Interstellar trade

"Many critics of conventional economics have argued, with considerable justification, that the assumptions underlying neoclassical theory bear little resemblance with the world we know. These critics have, however, been too quick to assert this shows that mainstream economics can never be of any use. Recent progress in the technology of space travel, as well as the prospects of the use of space for energy production and colonization (O'Neill 1976) make this assertion doubtful; for they raise the distinct possibility that we may eventually discover or construct a world to which orthodox economic theory applies. It is obvious, then, that economists have a special interest in understanding, and, indeed, in promoting the development of an interstellar economy. One may even hope that formulation of adequate theories of interstellar economic relation will help accelerate the emergence of such relations. Is it too much to suggest that current work might prove as influential in this development as the work of Adam Smith was in the initial settlement of Massachusetts and Virginia?

This paper represents one small step for an economist in the direction of a theory of interstellar trade. It goes directly to the problem of trade over stellar distances, leaving aside the analysis of trade within the Solar System. Interplanetary trade, while of considerable empirical interest (Frankel 1975) raises no major theoretical problems, since it can be treated in the same framework as interregional and international trade."

Paul Krugman, Yale University. The theory of Interstellar trade.