“The Theory Of Interstellar Trade”, 2010-09-14 (; similar):
This article extends interplanetary trade theory to an interstellar setting. It is chiefly concerned with the following question: how should interest charges on goods in transit be computed when the goods travel at close to the speed of light? This is a problem because the time taken in transit will appear less to an observer traveling with the goods than to a stationary observer. A solution is derived from economic theory, and 2 useless but true theorems are proved.
…Interstellar trade…involves wholly novel considerations. The most important of these are the problem of evaluating capital costs on goods in transit when the time taken to ship them depends on the observer’s reference frame; and the proper modeling of arbitrage in interstellar capital markets where—or when (which comes to the same thing)—simultaneity ceases to have an unambiguous meaning…The remainder of this article is, will be, or has been, depending on the reader’s inertial frame, divided into 3 sections. §II develops the basic Einsteinian framework of the analysis. In §III, this framework is used to analyze interstellar trade in goods. §IV then considers the role of interstellar capital movements. It should be noted that, while the subject of this article is silly, the analysis actually does make sense. This article, then, is a serious analysis of a ridiculous subject, which is of course the opposite of what is usual in economics…
First Fundamental Theorem of Interstellar Trade:
When trade takes place between 2 planets in a common inertial frame, the interest costs on goods in transit should be calculated using time measured by clocks in the common frame and not by clocks in the frames of trading spacecraft.
Second Fundamental Theorem of Interstellar Trade:
If sentient beings may hold assets on 2 planets in the same inertial frame, competition will equalize the interest rates on the 2 planets.
Combining the 2 theorems developed in this article, it will be seen that we have the foundation for a coherent theory of interstellar trade between planets in the same inertial frame. Interstellar trading voyages can be regarded as investment projects, to be evaluated at an interest rate that will be common to the planets. From this point, the effects of trade on factor prices, income distribution, and welfare can be traced out using the conventional tools of general equilibrium analysis. The picture of the world—or, rather, of the universe—which emerges is not a lunatic vision; stellar, maybe, but not lunatic.
Is space the Final Frontier of economics? Certainly this is only a first probe of the subject, but the possibilities are surely limitless. (In curved space-time, of course, this does not prevent the possibilities from being finite as well!) I have not even touched on the fascinating possibilities of interstellar finance, where spot and forward exchange markets will have to be supplemented by conditional present markets. Those of us working in this field are still a small band, but we know that the Force is with us.
…This research was supported by a grant from the Committee to Re-Elect William Proxmire. This article is adapted with minor changes from a manuscript written in July 1978.
View PDF: