I spent a fair chunk of yesterday sitting out on the patio reading Elizabeth Moon’s Trading in Danger. It should surprise no one that I absolutely adored it. A scifi adventure novel premised upon the profit to be gained from interstellar trade, you say? Why yes that does in fact sound like something I’d quite enjoy reading. (And, like many of Moon’s books, it features a strong female protagonist in a universe where gender is irrelevant to your qualifications for any job. I think I’m in love!)
The bad news about the future is that there are still tariffs. Looks like we’re going to develop an FTL drive before we actually achieve free trade. (Sadly, I would consider this to be a rather realistic proposition.) But the book manages to create one of the few scifi universes I’ve encountered where the idea of backwater worlds still using horse-and-plows for agriculture actually made sense. In Serenity, I was never quite able to accept the whole Wild Wild West theme– it was based on planetary cultures deliberately choosing to embrace a cowboy lifestyle rather than the cowboy lifestyle making sense given the resources available. But Trading in Danger depicts an economic and political system for the galaxy where encountering a mix of archaic farming techniques and space-age technology makes perfect sense.
In addition to that, other notable features of the book include: 1) A galactic corporation with a monopoly on the instantaneous communication market — and its relentless rent-seeking behaviors in order to maintain that monopoly serve as the backdrop for the events of the series; 2) A constant evaluation of opportunity costs, struggles of where to allocate cash on hand and when to take on a loan given the prevailing interest rates, and arguments over how credit ratings apply to sub-entities of corporate structures. The characters are traders, after all, and thus their internal struggles over where the best trading opportunities are to be found are prominently featured; and, 3) Constant wrangling over contract law, such as how breach and damages are to be determined when a system civil war breaks, or what indemnity clauses are to be included in the final text of an agreement.
And last, but not least, there is ample quoting from the IUCC. That’s right — the Interstellar Uniform Commercial Code. It made me so nostalgic for Martha Ertman’s Contracts course; I can totally imagine Prof. Ertman chilling out on a starship somewhere waxing rhapsodic about the default contract terms provided for under IUCC Art. 347.2.
So of course the whole time I was reading the book I had Krugman’s essay “A Theory of Interstellar Trade” in mind. (It’s worth reading simply for its groan-inducing jokes and references to science fiction, physics, and academia. Such as setting up his graphs so that his line is named ET.)
“If trading space vessels move at high velocities, we can no longer have an unambiguous measure of the time taken in transit. The time taken by the spacecraft to make a round trip will appear less to an observer on the craft than to one remaining on Earth. Since an interstellar voyage is an investment project which must have a positive present value, there is obviously a problem in deciding which transit time to use in the present value calculation.”
The essay’s not directly applicable to Elizabeth Moon’s universe, as Krugman assumes (slightly more realistically) that FTL travel is not possible, and thus deals with the relativistic effects that approaching-light-speed travel causes. With time distortion + lack of instantaneous communication, can interstellar arbitrage result in equalized interplanetary interest rates? Yes, actually — well, assuming we can stay within the bounds of special relativity. Krugman makes no representations as to how his theory might apply to non-inertial reference frames.
Although Krugman rejects FTL and instantaneous communication, he does assume that even if our technology will not have discovered how to break the light speed barrier, our economic systems will have discovered the near-equivalent: perfect forecasts on the price of goods over indefinite periods of time. In Trading for Danger, nothing close to this exists — which is a good thing, as it’s that very uncertainty over prices that provides a fair share of the drama and obstacles faced by the characters. The traders must make months-long trips between star systems based upon speculation on where the most profitable transactions are to be had, and if you guess wrong, you’re down a whole lot of time and credits. (Yes, they do have FTL — but given acceleration and deceleration times, it’s no quick jaunt to go between stars.)
So I’m going to add a Third Fundamental Theorem of Interstellar Trade to Krugman’s article: for good science fiction, you need to screw around with the laws of physics as the plot demands, but hold your laws of economics constant. Imagining FTL is more fun than imagining perfect futures markets.