Characterized by interstellar trade and interstellar finance, an interesting interstellar economics is discussed. Suppose both Earth and Mars need efficacy maximization; there may exist Pareto optimality between Earth and Mars, where both Earth side and Mars side have optimal equilibrium among their goods market and money market. Therefore, an economics with political economics would occur between the Earth and Mars, so that our knowledge of economics with political economics could extend to Earth-Mars interstellar economics.
TopIntroduction
In the future, one might find that interstellar economic activities need interstellar economics. Here we provide a foresee exploration.
In 1978, economist Paul Krugman wrote a paper titled The Theory of Interstellar Trade that was published in 2010 (Krugman, 2010). In the paper, Krugman analyzed the effect of travel near the speed of light on interest rates and interstellar trade, where he extended interplanetary trade theory to an interstellar setting. He was 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 two useless but true theorems are proved.
Interstellar trade is very complicated. Time passes slower to the observer traveling at the speed of light than to anyone who stays at home. While one traveled for a year near the speed of light, a hundred or maybe a thousand years would have passed on earth. If one came back after a year, one’s savings would go up and one might be suddenly a rich man. Therefore, the interest rate can only really depend upon the cost of fuel needed to ‘travel into the future’.
Supposing that Musk succeed to move 100 million people to Mars in the future, where we set up Bank of Mars (BoM) and we also have the Bank of Earth (BoE), then we can discuss the Earth-Mars trade and finance.
Interstellar Trade and Finance
Just like America-Africa trade happened across the turbulent Atlantic Ocean hundreds of years ago, people might cross the vast starry space for Earth-Mars trade in the future. The situation resembles high risk in interstellar trade, as shown in Figure 1.
Figure 1. Past America-Africa Trade versus Future Earth-Mars Trade
The turbulent Atlantic Ocean once caused people to experience failure and sadness, and the vast starry space might also cause immense losses in the interstellar trade.
In the Earth-Mars trade, at the beginning, Earth sells Mars necessities while Mars provides Earth with luxuries. With the development of the Martian industry, there may be Martian industrial products sold to Earth, but there is still a need for continuous daily supplies from Earth to Mars.
The BoE settles the Earth-Mars trade in Earth dollars, while the BoM settles in Mars dollars. If Earth Dollar: Mars Dollar = 1:1, the Earth-Mars trade is similar to a single currency system. However, with the implementation of trade, it will inevitably deviate from the initial value of 1:1, thus forming a dynamic changed exchange rate system, like the case of two countries on Earth.