The Economics of the XO
The stated mission of XO development is education, aimed at ending poverty. Economic theory tends to neglect education somewhat, although it is commonly recognized as a good investment, both privately and publicly. However, the XO has many other economic effects.
- Access to markets, specifically to e-commerce, for everyone with access to an XO and also to the Internet. This includes easy market entry and exit
- Access to the market information published on the Internet, including stock and commodities markets, company information, and the price of almost anything at retail, wholesale, or auction
- Access to technology, starting with the fundamental technologies of the Information Age
- A multitude of small producers without the power to set prices
- A multitude of largely substitutable (interchangeable) products
- Access to microfinance and at some point to conventional finance
- A wide range of products not locked up in so-called Intellectual Property (IP)
This list is not drawn up at random. The conditions listed are those defined for Perfect Competition in Welfare Economics. Perfect Competition is the set of necessary and sufficient conditions for an economy to reach equilibrium at a Pareto optimum, which guarantees certain kinds of market efficiency, including efficient allocation of resources. This should of course include efficient use of human resources, such as our schoolchildren, most of whom could previously expect only to be thrown away. It is clear that the XO does not in any way overcome the imperfections of existing markets, including oligopoly and monopoly power, excessive IP protection, numerous barriers to trade, corruption, and the rest.
Although there has been insufficient study of the question, it appears that approximating Perfect Competition leads to approximate efficiency, and establishing Perfect Competition in a subset of the market leads to efficiency in that part of the market. We do not need a complete solution to this problem in order to predict that the economic effects of the XO will be massive, and that they will go well beyond the elimination of dire poverty and the preparation of all the schoolchildren of the world for real jobs.
Economics used to be called Political Economy. The political element is still an essential part of the subject. There are political actors who distort economic theory for personal gain, and many other actors who don't know that they can use real economics to counter these distortions. Some apparently think it inappropriate to know, as if this knowledge were inherently corrupting.
Welfare Economics/General Equilibrium Theory
- For further research
The XO in the Market
- New jobs, new businesses, new markets
- Toward a sustainable economy
The Future of Political Economy
The essence of politics is the ability to exchange information, to conduct public debate, and to organize together. Without the XO, we have no means for much of the world to engage in any of these essential activities. Without any of them, elections are largely meaningless. With one-way mass communications, elections are not meaningless, but lack much of their possible effectiveness.