The positive externalities that have arisen from investment into NASA are well documented in economics. Estimates have pegged the return at ratios as high as 153:1, where 1 billion dollars of non-defense Federal budget reallocated to NASA would result in 153 billion dollars of growth. Throughout what is known as the Space Coast, the introduction of NASA has resulted in externalities such as better schools, better infrastructure, and new industries that support its mission.
However, the negative externalities associated with the reduction in funding at NASA are much less documented. A USA Today article discusses one such case related to the demise of the Shuttle Program. It looks into the possible externalities that may result from the program's end. One couple, the man a rocket scientist, the wife a small business owner, are feeling the brunt of the program demise on two fronts. The man is one of 8000 employees who will have lost their NASA jobs and the wife runs a small business employing 13 people that makes memorabilia related to the Space shuttle. With no more launches, her business may falter, and she is looking into the possibilities of layoffs or shutting down. With one reduced income, they may have no choice but to leave. The wife puts it best, "It's bad, because we don't want to leave here," says Mulberry, who has two children in high school. "If we leave here, 13 people lose their jobs. A lot of people lose if we leave." While the government may offer severance to the rocket scientist, the losses of those employed at and dependent on this small business are not internalized, a classic case of a negative externality as we have discussed.
For a link to an article discussing the positive externalities discussed, look at The Economic Impacts of the Space Program, by Jerome Schnee.
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