Tuesday, April 3, 2012

Space Homesteads: Numbers and Risk

Settlement into our solar system has the potential of creating an economic expansion the world has never before seen. While nobody has found the magic bullet that makes space development work beyond earth orbit (yet) real estate alone might be enough to provide that foundation. Mars, the nearest analogy to earth in our solar system with all the raw materials for an industrial society, has 144 million square kilometers of claimable land. No government owns it, has any authority over it, or has the right to grant it to others; but they can recognize reasonable claims by possession which is the legal precedent.

A settlement charter [revised] creates a legally enforceable contract for it's members. The more members the easier it will be to defend from outside legal attacks. I think a single square kilometer claim to any individual by possession creates a foundation for societal wealth on this new world, but perhaps I'm wrong about the right size of a claim. So let's pick some numbers.

It's important that the claim have enough value that banks are willing to take the risk of financing colonists (see my reply to this). This means some precursor events must occur. First a small group of people must go to mars and show that it is possible to live off the land there. After fifty years of humans in space, we know we could support a small group indefinitely, but settlers will need to know they can get all the requirements for life (food, water, air, power, etc.) from local resources.

Elon Musk thinks he can get the cost per person to the surface of mars down to half a million dollars. Assume he's off by ten and it actually costs $5m per person to the surface of mars with a couple of years of supplies.

$5m is a lot of money, but banks could and would finance the trip to mars for healthy, able bodied persons if their risk was covered by a good return. Let's assume the settlement charter allows each individual to make a one time claim of 3 sq. km. (3 million sq. m.) A mortgage loan with an obligation of selling 2 million sq. m. over 20 yrs would not be unprecedented. The bank would get the unsold property should the borrower default which they could then develop themselves with local contractors. So break even would be $2.50 per sq. m. ($5m/2m sq. m.) What profit would tip the balance so banks would take the risk? I don't know, but for the sake of argument let's say it's ten times break even, or $25 per sq. m.

The colonist can develop various sized plots for resale and has an obligation to pay the bank $25k for every 1000 sq. m. of plots sold (of the first two thirds of their property.) So for every colonist the bank provides a mortgage to, which cover transportation costs and supplies for a new life, the bank makes a $45m dollar profit over 20 yrs. An average of over $2m a year from a $5m total investment.

The colonist, if they do nothing else but develop land, gets a lifetime of income. The local economy gets a boost as the material and labor cost of development is rolled over on each newly developed plot (for these calculations we assume the $5m includes enough extra to grease the wheels of development.)

The colonist will want to take enough resources to get a good start on a new life but they don't have to make a down payment on the bank loan. You won't have to be rich to start a new life on mars. Any healthy young person will be able to go. The bank will get their down payment from the habitat sold to the new colonist (waiting for them when they land) by a colonist already on mars.

Down the line, martian babies put the economy into turbo boost mode.

Not everyone has to join this settlement charter. The members can go about their business and pretty much ignore any other group. The pace of growth, which is positively enforced for all involved, will ensure they have an advantage over any other groups that don't appreciate the power of liberty and ownership.


Not as I've described above. The reason is we can't send enough colonists so that each existing colonist will have the dozen or so buyers they need every year to satisfy the loan terms. But we can modify the terms so that it can work.

As described above, the colonists would probably have enough buyers over the twenty years to provide them with a good income, but in the end would default with the bank getting title to the remainder of their property. This is not the intention of the above plan.

To fix it, we enlist the buying power of those that will never get the chance to actually go to mars. Since they can't go to mars, they can't claim land by possession. But they can buy land from those that have claimed some. Since this is in addition to the mortgage obligation of the colonist, we can lower the banks return to just double, or $5/sq. m. for this unimproved land, all of which goes to the bank to satisfy the borrowers obligation of selling two of their three sq. km. This could result in the bank being paid off long before the 20 year mortgage is up. The bank would have the money to provide a settlement loan for two more colonists. The borrower would own their property with no more liens.

This isn't just a novelty purchase. The settlement charter says that property rights are absolute and total. Nobody can take it away from you or tax it away from you. You have to agree to any use of that land including payment for that use. It's yours until you voluntarily sell it.

The one thing we absolutely need is a can do attitude.

Update: via Mrmandias we have this interesting discussion. My main problem with the discussion is they turn the history of law on its head by talking about govt. land grants. The govt. can not grant any land; THEY DO NOT OWN IT. It's all unclaimed property. Individuals, especially legally through a settlement charter they all agree to, can make small reasonable claims and have those claims held up in court because they are made in the only legal way... by possession.

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