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A good friend of mine grew up poor in the city. His parents brought him and his brother every Sunday to the bookstore and told them they could buy a book. Even when the family was having trouble with finances. To this day, an individual who loves literature, he gets emotional when trying to tell me what this meant to him.
Sure, but if you have a computer with internet you have access to Wikipedia and the like. Access to information is what allows people to bring themselves up in the world. In so far as the OLPC will bring these kids more and higher quality information it will help them of course they need to learn to read before they can realize those benefits.
The important question isn't whether it improves scholastic performance, but whether it improves life and career performance. Computer skills are a prerequisite for getting almost any modern job.

Whether a computer improves a student's performance on algebra or history is really not too important.

Very good point. I had a computer available almost as long as I've been in school, since about age 6-7. I first stumbled onto QBASIC shortly thereafter, and I've been coding ever since.

My grades were never stellar. I was just never driven to excel in school and avoided homework whenever possible. Instead of studying, I spent my time learning about computers.

All that time on the computer definitely hurt my scholastic performance, but it did wonders for my career performance.

My dad was a programmer, so I don't know what it's like to grow up without a computer. Having a computer from such a young age set me up to be bored in school. Zork was a major influence in my initial interest in reading. By the time I hit kindergarten, I was already devouring the biographies written for kids. My teachers usually didn't know what to do with me, so I spent most of kindergarten - second grade on my own in the school library.

My grades have always been good, but I think that's more because of my parents' influence. My mom is a teacher and helped me find books on subjects that weren't offered in my school, so I would be less likely to hit material that I would be learning later in class. She also encouraged me to write.

My dad introduced me to programming and Pascal in elementary school. I went to a rural public high school in Louisiana, so my dad would often pick up old college textbooks in subjects my high school didn't offer, like chemistry, Latin, and history from a non Christian perspective. He also stood up for me when my guidance counselor tried to put me on the MRS. track instead of college. If I had to sit through 4 years of home ec and parenting classes, I would have dropped out as soon as I turned 16.

I think kids tend to do better in school when their parents care. An involved parent could use a computer to enhance their child's education. A non involved parent might use it as "tv 2.0" - just another thing to entertain their kid so they don't have to.

A deeper thing you're getting at is the irrelevancy of public grade school.
Public school isn't irrelevant. It just needs to be updated a bit. The gap between how the current generation (people born post 1980 or so) and people born before before that is huge. And now we're starting to get teachers who grew up in the 1980's and soon, the 90's. Having teachers that know how to relate to kids will do more to keep them interested then any change in the curriculum can do.

Because, fundamentally, the curricula is solid - Math doesn't change that often, Physics/Chemistry/Biology/Earth Sciences are well established fields. History is ongoing, but given what High School history classes focus on, it's not going to change much. English/Literature isn't going to change an incredible amount - new books can be added in, but Shakespeare's words haven't changed since he wrote them. Writing styles may come and go, but thats just a small part of everything learned in HS.

I agree. It is clear - certainly in the IT world - that scholastic performance is not linked with happiness and "success"
Computer skills are a prerequisite for getting almost any modern job.

It depends what you mean by computer skills. E.g. everything needs to read and write - only a few specialists need to know how to make paper and bind books, and they learn that as adults.

The truth is that if pencils and paper don't work, then computers won't either. The problem can't be solved by chucking more "stuff" or money at it.
Scholastic performance in this context usually means ability to follow arbitrary instructions, remain quiet, and perform obviously unimportant busywork without becoming bored or distracted.

So, no, a tool that can both provide distraction and unleash a creative mind to explore is not exactly what you'd want to hand someone you'd like to meet the above goal. Its quite likely the opposite. For God's sake, give it to them!

I'm not sure why anyone thought that computers could aid in teaching traditional subjects. Computers can store and process data, simulate objects, crunch numbers. They cannot explain or evaluate. These are the root of teaching and they're beyond computers' abilities.

My schools always had computers, and I never observed anything to suggest they aided in teaching. At best, they were labor-saving: More efficient than typewriters, more efficient than paper indices, more efficient than microfiche, etc.