Wednesday, November 30, 2005

Opposing the $100 Computer

It just figures that the writers on this site would come out opposed to a plan to put cheap computers into the hands of people worldwide, even when such a plan wouldn't cost then a dime out of their precious tax dollars.

In a rambling and poorly reasoned post, David Henderson rails against the plan because, at heart, it isn't sufficiently free market enough for him.

He writes, "We judge that by their willingness to pay, and the reason free markets work so well is that they get goods and services to those who are willing to pay the most. Note that those who are willing to pay the most aren't always, and aren't even typically, the wealthiest: even poor people regularly outbid rich people for food, clothing, and shelter, which is why poor people survive."

Henderson is wrong about one thing: the poor don't survive. They die in appalling numbers; life expectancy in poorer nations is well below that in the west, while infant and child mortality is substantially higher. Even in the United States, poor people die earlier than their richer compatriots.

Free markets work well if you have money, or at least, if people have relatively equivalent buying power. A distortion of wealth creates a distortion of valuation; a rich person would, in fact, pay $100 for a doorstop, because it represents a much smaller percentage of his wealth. People with little or no money, meanwhile, aren't able to express their choices at all. If you have less than $100, then you cannot opt to purchase a $100 computer, no matter how much you value it, not even if your life depends on it.

Henderson further observes, "Many people in those poor countries -- the vast majority, I suspect -- would not be willing to spend even close to $100 on laptop. What that means is that they would prefer to spend $100 on other items -- food, iodine pills for water, DDT to protect them from malaria, basic generic drugs, maybe even a sewing machine."

This is probably true. This is because poor people have little more than $100, and as noted, you cannot eat a laptop. It does not follow, however, that such people do not value a laptop (or other things, such as education, medicine, or clothing). It simply means that they cannot afford even things that they value greatly, because their income is so low. Survival comes first.

So what is the purpose of a $100 laptop? As has been widely noted, one of the greatest gaps between the rich and the poor is access to information. Many poor people live in land that could support them comfortably, but they have no means to support themselves because they do not have access to a basic education, information they would need to survive. It is true that you cannot eat a computer, but it is also true that you cannot eat a fishing pole. This does not mean that either is not valuable, it means merely that neither will be the first choice of a starving person with little or no money.

Henderson is concerned, moreover, that the governments of these countries should spend money on things of more value to citizens. He writes, "what started off as a completely innocent, let's-help-the-poor-in-poor-countries proposal will end up, with government involved, as just one more way of government using force against its own people to buy goods for them that they regard as luxuries, preventing them from buying the goods that they need to make it to next year."

The implication is, of course, that if the governments were not buying these computers, they would be buying things people need. But this, too, is something he would oppose, because, as he notes, "governments are notoriously bad at getting resources into the right hands."

Well maybe, but the free market isn't more effective. The free market is notoriously willing to tolerate the existence of poor people. And typical free-market solutions, such as tax reductions, do not help poor people - a tax break on a $100 per annum income doesn't translate into much of an increase in purchasing power, nor is the corresponding tax break to a rich person likely to find its way into the hands of the poor (it will find its way into the hands of another rich person, or into an investment account).

The fact is, unless the government provides resources to poor people, then because poor people do not have the resources to lift themselves out of poverty, they will remain poor and eventually die. It thus becomes a question of how best to provide for the needs of poor people, and while sustinance is of no doubt the top priority, so is giving such people the means to cease being poor.

Feeding people, and placing computers into their hands, in other words, cannot be and is not, as implied by the article, an either-or proposition. The $100 computer is intended as part of an overall strategy, one which aims not only at keeping people alive, but also at putting the means to lift themselves out of poverty into their hands. They should be combined with other programs, such as electrification, transportation and communications infrastructure, banking (and, for example, microloans) services, the rationalization of trade laws, and more.

Private enterprise and free markets do none of these things. They do not lift a country from nothing to something, because there is no profit in it. This is something most genuine capitalists recognize, which is why they routinely call on their various governments to provide these sorts of infrastructures, from roads to police and defense to universities and space programs. Most genuine capitalists regard this correctly as a pooling of their incomes, placed in the hands of a neutral agency, that will eventually produce new productive capacity and new markets.

This sort of wisdom seems to have escaped the writers on this site, however. They somehow believe that people can express economic choices without money, and that the engine of the marketplace will move to serve them without any reasonable expectation of profit.

This attitude is not only empirically wrong, it commits them to an economic and social policy that is repugnant and morally repelling.

2 comments:

  1. This issue is a little too fixed to spawn a free vs. controlled markets debate, IMO.

    Computers have cost; they must therefore be paid for by somebody, regardless of what your favorite economic theory is. If they are not paid for, then somebody in the supply chain has been *coerced* into doing something for nothing, and economic coersion is not particular moral, either.

    Another question involves the deployment of such systems, EVEN IF goverments are willing to pay for them. For example, in Karnataka (the India state where Bangalore is, where I live) I can tell you that there would be SIGNIFICANT political pressure from the left NEVER to purchase and deploy such systems to the children. Why? Because in India, the left includes the very strong cultural lobby, who would resist the distribution of such systems because they would use English; and these lobbies resist any and all measures that encourage English (which is necessary for economic advancement) over not Hindi, but Kannada. You'd have the same situation in Kolkata for sure, and I expect in Tamil Nadu as well. If nothing more, the entire situation would cause a good half decade of debate before anything was resolved.

    So, where does that leave us? Right where we started: having to have people buy them.

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  2. It is interesting that the dispute over these computers has missed a subtle point - Intel wasn't trying to slow down the MIT effort because it wanted to sell more of its chips or to help the Wintel model laptops. It was for a far more simple reason - if a laptop like this is built and distributed in mass numbers - who will use it the most? Not the third world kids for whom $100 is still a huge price barrier, but Western/European/Japanese users like me! It would do everything I would need most of the time at work at home - I could afford to buy 4 or 5 to time, and I wouldn't care if I went through one a year at this price! It would gut the market for most laptops and desktops - sure we'd still a great rig for the super games and advanced video/photo editing - but once it has been shown it could be done, it would be a race to the bottom - look at what happened to calculators and DVD players. I hope these super cheap laptops come into being but not because it would help the info gap in the 3rd world but because it would help here in the so-called 1st world.

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