Any thoughts on why google is building a phone? I would think that a big concern for google in terms of phones is that they could become one of the primary ways in which people connect to the internet (especially in the developing world). Wouldn't the best approach then be to buddy up with as many handset makers as possible to get some set of google apps bundled onto their phones, rather than competing with them directly? I thought Eric Schmidt was on the board of apple, who I imagine isn't very pleased about a gphone competitor...

The main objection, as I see it, comes from the fact that OLPC is a non-profit whereas intel is a for-profit company.

Economists have a notion that they call a "positive externality": an example of this that is normally given is returns from education. In a market with perfect competition, people would tend to under-invest in education, because they don't take account of the benefit that this investment provides for the economy as a whole. In this context, the market inefficiency could be rectified if the government provided a subsidy (i.e. public schools, vouches, whatever). More importantly for the current discussion, it could also be rectified if some NGO came in that provided the service at a subsidized price.

So the main argument against intel is that they are dumping right now in order to drive OLPC out of business. In the long run, they will set prices at profit maximizing rates, which could potentially lead to a lower than optimal supply because they won't be taking account of the positive externality caused by computer ownership. OLPC on the other hand, will have lower prices in the long-term because they are a non-profit, this could lead to a more extensive distribution of PCs to the needy.

What is a positive externality to computer ownership? For one, in developing countries teacher absenteeism and poor teacher quality are huge problems. Several studies by very reputable development economists have claimed to show that the computer assisted learning is effective in this context.

There are a lot of uncertainties in this argument, the biggest being that OLPC will actually manage in the long-run to provide PCs at below market prices. Just because OLPC is an NGO doesn't mean that it is well run. It could be that due to mismanagement, it can't offer the OLPC at a much better price than intel (when it is no longer dumping).

Still, it does seem pretty nasty on Intel's part to try to crush a non-profit. Also, apple might not be the best comparison in this case. Apple is also a for-profit company, so the winner of the competition didn't make much of a difference in the long run.

Actually, I can see Negroponte's point. If Intel is indeed dumping its classmate PC at below cost and it succeeds in doing away with the OLPC, I could see this being bad for third world recipients in the long-term. Once the OLPC is out of the way, Intel would be free to raise prices, lower output, and extract the most rent from consumers.

In essence, this would defeat the entire point of the OLPC program, which is to reach consumers who wouldn't normally be serviced under "efficient profit maximizing markets".

In the past I didn't think this was that big a deal, because it seemed dubious to me that the world's poor (i.e. those living under a dollar a day) could benefit much from access to a computer. Then I learned that teacher absenteeism is an enormous problem in developing countries. In this context computers make a good substitute for teachers, because, at the very least, they'll always be around. In fact there have been several studies that suggest they are somewhat effective; at least at teaching rudimentary level material.

Which leads me to the last part of the argument. PCs for the poor create a positive externality (through their improvement of education) that will not be captured by any profit-maximizing firm. So even if other competitors end up challenging intel once it has crushed OLPC, it's doubtful that this will lead to an optimal outcome from the perspective of developing countries.

All of this assume of course that the OLPC is well enough run to actually create a product that reaches more people and does more good than the for-profit alternative. I have no idea whether this is in fact the case. At the very least, the fact that it is a non-profit is a signal that it will try to maximize the welfare of consumers rather than shareholder dividends.

media center pc

HD-DVD drive

nope

halo 3

tivo

satellite!

Oblivion!