As a person credited with launch service privatizing legislation by Congressman (Ron Packard, R-Ca), in his introduction of my congressional testimony on private space development, the Congressman who sponsored that legislation, let me weigh in:
If your own money is at stake, you approach risk management in a very different way than when someone else's money is at stake.
Public funds for development results in a very different sort of risk management than private funds for risk management.
The typical argument for public funding of development is that the risk management under private funding is to, basically, not bother taking the risk at all -- and that therefore the public must.
Well... this has as its unspoken assumption that the downstream benefit is so great that it is clearly justifiable to take the risk. OK, let's go with that assumption and then let us further ask: Why is it that the capital markets are failing in their primary reason for existence: To manage investment risk?
The folks arguing for public funding of development need to provide answers for that question taking the form either of, a renunciation of the primary principle of capitalism -- since the public becomes more competent at investment the less risk there is -- or, proposals to correct the statutory regime under which investment is made so that the capital markets function properly.
In my role promoting private over public investment in launch services development, I was aware that there was, indeed, a capital market failure that needed to be fixed through statutory changes in the tax system. Yet I proceeded to promote private over public investment. Why? Because in the foregoing discussion of trade offs between private vs public risk management there goes unspoken the risk that a positive feedback system can easily develop where political action is funded by tax dollars, however indirect. This positive feedback system results in a body politic that excludes from political influence those who are not receiving tax dollars -- such as inventors in the garages who are trying to bring even incremental improvements to the market. Moreover, this lack of political influence is compounded by the fact that such inventors are seen as business risks by those whose political action is predicated on the technical ignorance of politicians -- hence government funds not only fund political action, but actively suppress improvement.
There is simply no way out of this mess but to, first, turn off the funding sources if at all possible, so that it is possible to then address the real underlying capital market failure that results in lack of investment in viable technologies of great value.
The role guys like Musk should be taking on here is to point out the capital market failure and recommend appropriate fixes in the statutory environment so that there is no place for the public sector rent-seeking of government funded political agencies, posing as technology companies, to hide.
One year after I gave my testimony before Congress, I did make a proposal for just such a reform in the tax and regulatory code in the form of a white paper which I sent to various think-tanks in the beltway. The problem is those think-tanks are, themselves, now funded by the same positive feedback loop that actively supports existing cash flows and their expansion -- which includes avoiding any reforms that would correct the capital market failures to which technosocialist political agencies point to justify their receipt of taxpayer money.
Here's what Musk needs to promote:
Replace all taxes on economic activity with a single tax on net liquidation value of assets. This is rational in that those assets enjoy government protection in a manner similar to the protection provided by property insurance corporations. In other words, taxes become a service fee equivalent to the insurance premium paid to a mutual insurance company in which all citizens are stockholders, in exchange for the lawful protection of the assessed property rights. Economic activity -- as a form of humanity in action -- is not taxed, nor is human capital arising from, say, investment in education (ie: no slavery direct or indirect).
Liquidation value is chosen for a very specific reason: Assessment can be objectively accomplished through bids held in escrow. The monetary base can then be viewed as the "mark to market" or liquidation value of assets in the economy, with the money supply defined by the bids in escrow. An owner can accept an escrowed bid at any time, thereby liquidating his property right and transferring ownership to the high bidder. Tax liability can be deferred as long as the total liability accrued does not exceed the liquidation value. Once it exceeds the liquidation value, the transfer of ownership is executed and the liability is paid. The high bid in escrow for a given property right is _not_ assessed as a taxable asset, but other, lower, bids, are taxed.
This isn't the only statutory reform needed but it is the most important to get the capital markets moving and remove taxation of income and capital gains resulting from high payoff risk taking.