How much is a planet worth?

by on February 6, 2011 at 5:27 am in Economics | Permalink

Greg Laughlin, via Kottke, interviewed by Lee Billings, tells us that there is a new equation:

This equation's initial purpose, he wrote, was to put meaningful prices on the terrestrial exoplanets that Kepler was bound to discover. But he soon found it could be used equally well to place any planet-even our own-in a context that was simultaneously cosmic and commercial. In essence, you feed Laughlin's equation some key parameters — a planet's mass, its estimated temperature, and the age, type, and apparent brightness of its star — and out pops a number that should, Laughlin says, equate to cold, hard cash.

At the time, the exoplanet Gliese 581 c was thought to be the most Earth-like world known beyond our solar system. The equation said it was worth a measly $160. Mars fared better, priced at $14,000. And Earth? Our planet's value emerged as nearly 5 quadrillion dollars. That's about 100 times Earth's yearly GDP, and perhaps, Laughlin thought, not a bad ballpark estimate for the total economic value of our world and the technological civilization it supports.

If you tweak the reflectivity of Venus a bit, you can get it up over a quadrillion dollars.  Sell short, I say, and buy some Mars.  The equation itself is at the third link, and it does not seem to be based on the idea of arbitrage.

Evan Harper February 6, 2011 at 2:28 am

Well, that makes sense. If you tweak the reflectivity of Venus a little, it turns into a viable Earth-like planet. Not saying it'd be a picnic, but you can imagine firing off some rocket capsules with extremophile microbes and terraforming it. I figure if one could capture the entire net present value of such a planet over the expected lifetime of the human species — which is a huge assumption, a v. dubious assumption I think — $then 10^<SUP>15</SUP> doesn't sound too unreasonable.

Actually, even Mars is an absolute steal at $14,000. I mean come on Dr. Cowen, forget about terraforming or even exploring Mars. Just imagine the intellectual property alone!! You could claim $0.10 on anything with a picture of Mars on it, sue every Hollywood studio for royalties… that's easily worth far more than $14,000. You don't even have to win these cases, just settle most of them at a modest profit. $140bil would be quite plausible… especially if you managed to sell near the top of an interplanetary real estate asset bubble…

anon February 6, 2011 at 8:53 am

Robert Costanza estimated the Earth to be worth about two hundred quadrillion dollars. The model is off by two orders of magnitude.

Will Sawin February 6, 2011 at 3:02 pm

Discounting never makes the future worthless, just very small worth. This is probably a linguistic error but may be conceptual, and thus significant.

Also "finite" discount rate should be "positive" discount rate, which is definitely a linguistic error.

Kumar February 7, 2011 at 4:29 am

Be right back, just calling Goldman to do a M & A on Earth.

IVV February 7, 2011 at 9:13 am

In this context, what does "owning" mean?

Anja February 7, 2011 at 10:52 am

Although I know that even the idea of selling a planet is an impossibility and that economists have only given our planet a price as some sort of strange experiment (I hope), it disgusts me to witness a number value being placed on our one and only home. There are some things in this world (including the world itself) that cannot be priced; they are given to us by nature and we could not survive without them. How can one put a price on life (although we do that with our current healthcare system, do we not)? I am new to the world of economics, however, and am perhaps wrong in my view that economists do not realize that there are actually some things that are deserving of the word “priceless”. I heartily agree with the comment by “Tommyvee”, in which he notes that if we sold the Earth for its market price, we would be sacrificing the home of future generations (and probably ourselves) and that we are lucky that our ancestors did not think in such a coldly analytical way or else we would not be here today. If we “civilized” beings balk at the idea of putting a price on the head of a human (i.e. slavery), what makes it okay to do the same for our planet? How far will post-industrial societies take this way of thinking before we doom humanity as a whole?

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