Economics of XO

What passes for Free Markets and Free Trade in political discourse today is economic freedom for corporations but not for citizens. The market cannot efficiently allocate jobs to people who are not in the market, nor can it provide food, clean water, health care, or education. For communities that get XO computers for their schoolchildren, things are different.

• The computer grants access to many markets, particularly to e-commerce. It enables the full range of possible international partnerships and other trade arrangements.
• The computer grants access to market information, whether from formal exchanges, legally mandated financial filings, or simply the description and asking price for every item on every commercial Web site.
• The computer is the essential production technology of the Information Age. It also makes it possible to contact the purveyors of every material production technology at the point where a business opportunity has been identified and funded.
• The billion children and their families and communities will not be in a position to impose prices on the market, but must take prices from the interplay of supply and demand.
• The products of these children and others will not in general be endowed with special rights. Although much that they sell will be culturally unique, and protected by copyright and other so-called "Intellectual Property" laws (actually grants of temporary licenses), consumers will be able to buy music, clothing, art, and other such items from a wide range of sources. Cartels will be hard to form, easy to break, and not permitted among Earth Treasury participants.
• The children will have access to capital, initially from outside sources, but soon from their own banks and other financial institutions.

Compare this with the conditions for a genuine Free Market, collectively known as Perfect Competition.

What all this means is the possibility of creation of the largest actually Free Market in human history. But the conditions created by availability of computers are not guaranteed to obtain, and in particular are not the automatic creation of market forces. Economic theory requires these conditions in order to deduce the efficiency of markets in resource allocation and other benefits, not the other way around. These conditions will only continue to obtain if the forces of technology and society are directed to maintaining them, and not to extending the privileges which corporations have historically demanded from governments. This in turn is possible only if the children come to understand the nature of the problem and the opportunity, and if they and their communities can be brought together to act on them.

This is a massive undertaking, for the highest stakes in human history. Like many who went before us, we cannot see our way through to the end, but like many who did not shirk equally daunting challenges, we can see our way forward from here, and have no proper choice but to take it.