Space Shuttle: A Case Study in Economic Analysis

This case study reports on an application of economic analysis provides examples of the methods draws conclusions and comments on lessons learned. It was developed from NASA and contractor primary references and from the authors experiences. In 1971, NASA was faced with a dilemma. The Space Shuttle Program, which had been established to substantially reduce the cost of space operations, was being designed to reduce principally transportation cost. Issues were surfacing which established that this transportation cost emphasis did not account for Shuttle development cost and the great bulk of the costs of a satellite program. OMB, furthermore, was imposing a peak funding ceiling which precluded developing the then - baselined configuration. Economic analysis performed by MATHEMATICA, Inc., succeeded in establishing the economic worth of Shuttle and pinpointing the most economical configuration. Of particular interest are the explicit treatment of uncertainty in the data base and the innovative methods used to graphically portray results.