Paul Krugman: Musk, Mars and the modern economy – Berkshire Eagle

Elon Musk is clearly having a moment; hes trying to back out of his deal to buy Twitter, but he probably cant without paying billions in damages. Perhaps thats why hes thinking about zooming off to Mars?

OK, Im being unfair. (Am I about to receive a poop emoji?) While Musks decision to talk up a scheme to send 1 million colonists to Mars may reflect a desire to change the subject, his plan calls for doing so by 2050 and he has been talking about that idea for years.

Still, the Mars talk caught my attention, largely because of the line about 1 million people (which I cant help but say in my best Dr. Evil voice).

Whats your reaction to that number? Does it seem absurdly high? In terms of the logistics of actually getting people to Mars, it probably is. But my original home field in economics was international trade. And if you know anything about trade, or for that matter the realities of industry, you realize that 1 million is actually an absurdly low number of people far too few to support a modern economy.

Lets instead treat the SpaceX chiefs Mars fantasies as a teachable moment a chance to talk about the economics of globalization more generally.

Musks comments immediately called to mind for me a great essay by one of my favorite science fiction writers, Charlie Stross, that posed precisely this question: What is the minimum number of people you need in order to maintain (not necessarily to extend) our current level of technological civilization?

Stross answer was that given the complexity of modern society, youd need a lot of people. In fact, writing back in 2010 when Musks Tesla was still a struggling company that had only survived the Great Recession thanks to an Obama administration bailout he explained how Musks current plan is thinking far too small: Colonizing Mars might well be practical, but only if we can start out by plonking a hundred million people down there. I agree if anything, thats on the low side. To understand why, you need to think about why nations engage in international trade.

One reason is that countries have different resources and climates: Its hard to grow pineapples in Norway. But another reason is that in the modern world there are often huge economies of scale in production. These economies of scale make it efficient to supply the entire world market for some goods from only a handful of locations sometimes just a single location with international trade delivering those goods to customers in other countries.

For example, a recent shortage of semiconductor chips which seems, finally, to be easing has drawn attention to the role of photolithography machines, which use light to etch microscopic circuits on silicon wafers. (Any sufficiently advanced technology is indistinguishable from magic.) The world market for these, it turns out, is dominated by a single firm in the Netherlands, ASML, which has a complete monopoly on the latest generation of machines, which use extreme ultraviolet light to make circuits even more microscopic.

So how many factories does ASML have assembling these cutting-edge machines? One. (It has other factories producing subsystems.)

These economies of scale mean that no one country can reasonably produce the full range of goods required to operate a modern, high-technology economy. International trade is essential, and more essential the smaller the economy which is why Canada is far more dependent on imports than the United States, Belgium far more dependent than Germany, and so on.

Now, given access to world markets, even small countries can have full access to the benefits of modern technology; life in Luxembourg is pretty good. But unless we actually invent the Epstein Drive or something, the realities of transportation costs mean that Musks hypothetical Mars colony would have to be largely self-sufficient, cut off from the rest of the solar system economy. And it wouldnt have enough people to pull that off with anything like a modern standard of living.

As I said, I see Musk on Mars as a teachable moment, an unintended thought experiment that helps remind us of the positive aspects of international trade. Yes, there are downsides to globalization, especially to rapid change that can disrupt whole communities. But you really wouldnt want to live in a world without extensive international trade. And you really, really wouldnt want to live on another planet, cut off from the globalization weve created on this one.

Paul Krugman is an economist and a New York Times columnist.

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Paul Krugman: Musk, Mars and the modern economy - Berkshire Eagle