A Herculean Task? Economics, Politics, and Realigning Government in the Case of U.S. Polar-Orbiting Weather Satellites

In 1994 one of the most radical institutional restructurings in the U.S. government’s provision of critical weather information took place after eight unsuccessful attempts. A presidential decision directive merged weather data collection by satellites operated by the Department of Defense for military operations and satellites operated by the Department of Commerce for civilian weather forecasting. Such radical restructuring involving government agencies with different objectives, economic constraints, and operating cultures is rare. This paper reviews the decision that led to “convergence,” discusses economic arguments advanced for the merger, and finds that the problem of an incomplete contract, from the perspective of contract theory, is the fundamental challenge confronting the new structure. The paper also discusses the implications of the new organizational structure for incentives to engage in research and development in pushing the frontier of space technology, and the increasingly large role played by satellites in collecting not only weather but also climate-related data.