I used to blindly accept the intrinsic value concept until my blind eyes were healed over at Rand's Blog. Value only exists because people assign it. Nothing has an value apart from people. Putting two words together (intrinsic + value) that independently do have a reasonable meaning is an example of the intellectual idiocy that happens when juvenile thinking is allowed to flourish.
Intrinsic just means that things have attributes. Value is an attribute. The problem is that 'intrinsic value' is a formulation that includes a contradiction. Value doesn't exist without a person to assign it. It can never be objective as the definition of intrinsic implies. Different people assign different value to things based on personal preference and situations. It's easy to come up with some formulation of value to assign to a thing, but even if useful, that is not it's intrinsic value. There is no such thing. So what does that have to do with the focus of this blog?
Martian real estate has no intrinsic value. It does have value. How do we determine what that is? For many it's simple: zero. For those of space settlement that value is $100 an acre. I say it could be both zero and millions of dollars a hectare (time to stop using mile and acre in space.) I will explain.
Suppose enough people agree to the terms of a charter that a reasonable claim is just one square kilometer per person, they get exactly one and only one claim per rock, and only by stepping on the surface of a world can they take legal possession of it. How much is that land worth to that claimer? To the bank? To a potential buyer? What factors help determine that?
It is reasonable to assume the claimer would assign a value near the cost of getting that land which would include travel, supply and loan costs. The banks assignment of value is simple... whatever the market will bare plus their profit. Now we come to the heart of it. There is only one objective determination of value. That is only determined when a thing is freely traded. So what is the value to the buyer?
Well the buyer paid expenses to acquire their 'free' sq. km. To acquire more, since they are legally bound by a charter they agreed to, would mean buying from others that would value their land at a similar cost. They might buy land from others that are not members of the charter, diluting its overall value, but going beyond that charter means they've lost a lot of potential buyers. Expect it to happen but not change things all that much. It just muddies the waters. By violating the charter they lose title to the one sq. km. claim which could then be claimed by someone else that did follow the groups rules and they have a cloud on the title to other land making it more difficult to trade and potential of being lost in legal battles. Legal battles for charter land is defended by all members of the charter (all now rich enough, even if they started with nothing, to hire some really good law firms. Think army of a vast legion of lawyers.)
Suppose they divide that claim up into 100 hectare plots for development and resale. The value of those should then be about 1% of the whole, plus development costs. We can assume those development costs will be about the same regardless of whether the buyer or seller pays them. The difference is that the seller can pay them before the buyer arrives making the best use of time. Also, the buyer is not likely to buy a developed piece of property unless it has had an independent inspection. Lives are involved.
So lets see... we're going to reuse the assumption of $40m as travel cost (we'll have a post on that later with some of the companies and costs likely to be involved) and assume the bank agrees to one million per hectare for the first fifty sold giving them a 25% profit (over some period of time where shorter is generally better for both the bank and claimer/seller.) Assume with all costs and a small profit included that hectare ready for occupancy could be sold for $2m (make it more if you like) would the buyer pay it. Meaning would they accept that value to them for it? What are the alternative choices?
1) No. They pay $40m to travel to mars and claim one undeveloped sq. km. They must buy or rent a place to live immediately upon arrival. This will cost them more than the package deal that includes title to a new home. A loan will be much harder to get because the bank will want a large down payment to compensate for the one million dollar down payment they would have gotten from the seller of the developed hectare if this chooser had made the next choice...
2) Yes. They pay nothing to travel to mars and claim one undeveloped sq. km. The bank that has a lien on their claim will find buyers for the plots they develop for resale.
I don't know. It seems like a tough choice. Go ahead, give me 3) et. al.