RSE #31
For a small market, development costs have a huge impact. A ten billion dollar NASA development program for a 100 flight vehicle can add 100 million dollars to the launch costs of each vehicle, not to mention the fact that after development NASA will want to operate the vehicle itself. The original Space Shuttle studies called for 60 flights per year per vehicle to spread development cost out. Harry Stine in his book "Halfway to Anywhere" makes the same mistake in assuming a high launch rate for a Single Stage to Orbit vehicle. The current market is about 30 flights per year world wide.
The high tech launch vehicles that NASA loves also have high maintenance costs. Currently NASA has a "marching army" of 5000 technicians to maintain the Space Shuttles. High maintenance costs have been the death of such vehicles as the B58 bomber, the SR71 spy plane, and steam locomotives. Most SSTO models assume very low maintenance costs, yet a SSTO vehicle will be a very delicate, high tech, high maintenance vehicle. For economic operation you should always assume minimum wage third world maintenance workers who break things and forget to remove safety covers, and the vehicle should be robust enough to keep working even if compromised.
The biggest cost of high priced development programs is of course is that it keeps a private industry from developing.