How does SpaceX’s economic philosophy substantially drive down the per-launch cost?

It operates with a philosophy aimed at vertical integration and mass production of components.

A key driver for NASA's reliance is the profound cost advantage SpaceX introduced by operating under a different economic philosophy compared to traditional aerospace contracting. Traditional models often relied on cost-plus structures, where contractors were reimbursed for expenses plus a fee, leading to high costs for unique government hardware. In contrast, SpaceX employs vertical integration, meaning they control more of the supply chain internally, combined with a focus on mass production of components. This strategy inherently lowers the variable cost associated with each subsequent launch, creating substantial cost savings that influence NASA’s budgetary planning significantly.