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Hal Varian on the $100 laptop

Economics professor Hal Varian offers his thoughts on Media Lab's $100 computer - the universal cash register.

Hal Varian, professor business, economics and information management at UC Berkeley, offers a different perspective in the New York Times this week. His ideas are quite a ways from the usual educational and communications bromides for the third world. He sees cash registers, ATM machines, and personal archives. He's thinking about driving capitalist economies from the bottom up, in places where the lack of real economic engines is the elephant in the international development room.

[T]he must-have technology of 1853 was the sewing machine. Its success was largely because it offered purchasers a way to make money by taking in mending. Isaac Singer capitalized on this application by inventing a new way to sell products to consumers: the installment plan.

What is the 21st-century equivalent of taking in mending? Let me suggest that using the $100 laptop as a cash register could be quite attractive. These days, a cash register is nothing but a personal computer with a different interface. A simple cash register program plus accounting software would be useful to merchants whether or not a network was available.

If the computer was networked, there could be other valuable commercial applications. One could imagine using a networked laptop as a way to transfer funds, something like an A.T.M. with a human operator.

Low-cost laptops could also serve as a way to record and preserve contracts and other legal documents. The Peruvian economist Hernando de Soto has argued that the lack of formal titles to land and other property has prevented the poor from posting collateral to secure loans. Perhaps cheap, networked laptops could serve as repositories for such documents. Replicating legal documents across a network using peer-to-peer technology would ensure that they would remain accessible even if an individual laptop were lost or stolen.

And he makes a bottom-line pronouncement. Cellphones might seem more realistic, more "appropriate" for the developing world. But as Dr. Paul Farmer, asks, why is what's appropriate for poor countries always so much crappier than what's appropriate for rich ones?

Ultimately, both sides of the Davos debate are right: cellphones have proven uses and will continue to spread rapidly in developing countries. But cellphones have their limits. Offering general-purpose technologies like low-cost laptops is a riskier strategy, but it just might have a big payoff.