancock County (Mississippi), Brevard County (Florida), and Huntsville (Alabama), in that order, than in either Houston or New Orleans. Specifically, NASA Civil Service and contractor employment comprised 57 percent of total 1966 employment in Hancock County, 22 percent in Brevard County, 17 percent in Huntsville, 3 percent in New Orleans, and less than 2 percent in Houston.

In those areas where NASA accounted for a large proportion of local employment, the economic impacts of the space program were direct and identifiable. Hancock County, Brevard County, and Huntsville each experienced large increases in sales volumes of local business establishments and growth in per capita income. Between 1960 and 1965, average increases for the three communities in retail sales volume and per capita income were, respectively, 39 percent and 86 percent.

A comparison of NASA's economic impacts on Houston with those on New Orleans illustrates that the economic effect of the space program varied inversely with the strength of the local economy at the inception of the program. For example, Houston and New Orleans represented strikingly dissimilar economic environments prior to the NASA buildup. Houston had sustained a very high employment growth rate since 1940. The annual growth rate during the 1950s was 4.2 percent, compared to a national rate of employment growth of 2.2 percent. In contrast, the annual rate of employment growth in New Orleans during the 1950s was 1.7 percent. The 1957-58 economic recession produced a much more severe reaction in New Orleans. Unlike the rest of the nation, which recovered from the 1957-58 recession by 1959, total employment in New Orleans did not regain its 1957 peak of about 292,000 until 1963.

Between 1961 and 1966, employment at both the Michoud Assembly Facility (New Orleans) and the Manned Spacecraft Center (Houston) increased by about 11,000 personnel. Although the rises in employment were roughly similar, the economic impact on the depressed New Orleans economy was far greater: following an increase in the unemployment rate from 2.7 percent in 1957 to 6.2 percent in 1961, New Orleans recouped to become one of the ten fastest-growing cities in the nation between 1961 and 1966. Space-related employment directly accounted for 17 percent of the total increase in wage and salary employment during this period. However, NASA employment was directly responsible for only 10 percent of total employment growth in Houston between 1961 and 1966. Houston benefited relatively less from space employment than New Orleans; specifically, employment growth was 40 percent higher because of the influence of the NASA space program (the comparable figure for New Orleans was 60 percent).

In addition to direct economic impacts, the space program altered the quality and context of the local environment in the southern crescent. The influx of large numbers of scientists, engineers, and other professional personnel to these small cities stimulated an expansion of university and graduate programs. As an illustration, enrollment at the Huntsville Center of the University of Alabama grew from 1,500 in 1958 to more than 4,000 in the mid-1960s. The educational impact of federal R&D programs was not limited to the university and junior college level; primary and secondary school systems also improved noticeably. Rapid growth in school enrollments and construction were accompanied by substantial advances in average educational attainment and in primary and secondary educational quality.

Of course, the individual communities exhibited substantial differences in capabilities to diversify beyond the NASA program and build an economic base for longer-term growth. For example, Huntsville's attempt to broaden its economic base beyond the dominant NASA program was more successful than Brevard County's. Although much of Huntsville's progress stemmed from organized industrial development, the technological characteristics of NASA activities at Marshall Space Flight Center nonetheless afforded Huntsville an important advantage in its diversification efforts. The Marshall Center had primary responsibility for the manufacturing and testing of rocket propulsion units, such as the first and second stages of the Saturn V launch vehicle. In contrast, the John F. Kennedy Space Center at Cape Canaveral acted as NASA's prime launch facility and, as such, required no development or manufacturing activities. The engineering and manufacturing programs at Marshall thus provided a firmer base for attracting industry than did the launch, maintenance, and technical service activities at the Cape.

IV. NASA's Influence on the Growth of High-Technology Industries

A brief discussion of NASA's influence on industry in general is included in Appendix Two. However, large government programs can play a particularly essential role in fostering the growth of high-technology industries. This type of industrial growth is illustrated by the influence of governmental space and defense programs on the semiconductor and computer industries (7). The birth and rapid expansion of the U.S. semiconductor and computer industries during the late 1940s and 1950s were greatly aided by government space and defense programs. In achieving supremacy in the computer and semiconductor sectors of the world electronics industry, U.S. firms relied on important economic, technological, and manpower support from federal space and defense programs. Three types of economic impacts can be readily identified (8): (1) direct and indirect financial support for semiconductor and computer R&D; (2) assured demand during the early years of the industry; and (3) the use of space and defense demand to support new firms and to affect the competitive balance within the industry as it matured.

Direct and indirect financial support for R&D by space and defense programs constituted an important factor in the development of the semiconductor and computer industries. Direct financial support for semiconductor R&D totaled $66 million between 1955 and 1961. These government grants encouraged semiconductor firms to greatly expand production capacity during this critical six-year period. In addition to direct R&D funding, semiconductor firms received indirect federal R&D support by serving as subcontractors for weapons systems prime contractors. The Department of Defense estimated that the R&D subcontracts awarded by such prime contractors more than equalled direct R&D expenditures. By the end of the 1950s, total direct and indirect government-financed R&D represented approximately one-quarter of total semiconductor industry R&D expenditures.

Federal agencies, particularly the military services, provided strong financial support for every major U.S. computer development between 1945 and 1955. The Army funded the development of ENIAC (the first electronic computer), for use in trajectory calculations. During the first ten years of electronic computers, major technical advances were achieved as part of the effort to create large computers which met the specifications set by military and other government agencies. Most of these advances subsequently were incorporated into the medium and small scale computers designed for the commercial market. The large U.S. government outlays for computer development during this period dwarf those of other countries, such as Great Britain, and help explain the early dominance of U.S. firms in the computer industry.

Second, federal space and defense programs influenced the computer and semiconductor industries by generating huge markets for such products. Space and defense demand constituted a major factor in the growth of the U.S. semiconductor industry, as learning economies proved essential. Learning economies resulted in dramatic decreases in semiconductor prices; the average price of an integrated circuit dropped from $50 in 1962 to $0.63 in 1973. During the early years of second and third generation component technology, the space and defense market accounted for a substantial part of the sales volume that made these learning economies possible. Space and defense demand represented at least 35 percent (and as much as 45 percent) of semiconductor sales each year between 1955 and 1961 and over 70 percent of annual sales during the first four years of integrated circuit production.

The market for military data processing systems reached the $200-million level before Remington Rand delivered the first Univac for business data processing in 1954. The space and defense market accounted for over 60 percent of all computer sales during the industry's first decade, and the sales of commercial computers did not overtake space and defense hardware sales until 1962.

Third, as both the computer and semiconductor industries matured, space and defense demand promoted competition among existing firms and aided the entry of new firms. New semiconductor companies could enter the market easily given the receptivity of the military agencies and NASA to the products. Several new companies used space and/or defense contracts to establish an initial market position. The first sales of Texas Instruments' silicon transistor and Transitron's goldbonded diode were directed toward use in military products.

Control Data Corporation, the third largest computer manufacturer by 1965, depended exclusively on military sales when it first entered the industry in 1957. Space and defense business helped IBM's major competitors‹ particularly Univac, Control Data, and Burroughs‹to improve their market position during the 1960s. By 1970, one-fourth of all Univac computers were located in space or defense installations.

In addition to supplying needed sales revenues for firms during the early stages of growth, space and defense demand accelerated the advance of semiconductor and computer technology. The learning economies that have been so important in the semiconductor industry were not an automatic by-product of production. Such learning economies required deliberate planning. The challenging performance and reliability specifications set by the military agencies and NASA accelerated many of these semiconductor learning economies. In this regard the space program's specifications for the integrated circuitry of the Apollo Guidance Computer provided a major impetus for improvements in the reliability of third generation component technology.

V. The Economic Impact of Specific NASA Programs: Meteorological Satellites

Meteorological satellites represent one of the most important technological advances in the history of weather analysis and prediction (9). The launching of TIROS I (Television and Infrared Observation Satellite) on April 1, 1960 revolutionized weather observation methods. TIROS I demonstrated the effectiveness of meteorological satellites in overcoming limitations of conventional observation techniques. For example, radar, weather reconnaissance aircraft, weather ships, and weather balloons supplied information on less than one-fifth of the Earth's surface; TIROS I encompassed almost the entire globe.

NASA has served as the R&D organization with the National Meteorological Satellite Program, exercising the responsibility for designing, building, launching, and testing satellites. When a meteorological satellite becomes operational, the U.S. Weather Bureau then assumes responsibility for processing satellite data for operational purposes, disseminating data and forecasts, and conducting research on the climatological uses of satellite data.

The economic benefits of improved weather forecasting can be substantial, because of the significant total value of annual weather-caused losses in the United States. J.C. Thompson's 1972 survey of agricultural, industrial, and other activities suggests that the annual cost of weather-caused losses approximated $12.7 billion. RoughIy $5.3 billion of this total could have been avoided with adequate warnings. However, all of such "protectable losses" cannot be avoided, because the costs of protection must be weighed into the calculation as well. Perfect weather forecasts only can salvage about 15 percent of protectable losses, a relatively modest proportion of total protectable losses, but a relatively large absolute savings‹ $739 million according to Thompson's estimate (10).

Meteorological satellites have greatly enhanced the accuracy of storm warnings and forecasts; the availability of satellite data produced economic savings over the 1966-73 period of approximately $20 million. However, it appears unlikely that satellite data have as yet improved the accuracy of daily weather forecasts. In fact, the true potential of satellites in weather forecasting will not be realized until satellite data are integrated into numerical weather prediction models, which may occur during the 1980s.

What type of economic impacts can be expected when an operational weather satellite system is implemented and linked to numerical prediction systems? Despite substantial progress in numerical weather.prediction, improvements in the accuracy of daily weather forecasts have ranged between 5 and 10 percent. Furthermore, Thompson contends that only 56 percent of estimated economic gains could be achieved using more accurate forecasts. Therefore, if the use of satellite data increased current levels of forecast accuracy by another 5 to 10 percent, annual economic savings would range between $20-40 million ($739 x .56 x .05 or $739 x .56 x .10). It is important to recognize that these projected savings represent a small fraction of the potential economic benefits. The contributions of weather satellites and numerical weather prediction to weather forecasting will not be fully exploited until two major barriers are overcome.

First, substantial improvements in the dissemination of weather information are required. The most pressing demand in this respect is to provide the user with specific types of necessary weather information. As an illustration, most economic models estimated potential savings from better forecasts by focusing on how users could make optimum use of weather information in decisionmaking. Such models presume that weather predictions include information on uncertainty. However, the National Weather Service began to meet this requirement only recently by disseminating probability forecasts.

Second, decisionmaking by farmers, businessmen, builders, and other users of weather information is far from optimal. The inadequacy of present decision strategies is demonstrated by Thompson's contention that 44 percent of estimated potential economic gains could be achieved through better use of current forecasts. The economic benefits of more accurate weather forecasts are unlikely to materialize unless users employ decision strategies that capitalize on the new information.

VI. Studying Economic Impacts of the Shuttle Program

The analysis in this paper documents that the space program has generated several distinct, diverse, and far-ranging economic impacts, including: economic expansion in cities and surrounding regions, acceleration of technological advances, and growth of new industries and scientific fields. The past space programs suggest the types of economic results that are likely to flow from the Shuttle program. A logical starting point for the examination of potential Shuttle program impacts would utilize the frameworks of earlier studies. Specifically, the following questions concerning program scale, geographical location, linkages with industry, and linkages with science and engineering should be considered:

A. Scale


(1) How large are past, current, and future Shuttle program budgets?
(2) What are the direct and indirect employment levels of the Shuttle program?
(3) What is the research and development component of Shuttle program expenditures?
(4) How do the level and pattern of Shuttle program expenditures and employment levels compare with those of the Apollo program?

B. Geographical Location


(1) Which NASA facilities perform the bulk of Shuttle program work?
(2) Is the Shuttle program concentrated in one or two locations?
(3) Has there been a sharp increase in program activity and employment at particular NASA locations?
(4) Are the most active Shuttle program facilities located in major cities (e.g., Houston) or in smaller, less developed areas (e.g., Brevard County, Florida)?
(5) What are the previous patterns of economic development in the principal Shuttle locations?
(6) How does the network of Shuttle program locations compare with the pattern of manned space program facilities?

C. Linkages with Industry


(1) Which industries (by SIC classification) supply the largest numbers of goods and services to the Shuttle program?
(2) How does this pattern of industrial expenditures for the Shuttle program compare with the pattern for the manned space program?
(3) Are distinct new technologies required by the Shuttle program? What are the potential industrial applications of these new technologies?
(4) Are there new industries and/or new firms that have been launched as the result of Shuttle program support?
(5) How have Shuttle program expenditures affected competition among firms in particular industries?

D. Linkages with Science and Engineering


(1) What is the pattern of basic and applied research funding in the Shuttle program?
(2) What scientific and engineering disciplines have received the major share of these basic and applied research funds?
(3) How does Shuttle program funding within these disciplines compare with total federal support for each discipline?
(4) Has the Shuttle program made it necessary to attract new manpower to particular disciplines? Which disciplines have had the largest manpower increases?
(5) Have new fellowship programs and other forms of graduate student support been established to meet the manpower needs of the Shuttle program?

This checklist of questions will provide the student with detailed information on key dimensions of the Shuttle program. In addition, the student should draw on generalizations provided by earlier studies: for example, previous reports clarify that economic impacts of the space program have depended on the relative importance of the new resources made available by NASA in comparison to those from existing resources. Hence, NASA produced a much greater impact on Huntsville, Alabama and on the communities in Brevard County, Florida than on Houston, Texas.

Despite the many positive economic impacts of the U.S. space program, NASA's role has not been free from criticism. Some analysts have complained that the U.S. space and defense programs created imbalances in the nation's supply of scientific and technological manpower. In some areas of engineering and science, these federal programs helped to produce a supply of engineers and scientists that exceeded demand in subsequent years. As NASA and the Department of Defense provided substantial funding and devoted specific efforts to attract and educate more scientists and engineers, these agencies assumed difficult responsibilities. The instability of government funding and sudden program changes have adversely affected the supply and morale of scientists and engineers.

For these reasons, it is inappropriate to dwell only on the positive economic effects of the Shuttle program. The careful researcher also must be sensitive to potential negative economic consequences.

Appendix Two also includes a case study of NASA's economic impact on the science of astronomy.

Footnotes

1. L.G. Reynolds. "Economics." (Revised edition.) Homewood, Illinois: Irwin, 1966, p. 534.

2. E. Mansfield. "Technological Change." New York: W.W. Norton, 1971, pp. 1-7.

3. Midwest Research Institute. "Economic Impact of Stimulated Technological Activity." Kansas City, Missouri: Midwest Research Institute, November 1971.

4. Chase Econometric Associates, Inc. "The Economic Impact of NASA R&D Spending: Preliminary Executive Summary." NASA-2741, April 1975. Also: "Relative Impact of NASA Expenditure on the Economy." Unpublished NASA Staff Report, March 18, 1975.

5. Rockwell International, Space Division. "Impact of the Space Shuttle Program on the California Economy." FD-74-SH-0334, December 1974.

6. The data contained in this section are based on: Ronald Konkel and Mary Holman. "Economic Impact of the Manned Space Flight Program." National Aeronautics and Space Administration, January 1967; Ronald Konkel. "Space Employment and Economic Growth in Houston and New Orleans, 1961-1966." Tulane University MBA Thesis, June 1968; Stanford Research Institute. "Some Major Impacts of the National Space Program: Economic Impacts." N68-3438, June 1968; and U.S. Congress, House of Representatives, 88th Congress (2nd Session). "Impact of Federal Research and Development Programs." House Report No. 1938, Study Number VI, 1964.

7. During the early stages of this study, it became clear that NASA's impact on computers and semiconductors was intertwined with the influence of the U.S. defense program. The Department of Defense certainly accounted for the largest share of federal spending on computers and semiconductors. Consequently, the combined influence of the space and defense programs was examined.

8. These economic impacts, along with the technological and manpower impacts of the space and defense programs, are discussed more fully in: J. Schnee. "Government Programs and the Growth of High-Technology Industries." Research Policy. Vol. 7, No. 1, January 1978, pp. 2-24.

9. The material in this section is based on the more comprehensive discussion in: J. Schnee. "Predicting the Unpredictable: The Impact of Meteorological Satellites on Weather Forecasting." Technological Forecasting and Social Change. Vol. 10, May 1977, pp. 299-307. Also: E. Ginzberg, J. Kuhn, J. Schnee, and B. Yavits. "Economic Impact of Large Pub1ic Programs: The NASA Experience." Salt Lake City: Olympus Publishing, 1976, pp. 115-41.

10. J.C. Thompson. "The Potential Economic Benefits of Improvements in Weather Forecasting." San Jose, California: Department of Meteorology, California State University, September 1972, pp. 7-12.

Appendix Two

Economics


Resources for Individual Disciplines Economics

NASA's Influence on Industry and NASA's Economic Impact on Science (A Case Study of Astronomy)


Jerome Schnee
Business Administration Department
Rutgers University

I. NASA's Influence on Industry

As a result of NASA's multi-billion-dollar budgets during the 1960s, the agency became an important customer for several U.S. aerospace industries. Total sales of aerospace products increased from $16.4 billion in 1961 to $22.6 billion in 1967. Among the three major components of industry demand‹Department of Defense (DoD), NASA and the Atomic Energy Commission (AEC), and the commercial purchases‹a significant shift in relative importance occurred during this period. The combined NASA and AEC share of total industry demand rose from 4 percent to 19 percent, commercial purchases rose from 11 percent to 18 percent, and DoD dropped from 85 percent to 63 percent (1).

The importance of NASA as a source of industry demand increased each year from 1960 to 1965. From 1963 to 1965 the rising demand from NASA programs served to offset decreasing defense purchases within the industry. The major impact of increased NASA purchases in the aerospace industry during this period was a shift of employment away from aircraft production and into missiles and space production.

In 1966 the relative importance of NASA purchases began to decline because of large increases in defense and commercial purchases. Demand for military aircraft rose as a result of the United States commitment in Vietnam; there was also a rise in the commercial demand for transports. As a result, the aerospace employment shift of 1960-65 was reversed. By 1966 employment in missiles and space had declined by about 70,000 workers from its peak level of 578,000 in 1963.

The space program played an integral role in the development of the international communications industry. The first satellite communication system, Intelsat-l, became operational in 1965 after a fifteen-year national R&D effort to develop commercial communications satellites. During this development period, NASA (with the assistance of various military agencies, AT&T, Space Technology Laboratories, and Hughes Aircraft) carried out several additional innovations to advance satellite communication technology (2).

Because of their greater channel capacity, Intelsat-l and subsequent satellites spurred a major expansion in the volume of international communications. Between 1966 and 1970, the volume of international communications (excluding telephone) increased by 55 percent; this increase represented the highest rate of growth for any five-year period since 1961. By 1971 Comsat, which had been created to manage the U.S. commercial communications satellite system, had invested almost $200 million in equipment and facilities; between 1965 and 1970 Comsat's revenue grew from just over S2 million to nearly $70 million (3).

The new technology which industry acquired from NASA had a significant effect on the industry's cost structure. The annual cost of a satellite communication circuit was $25,000 when Intelsat-l was launched in 1965; the cost had dropped to S719 when Intelsat-lV was launched in 1971. The annual cost of a circuit dropped to $30 by 1976 when Intelsat-V was placed in orbit. The cost of Earth stations also declined substantially; whereas Earth station costs ranged between $6 million to $12 million in 1968, the range had been reduced and narrowed to $2 million to $4.5 million by 1971 (4).

The commercial results of these technological advances are reflected in the history of transatlantic telephone charges. For example, the monthly rates for a leased telephone circuit between New York and Paris remained unchanged for a number of years, but in 1966, immediately after the first communications satellite went into operation, monthly charges dropped sharply and have continued to drop since that time. The $4,625 monthly charge in 1971 was less than one-half the monthly rate for 1965 (5).

In addition to generating specific technological gains for industry, NASA also sought to promote general technological progress. In 1962, NASA established a Technology Utilization Program to promote the transfer and application of its technology to other organizations. When the Technology Utilization Program was created, it was widely believed that the technical by-products of the space program, or "space spinoffs," would be both large in number and commercially significant. The concept of space spinoffs assumed that a specific, discrete innovation in the space program would be identified as relevant to a need outside the program and then would be adapted and applied commercially (6).

Evaluations of the Technology Utilization Program failed to uncover a significant number of technology by-products. It became apparent that the term "spinoff" was misleading, because it implied that space contributions were directly and readily identifiable when, in fact, they were not (7). As a result of such findings, NASA switched the focus of the Technology Utilization Program from generating space spinoffs to developing improved methods of technology transfer.

A subsequent Denver Research Institute (DRI) study concluded that the principal technological impact of the U.S. space program has been acceleration of technical advances. DRI estimated that a major share (78 percent) of NASA's technical contributions were advances that would have eventually occurred even in the absence of the space program; NASA's role was to accelerate development (8).

What is the economic value of NASA's technical "acceleration effect?" Drawing on four case studies (gas turbines, cryogenic multilayer insulation, computer simulation, and integrated circuits), Mathematica, Inc. concluded that the economic benefits that result from NASA's acceleration of technology are very large. The value of a speedup in technology in those four fields was estimated to be between $2.3 billion and $7.6 billion in 1974 dollars. Mathematica's "most probable" estimate is that the four case studies alone produced savings equal to 6 percent of all NASA R&D expenditures since 1958 (on a discounted value basis) (9).

II. NASA's Economic Impact on Science: A Case Study of Astronomy

The U.S. space program produced a dramatic and permanent transformation of astronomy (10). In order to fully appreciate NASA's impact on astronomy, it is useful to characterize the science as it existed during the pre-NASA years. Prior to the 1950s and 1960s, astronomy was a small science growing at a modest pace. The number of astronomers was in the hundreds, with an average annual growth rate between 4 percent and 5 percent. The science remained small during the pre-1950 period, because research funds and observational facilities were both limited. The three or four institutions that controlled the big telescopes dominated the science in every way. Astronomers concentrated on observation rather than the kind of experimental design work which typified physics and other scientific disciplines.

The limited funds and observational facilities discouraged astronomers from considering improvements in instruments, and, as a result, astronomy was slow in adapting technology developed elsewhere. Thus, the major pre-space exploration advance‹radio astronomy‹originated with university electrical engineers and physicists, not astronomers. Radio astronomy flourished during the 1950s, as scientists familiar with instrumentation and engineering moved into the field. The development of this new branch of astronomy was dependent, in large measure, on the willingness of the Department of Defense to fund expensive radio astronomy facilities. Total astronomical funding began to increase substantially during the early and middle 1950s because of the support of several federal agencies.

At the outset of the space program, astronomers were not enthusiastic about the opportunities for space exploration. While there were benefits to be gained from space observation, much of the scientific community was distressed about NASA's substantial commitment to engineering and hardware production. Despite the efforts of NASA's senior management to enlist the aid and support of astronomers, the astronomical community continued to give highest priority to ground-based instruments and research through the mid1960s. It was not until the Greenstein Report of 1972 that astronomers acknowledged the unique role that space observations can play in advancing the science.

NASA's direct scientific contribution to astronomy may be grouped into three categories: the resurrection of old astronomical fields (celestial mechanics and geodesy), the creation of new astronomical fields (lunar and planetary studies), and the synergistic effect on optical and radio astronomy. As important as NASA's direct scientific contributions have been, the influence of the space program on the organization and structure of astronomy may equal or surpass direct support. There has been a substantial increase in the size of the profession during the space era. Over the 1960-70 decade the number of astronomers tripled to approximately 2,500, with an annual growth rate of 15 percent over the last part of the 1960s. Financial support from NASA, the National Science Foundation, and the Department of Defense produced an equivalent upsurge in the number of astronomy doctorates.

The combined influence of large funding increases, sharp rises in manpower, and the demands of space experimentation forced astronomy to take on many of the characteristics of big science. Increasingly, astronomers worked as members of large project teams in order to accomplish satellite missions. In contrast to the individualistic, research orientation of the science during the pre-space days, astronomers now have to involve themselves in complex engineering tasks, meet large financial responsibilities, and manage larger staffs.

A related structural effect on astronomy is its fractioning into a group of related but quite distinct sciences. Each of the sub-fields has as many or more personnel as the whole of astronomy did a generation ago. This segmentation of the science has been accompanied by more complex funding arrangements; federal funds now flow through NASA research centers, national observatories, universities, and other nongovernmental corporations. The specialization within the science, the influx of new manpower, and more intricate funding arrangements require more effort on the part of astronomers to set priorities, establish coordinated efforts, and manage effective programs.

In summary, NASA's large expenditures of over $100 million annually for basic research alone and the stimulus provided by space exploration have dramatically transformed astronomy. It has become a more open science with more numerous facilities, research opportunities, and scientists. Younger astronomers with more diverse educational backgrounds have been attracted from other scientific fields to work in several new specialties that have developed. More complex management and funding arrangements and large project efforts demonstrate that astronomy has achieved big science status.

Foot notes

l . Ronald Konkel and Mary Holman. "Economic lmpact of the MannedSpace Flight Program" Washington, D.C.: National Aeronautics and Space Administration, January 1967.

2. Midwest Research Institute. "Technological Progress and Commercialization of Communications Satellites." In: "Economic Impact of Stimulated Technologlcal Activity." Kansas City, Missouri: Midwest Research Institute, November 1971.

3. D. Interaglia. "The U.S. International Record Carrier: Past, Present, and Future." New York: Pace College, Master's Thesis, February 1972.

4. See footnote 2, pp. 54-59.

5. R. Jastrow and H. Newell. "The Space Program and the National Interest." Foreign Affairs. April 1972.

6. The history and operation of NASA's Technology Utilization Program are discussed in: R. Lesher and G. Howick. "Assessing Technology Transfer." Washington, D.C.: National Aeronautics and Space Administration, 1966; S. Doctors. "The Role of Federal Agencies in Technology Transfer." Cambridge, Mass: MIT Press, 1968, p. 69; R. Rosenbloom. "The Transfer of Space Technology." In: R. Bauer (ed). "Second-Order Consequences." Cambridge, Mass: MIT Press, 1969; and J. Geise. "The Role of the Regional Dissemination Centers in NASA s Technology Utilization Program." Washington, D.C.: National Aeronautics and Space Administration, May 1971.

7. Denver Research Institute. "The Commercial Application of Missile/ Space Technology." Denver, Colorado: Denver Research Institute, September 1963. Also: J. Wells and R. Waterman. "Space Technology: Pay-Off from Spin-Off." Harvard Business Review. July-August 1964.

8. Denver Research lnstitute. "Mission-Oriented R&D and the Advancement of Technology: The Impact of NASA Contributions." Denver, Colorado: Denver Research lnstitute, May 1972.

9. Mathematica, Inc. "Quantifying the Benefits to the National Economy from Secondary Application of NASA Technology." Princeton, N.J.: Mathematica, Inc., June 1975.

10. The case study of astronomy was carried out by Professor James Kuhn of Columbia University. See: E. Ginzberg, J. Kuhn, J. Schnee, and B. Yavitz. "Economic Impact of Large Public Programs: The NASA Experience." Salt Lake City: Olympus Publishing, 1976, pp. 81-113.


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