Examines claims that technology can decrease educational costs, primarily by replacing teachers and other staff, thereby increasing educational productivity. The authors conclude that such claims are unwarranted. First, most cost analyses focus on hardware costs, but these costs are not the major factor driving the cost of computers used in instruction. Second, technology is more likely to change the skill mix of labor in education than to decrease the intensity of labor. Third, research on the effectiveness of computer-assisted instruction (CAI) indicates that drill and practice as an adjunct to or alternative to some regular instruction is effective. Therefore, a policy of integrating the computer with the teacher, rather than replacing the teacher, is more likely to lead to improved achievement in less time. Finally, the cost of replacing a significant portion of teacher time with CAI is currently prohibitive.