http://economicsdetective.com/ Let's talk about money. Recall the simple economy developed in "Gains From Trade". We had two people, Jane and Gilberto-Rahoule, who were trading bananas and fish. There wasn't much reason for Jane and Gilberto-Rahoule to use money, since they were only trading with each other, and they were doing it simultaneously. Let's imagine, however, that Jane and Gilberto-Rahoule do have money on their little island, and that they both accept it in trade for their goods. Jane gives Gilberto-Rahoule a banana in return for a dollar, and then Gilberto-Rahoule gives Jane a fish in return for that same dollar. The result? Jane and Gilberto-Rahoule have traded one fish for one banana just like they did before, but with an intermediate step. Seems pretty useless in this situation, but it segues nicely into one of the older laws in Economics, Say's Law. Say's Law states that products (like bananas) are paid for in products (like fish). It was popularized by Jean-Baptiste Say who said, "Money performs but a momentary function in this double exchange; and when the transaction is finally closed, it will always be found, that one kind of commodity has been exchanged for another." But if you're just trading things for other things, why add an intermediate step? Here's another example. Let's say that bananas only grow in the warm months, and fish only migrate past the island in the cold months, and that both of these foods go bad at the end of the season. Now, without trade, Jane will be underfed in the cold months because she is no good at fishing, and Gilberto-Rahoule will be underfed in the warm months because he is no good at picking bananas. Let's say that it's the summer solstice, and both islanders know that at the winter solstice they will be rescued by a ship. There's going to be a warm season and then a cold season, and then rescue. Gilberto-Rahoule says to Jane, "Look, I'm having trouble picking bananas this warm season. How about you give me some of your bananas this season, and I'll give you some fish next season?" to which Jane replies, "No. I'm not giving you bananas because I can't trust you to give me fish. There's nothing to make you keep your promise." So in this situation, there won't be any gains from trade because there won't be any trade. However, now let's imagine that Gilberto-Rahoule has some American greenbacks in his pocket. He and Jane know that they will be able to spend this money after rescue. Gilberto-Rahoule can offer greenbacks for bananas in the warm months, and then he can offer fish for greenbacks in the cold months, and Jane will take the deal because she knows that greenbacks have real value. The existence of money has allowed our islanders to trade perishable goods across tim ... https://www.youtube.com/watch?v=InwVM6s7WoY

To download the episode, read the full transcript, and access all the links we mentioned, go here: http://economicsdetective.com/2016/11/space-debris-governance-economics-space-alex-salter/ To subscribe to the podcast on iTunes, go here: https://itunes.apple.com/ca/podcast/economics-detective-radio/id914356499?mt=2&uo=4&at=11lSv3 To subscribe on Android, go here: http://subscribeonandroid.com/economicsdetective.libsyn.com/rss To subscribe on Stitcher, go here: http://www.stitcher.com/s?fid=53265&refid=stpr So Alex, let’s start by talking about space debris. What is it and why does it matter? Salter: So space debris is basically junk in space that no longer serves any useful purpose. So as you can imagine, since the first piece of space debris launched up in 1957—which was the rocket body from Sputnik I—a lot of orbits around the Earth, especially low Earth orbit, have become kind of cluttered with space junk. And the reason it gets cluttered is because no one has an incentive to clean it up. It’s a problem because a lot of this stuff is big enough and moving fast enough that if it strikes something like a communications satellite, it can take it out. So the probability of a collision right now that will cause serious damage is currently low, but there are a lot of worries among scientists who study the problem that as debris occasionally collides with more debris, you get a sort of snowballing effect of the clutter. So if we’re going to get a handle on it, it needs to be earlier rather than later. Petersen: I think intuitively it seems like the sky is so big and satellites are so small that we’d never have to worry about collisions. So why is that not the case? Salter: So there’s obviously quite a bit of room up there, but the problem is that some orbits are more valuable than others. In particular, geosynchronous orbit, which is I think 36 thousand kilometers above the Earth, is a really valuable place for specific satellites. And also low Earth orbit is a valuable place for specific satellites. Now, there’s still a lot of room there, but it’s significantly restricted. If my communications satellite is taking up a particular orbit, your satellite can’t be in the same place. So there’s only so much of it to go around, and again, what we’re really worried about is debris colliding with something, which creates more debris, which can collide with more stuff. We’re really worried that snowball effect, which is sometimes called the Kessler syndrome after the scientist who first wrote about it. Petersen: So the odds of a single collision might be low, but given one collision, it becomes much more likely that we’ll have two and three and four—a chain reaction of collisions. Salter: Exactly. So right now the probabili ... https://www.youtube.com/watch?v=ituWU1Sy1ao