Observing that :

- Asgardia was established from the ideal of scientific excellence ;

- There has never been, in the history of mankind, the opportunity to carefully design a completely new economic system ;

- The present topics focus mainly on currency and resources without proper framework ;

I wish to weigh in on the discussion of Asgardian economics, presenting my knowledge of economic theory for the Asgardian greater good.

Since Asgardia is supposed to establish itself as a beacon for scientific excellence, I propose the following : we construct, from generally accepted economic theory, a framework in which we would like the Asgardian economy to operate, from which we can futher derive practical implementation. Also, considering the ability of a scientific society and the eagerness with which fellow Asgardians have promoted the use of a digital block-chain currency, we must consider a framework that is flexible enough to allow experimentation.

But first, to create our base economic framework, we must determine our core value that determines the theoretic framework we will apply. We are confronted with three possibilities for how we want the Asgardian state to operate:

1 A pure liberal (libertarian) state, in which the government collects a very limited budget to support its main tasks (i.e. security and justice), economic policy is based on the Laissez-Faire principle;

2 A Welfare state, in which the state allows for individual decision making, private ownership and entrepreneurship but tries to limit (or completely eliminate) externalities and market failures and protects its citizens against the hardships of the market;

3 A communist/Marxian state, in which the state functions as a benevolent social planner, owns all properties and determines all inputs and outputs.

Note that this is in essence a philosophical question that ought to be presented before the whole Asgardian population.

Yet, for the sake of the argument I will propose the following:

- Given that Asgardia ought to improve scientific research and that there will be large costs for the promotion of space travel/exploration, a pure liberal state will not suffice;

- Given that current Asgardians are spread out over planet Earth (and with the future in mind, will be spread out across the galaxy), a central planner won’t suffice either;

- Lastly, a pure liberal state assumes externalities and market failure do not exist and a central planner assumes perfect knowledge, thus a welfare state system can be perfectly replicated if certain parameters in the models are adapted accordingly.

Therefor I propose the ‘Welfare state’ as our core value to further the analysis.

To continue the construction of a fundamental economic framework for Asgardia, the main actors of the economy must be revised. I will derive these main actors from Macroeconomic theory. Macroeconomic theory distinguishes between Short-run equilibrium and Long-run equilibrium. These can be represented in the following (basic) formulas:

    SR: Y = C + I + G + E – Z

    LR: Y = f(K,H,A,L)

Where we have:

Y: aggregate output or more generally GDP;

C: private consumption

I: private investment

G: government expenditure

E: export

Z: import

F(.): the production function (which is usually determined as a Cobb-Douglas function, but that is not necessary at this point)

K: the capital stock (with which is meant the total of infrastructure, machines, etc, not standard idea of capital in the form of financial assets)

H: human capital, mostly represented as education and experience

A: technological progress

L: labour

From this we can derive some main actors:

  1. Consumers (or more clearly: the citizens of Asgardia), who: consume, invest in housing, invest in their education and supply labour;

  2. Firms: that invest in the capital stock, invest in research and development and demand labour;

  3. The government: that applies taxes, transfers, invests in public capital such as roads, pays for public consumption and invests in human capital (insofar it pays for public education) and public research (either through government agencies or through public universities);

  4. Foreign countries: determine the terms for export and import;

Our further analysis should involve the determinants for these actors. Note that so far the question of money has not been touched! I would like to hear some opinions first, before I continue my analysis of an appropriate framework. (Also, I have exams so I have but limited time at the moment xD )

One humanity, one unity!