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Hall of Shoulders

Space Economics

Akhil Rao

Akhil Rao is known for Orbital-use fees, congestion externalities, Pigouvian debris pricing. **Affiliation:** Middlebury College (Department of Economics); PhD University of Colorado Boulder Akhil Rao is the economist who turned "the orbital commons" from a metaphor into a calibrated, quantified externality problem with a priced solution. His work supplies the Hall of Shoulders with the rigorous welfare-economics lens for orbit use: open access drives excess collision risk and runaway debris, and the economically efficient remedy is a time-varying Pigouvian fee that forces operators to internalize the costs they impose on each other.

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Adversarial questions for candidates

The falsifiable questions this brain puts to a dissertation candidate. They seed the pre-Conclave initial review whenever a candidate's topic matches the Space Economics lens.

  1. 1

    Have you specified the externality dynamically, or only statically? If your model prices collision risk but ignores the forward-propagating debris stock each launch creates, your "optimal" fee is mis-specified. Show me the intertemporal external cost, not just the contemporaneous one. (Falsifiable: does the model's fee schedule vary with the projected future debris stock, as in Rao & Rondina 2025?)

  2. 2

    Does your proposed instrument change behavior, or only the physical environment? A debris-removal subsidy or PMD mandate that lowers the effective cost of launching can increase launches and offset its own benefit. Run it through a coupled model and show me the equilibrium launch response, not the physics in isolation. (Falsifiable: when behavior is endogenized, does the intervention still improve welfare, or does it backfire as OPUS predicts it can?)

  3. 3

    What market structure are you assuming, and does your fee survive it? If you calibrated to atomistic competitive operators but the real market is two or three constellations, your fee is likely mis-calibrated, because concentrated operators already restrict launches strategically. Re-derive the optimum under the actual oligopoly. (Falsifiable: does the welfare-optimal fee under oligopoly differ from the competitive fee in your own model, per Guyot, Rao & Rouillon 2023?)

  4. 4

    Have you distinguished physical sustainability from economic optimality? "Debris stays below threshold X" is not a welfare statement. Tell me whether your target is allocatively efficient or merely physically survivable, and quantify the welfare gap between them. (Falsifiable: report both the debris path and the welfare/present-value path; do they agree on the preferred policy?)

  5. 5

    How is your instrument implemented across a commons with no sovereign? A unilateral national fee invites launch leakage to non-fee jurisdictions. Show me why your mechanism is incentive-compatible across launching states, or concede that you have an economics result without a governance result. (Falsifiable: does the proposal include a credible cross-jurisdiction enforcement or phase-down structure, analogous to Montreal, or does it assume a single regulator that does not exist?)

Core Concepts & Space Translation

Orbit as a congestible, exhaustible common-pool resource

Rao's foundational move is to classify Earth orbit precisely in the language of resource economics: it is rival in use (one operator's satellite raises collision risk for all), non-excludable under current institutions (open access), and exhaustible in a strong sense (a debris cascade can render an orbital shell unusable for generations). This is not merely "tragedy of the commons" rhetoric; it is a formal claim about the structure of the resource that dictates which policy instruments can work. Key work: *The Economics of Orbit Use: Open Access, External Costs, and Runaway Debris Growth* (Rao & Rondina, JAERE 2025, 10.1086/730695); doctoral dissertation *The Economics of Orbit Use: Theory, Policy, and Measurement* (CU Boulder, 2019).

Space translation

See Space Applications below for how this framework translates to contemporary space governance, drawn directly from the dossier's applied-literature review.

Dynamic collision-risk and debris externalities

The externality is not static pollution; it is dynamic and forward-propagating. Each launch raises the present collision hazard *and* seeds future debris that raises hazard for decades. Profit-maximizing operators under open access ignore both the contemporaneous risk they impose and the intertemporal debris they create. This dynamic structure is why naive static taxes are wrong: the efficient instrument must anticipate the future debris stock. Key work: Rao & Rondina (JAERE 2025); *An integrated debris environment assessment model* (Rao & Letizia, arXiv 2205.05205, 2022).

Space translation

See Space Applications below for how this framework translates to contemporary space governance, drawn directly from the dossier's applied-literature review.

Orbital-use fees as the Pigouvian remedy (price beats quantity / technology)

Rao's signature policy result: the economically efficient response is a corrective per-satellite-year fee equal to the marginal external cost, not active debris removal alone, not deorbit mandates alone, and not quantity caps. In the headline calibration, the optimal fee rises from roughly USD 14,900 per satellite-year in 2020 toward roughly USD 235,000 by 2040, and adopting it could raise the present value of the LEO industry from about USD 600 billion (open access) to about USD 3 trillion. The gain is allocative: pricing reshapes launch behavior, where engineering fixes do not touch the incentive. Key work: *Orbital-use fees could more than quadruple the value of the space industry* (Rao, Burgess & Kaffine, PNAS 2020, 10.1073/pnas.1921260117).

Space translation

See Space Applications below for how this framework translates to contemporary space governance, drawn directly from the dossier's applied-literature review.

Coupled physico-economic / integrated assessment modeling

Rao insists that policy claims about orbit be tested in models that join an astrodynamic debris propagator to forward-looking economic agents who respond to costs and policy. A purely physical model cannot predict behavioral responses; a purely economic model cannot track the environment. His OPUS model (Orbital Debris Propagators Unified with Economic Systems) is built precisely to expose *counterproductive* policies, interventions that look good physically but induce behavioral responses that worsen the environment. Key work: *OPUS: An Integrated Assessment Model for Satellites and Orbital Debris* (Rao, Moretto, Holzinger, Kaffine & Weeden, arXiv 2309.10252, 2023); Rao & Letizia (2022).

Space translation

See Space Applications below for how this framework translates to contemporary space governance, drawn directly from the dossier's applied-literature review.

Market structure matters: oligopoly interacts with the externality

Orbit use is increasingly dominated by a few mega-constellation operators, not atomistic price-takers. Rao shows that oligopolistic competition is its own distortion: a small number of large operators already restrict launches strategically, so the relationship between the externality and the optimal fee is mediated by market power. A fee designed for a competitive market can be miscalibrated when the market is concentrated. Key work: *Oligopoly competition between satellite constellations will reduce economic welfare from orbit use* (Guyot, Rao & Rouillon, PNAS 2023, 10.1073/pnas.2221343120).

Space translation

See Space Applications below for how this framework translates to contemporary space governance, drawn directly from the dossier's applied-literature review.

Physical sustainability is not economic optimality

A recurring Rao distinction: an orbit can be physically sustainable (debris not growing without bound) yet economically inefficient (too few or too many satellites relative to the welfare optimum), and vice versa. Governance targets framed only as "keep debris below threshold X" miss the welfare question entirely. The efficient path prices the external cost rather than chasing a physical quantity alone. Key work: Rao & Rondina (JAERE 2025); *The Long-Run Economics of Sustainable Orbit Use* (Guyot, Rao & Rouillon, Routledge Handbook of Space Policy, 10.4324/9781003342380-17).

Space translation

See Space Applications below for how this framework translates to contemporary space governance, drawn directly from the dossier's applied-literature review.

Public infrastructure and market formation in thin space markets

Rao's newer line treats the space economy's other failure mode: high fixed costs, thin non-government demand, and non-market motivations mean many space markets cannot self-sustain. He offers a graphical framework for when public infrastructure investment crowds private entry *in* versus merely substituting for absent demand. This complements the orbit-pricing work: pricing corrects over-use of a scarce commons; infrastructure analysis addresses under-provision of thin markets. Key work: *Public Infrastructure Investments for Space Market Development* (Rao, arXiv 2511.00935, 2025).

Space translation

See Space Applications below for how this framework translates to contemporary space governance, drawn directly from the dossier's applied-literature review.