This was one of the topics suggested by Doug Plata -- Colonization O Neillian vs lunar colony - Where first?
Neither Is Likely
For review I'll recap a discussion I've been through a number of times:
Skeptic: Humans are adapted to life on earth's surface. Outer space is too hostile for humans to call home.
Hop: Man's extended phenotype has enabled humans to live in places they're not adapted for. Without animal skins, shelters and fire, our ancestors couldn't have settled northern Europe.
Skeptic: Well, sure. But outer space is a lot more hostile than northern Europe.
Hop: And our extended phenotype is a lot more sophisticated than our prehistoric ancestors.
Skeptic: The advanced extended phenotype that could enable humans to live off planet requires a massive infrastructure and population. Until such a massive infrastructure and population is established off world, the outpost will remain dependent on earth.
And that's where Skeptic wins the argument. Space enthusiasts do indeed suffer from Home Depot Syndrome. Need grow-lights? Go to Home Depot. Solar array? Home Depot. Gaskets and seals? You get the idea. It's so convenient to get many diverse products that it's easy to forget they come from a vast mining, transportation and manufacturing infrastructure.
To establish such an infrastructure off world would take a long and costly effort. Who's going to make that sort of investment?
Not governments, at least not with the present zeitgeist. When the general populace finds New Horizons more interesting than Caitlyn Jenner, I might change this view.
How about Musk? He's going to launch a huge constellation of sats providing communication to the 3rd world. He's going to make fully re-usable spaceships and cut cost of spaceflight 100 fold.
A worst case scenario for Musk's constellation is Iridium redux. Maybe Musk's scheme will be more successful. Electronics for a com sat now takes less volume and mass. And Elon is enjoying some success in reducing launch costs.
Let's look at a best case scenario. Musk establishes a thriving communication monopoly for the 3rd world. He'll be like Mexico's Telmex monopoly owner Carlos Slim but 10 times as rich. Is this likely? I don't think so. Fiber optics and cell phone towers are already being erected through out the 3rd world. And if LEO com sats are as lucrative as Musk hopes, other competitors will move in and attempt to take market share. But for the sake of argument let's assume Musk becomes a Carlos Slim on steroids. Further let's assume fully reusable, cheap spacecraft (also questionable but for the sake of argument…)
Even then, there's not enough to colonize Mars. A base almost wholly dependent on earth. maybe. But not a colony. I don't believe Musk would have enough to make a self sufficient colony in the Gobi Desert. See my discussion of the Home Depot syndrome above.
Walden Ponds Sans Home Depots
Space enthusiasts like to imagine Closed Ecological Life Support Systems (CELSS) that provide our needs without importing lots of food and water from planet earth. They also like to imagine 3-D printers that could make a huge variety of parts and supplies from a few feed stocks. Throw in some basic tools like a lathe and mill. Maybe we could get by without a huge infrastructure.
Is a small, self sufficient, nay - thriving outpost possible? Maybe it is. If so, that could be a source of income for would be space colonizers.
Toss some of these colony seeds in the Gobi desert. Or Siberia. Atacama Desert. Arctic tundra. Earth's wastelands are a tropical paradise compared to Mars, the moon or asteroids. With time these colony seeds grow and you have self sufficient, thriving metropolises where there used to be barren dirt.
A reader who doesn't know me may think I'm being snide and sarcastic. But I'm serious. The notion of seeding barren places with self sufficient Walden Pond style Kibbutz settlements is perhaps doable. Maybe we'd need the massive infrastructure beneath the Home Depot tip of the iceberg. Maybe not.
Developing this ability is a prerequisite for colonizing Mars. If someone does develop that technology, it could be a source of revenue.
My Suggestion for the First Pre-Space Kibbutz
La Rinconada is described as the highest city in the world. The place is very unpleasant. At 5.1 km, it's hard to breathe. It's cold. It has no plumbing or sanitation system. Gold is the reason people endure these hellish conditions.
Would be space colonizers like to imagine starting out with buried Bigelow habs and then later burrowing or building walls with ISRU materials to contain atmosphere. Airlocks would be imported at first and later built with ISRU materials. The CELSS would convert nasty sewage and CO2 into food and fresh air.
What better place to try this than La Rinconada? Habs with warm, clean, pressurized air would be a Godsend to these people. Not to mention clean water to drink and sanitation facilities. La Rinconada miners would pay good money to enjoy the amenities space enthusiasts assume CELSS would provide.
The First Space Economic Incentive for developing CELSS
Some suggest necessity is the mother of invention. That if the choice is do or die, colonists will develop CELSS and self sufficiency. In my opinion that is putting the cart before the horse.
However it may well be that we won't develop self sufficient CELSS until humans are spending long stints beyond LEO. My notion of earthly seed colonies is unlikely. There are sovereign governments, private land owners, environmental impact statements and mountains of red tape standing in the way.
If space mining does happen, I'd expect the first mines to be on a Near Earth Asteroid parked in lunar orbit.
Space mining would probably be mostly robotic. But there may be some need for a human presence. See my post Who Needs Humans? If so, transporting humans to lunar orbit and back would be expensive and dangerous. There would be some incentive to make longer stays possible and thus reduce number of back and forth trips.
Some of the first steps I'd expect Planetary Resources or Deep Space Industries to make:
A modest spin hab. Enough spin gravity to enable flush toilets, showers and draining sinuses would be a huge boon for worker morale. It's possible a small amount of gravity could largely mitigate atrophy problems. We won't know until we try.
Plants. Green plants make a much more pleasant environment. Of course plants provide oxygen and cleanse CO2 from the air. Fresh vegetables are also a morale booster.
Sewage Treatment. I understand this is one of the more difficult problems for CELSS. But rich organics are valuable and mass imported from earth is extremely expensive.
Should Planetary Resources or Deep Space Industries develop good CELSS on rocks in lunar orbit, they'd be in a much better position to send humans to rocks in heliocentric orbits. And while smaller rocks amenable to retrieval are economically interesting, the bigger rocks have more resources.
Early asteroid habs would certainly not be self sufficient. But it is possible to reduce needed imports over time. And if the asteroid mines are making money and trading exports, self sufficiency isn't necessary.
If my goal were winning in Vegas, I'd place my bets on humans never getting past LEO with the exception of rare flags and footprints publicity stunts.
But I am an unrepentant optimist. So my money is on early asteroid mining outposts gradually becoming less dependent on earthly imports.
Even being a die-hard optimist, I would still bet against O'Neill cylinders or massive planet side colonies. At least in this century.
But given a gradually growing presence in the asteroids, I believe massive O'Neill Islands in heliocentric orbit would eventually come to pass. As well as cities on the moon, Mars, Ceres and beyond.