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Public‐Private Coproduction of Risk: Government Indemnification of the Commercial Space Launch Industry
Author(s) -
Brennan Timothy J,
Kousky Carolyn,
Macauley Molly
Publication year - 2010
Publication title -
risk, hazards and crisis in public policy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.634
H-Index - 8
ISSN - 1944-4079
DOI - 10.2202/1944-4079.1012
Subject(s) - government (linguistics) , liability , business , space launch , damages , incentive , coproduction , private sector , finance , economics , public relations , launch vehicle , law , engineering , market economy , economic growth , philosophy , linguistics , political science , aerospace engineering
Using rockets to launch communications satellites and other spacecraft poses risks to the uninvolved public, including persons and property under the flight path of the launch vehicle. The federal government plays a pivotal technical role during the actual launch by carrying out certain risk‐related procedures, thus causing third‐party risk to be jointly produced by the company and the government. In addition, under the Commercial Space Launch Act, the government partially indemnifies commercial launch companies for third‐party damages. We compare the indemnification policy to optimal liability rules under public‐private co‐production of risk. Under modest assumptions, shared liability created by the indemnification rules decreases the incentive of both parties to take care relative to the optimum. If care were observable, it would be preferable for the government to fully indemnify companies that take due care. The role of the government as an agent for third parties may qualify these findings.