Star Wars & Phantom Menace/George lucas
Why did he make his movies in space?
Thanks for the question. There are two sources that are often cited as having influenced George Lucas into making "Star Wars". The first one is "The Hero with a Thousand Faces" by Joseph Campbell, and the second one is "The Hidden Fortress" by Akira Kurosawa. The latter primarily influenced the filmmaking style that Lucas employed in the "Star Wars" series (e.g., use of wipes as transitions, showing the film from the perspective of the two most "lowly" characters, etc.). The former influenced the mythological aspect of the series, particularly the "hero" archetype that is often present in myths. As far as I know, George Lucas hasn't publicly stated precisely why he set "Star Wars" in space (or, more accurately, why he decided to make a "space movie"), but my theory is that in attempting to create a new mythology, he felt that space would be distant or "out-of-this-world" enough for the audience (both literally and figuratively), which is typical of the many old mythologies that Lucas was trying to emulate. Note how "Star Wars" is also set in the past (again, similar to your typical myth), which somewhat reinforces this theory.
George Lucas also grew up watching the 1950s serial "Flash Gordon", which is set in space; so, that could certainly also be a contributing factor in his decision to set "Star Wars" in space.
Hope that helps. Let me know if you need me to clarify anything.