Deathonomics

Twilight had to teleport through the clear glass doors of the Sugarcube Corner. That was because it was packed so tightly with ponies that the door wouldn’t open. With her front hoofs firmly pressed against her ears in a futile effort to drown out the noise, Twilight teleported to a relatively empty corner, squeezing aside two ponies screaming at each other about cake. Squashing fleeting memories of a blurred dark pony as a noise bomb went off inside Twilight’s head, she muscled her way through the crowd, intent on ignoring everypony.

“—What I like about the PinkieCake is that it has such a great eater interface—“

“—No worms—“

“—I love being able to customize my own—“

“—And it’s only slightly more expensive—“

Twilight shut her ears to the insanity. The whole place was a madhouse, a habitat warped by the sheer mass of Pinkie’s craziness, which Twilight was convinced existed in physical form in a mostly closed-off dimension and had the density of a black hole. Pinkie’s brain was the conduit, and like planets trapped in their doomed orbits, ponies swirled around Pinkie like moths to the light. And eventually enough cake had pretty much the same effect on ponies as fire did on moths.

She pushed her way past an obstinate and severely overweight stallion bragging about how he had updated to the Premium Dessert Plan Star Plus Extra, which meant that he could get icing anywhere, and stopped to lean against a long counter crowded with ponies and cakes.

“How can I help you today, miss?” said a bright young pony behind the counter.

“Just catching my breath,” Twilight panted. “And it’s madame, as in, madame economist.”

“How can I help you today, madame economist?”

Twilight looked at her. “With what?”

“With cake and cake accessories, of course. This is the Party Bar. Cakes, batters, icing, spoons, whisks, bowls, pans, spatulas, eggs, egg beaters, egg-beating technique—“

“No!”

The fat stallion from before lumbered up to the bar, not exactly pushing so much as rolling Twilight away.

“Hey, uh, I really like Sugarcube Corner cakes and stuff,” he said, sweating profusely.

“Wonderful, sir. How can I help you?”

“Well, I got into cakes the usual way. Baking birthday cakes, that sort of thing. I knew some of my friends were into Sugarcube Corner, but I didn’t know much about it. Well, one day I tried the, uh, I think it was a peanut butter brittle cupcake, and wow, it was just amazing.”

“Oh, great!”

“So I started branching out, made some apple cakes, gave a Marechusetts cream pie a shot, and, you know, I got the cake bug in me. Bought all the Sugarcube Corner equipment and books, and of course I come here every day for at least one square meal of cake. So now I’m working on a better than clop cake—“

“Very good, sir!”

Twilight wasn’t fully recovered, but the knowledge that the opportunity cost of waiting was listening to more of this drivel sent adrenaline flooding through her. She had made it past pony-snatching vines; she could get through a crowd of cake-filled, terribly sweaty ponies.

She was almost to a counter lined with cakes with a cash register in the center when she heard a pony say, “Well, muffins simply don’t have the same eater interface, you know, it’s all about the eater interface—“

And inside Twilight Sparkle, something snapped.

“What,” she said loudly, “Is an eater interface?”

The pony turned to look at her, surprised. “You know, the way your hoofs and mouth interact with the cake.”

Twilight stared at her.

“It’s very important,” the pony said. “Only Sugarcube Corner does it right. Have you never eaten a cupcake before?” She snickered, elbowing her friend.

“Cake is okay every once in a while, but most of the time I’d rather have a muffin or something, honestly,” Twilight said.

The silence blasted through the room like the rage of an Alicorn.

“HEY, EVERYPONY! YOU BETTER BE READY TO PARRRRTAY!”

The ceiling exploded pink. Helium-inflated balloons fell from within a porridge of confetti and gummy worm streamers. In the midst of it all was the pinkest pony, standing on the counter.

“PINKIE!” the assembled ponies cheered.

Pinkie Pie spread her hoofs over the mass of frenzied fanatics.

“I’m so glad to see you all today! Who’s ready for some cake?!”

The crowd’s response was incoherent. Some ponies were screaming, others openly weeping.

“It’s really her!” a filly sobbed to a mare Twilight hoped was her mother. “She really is real!”

“We can’t eat cake on a cold stomach!” Pinkie said. “We have to work up an appetite! Let’s all do the Physical Perks!”

Twilight watched as her last hold on reality slid away entirely. Pinkie was leading the entire store in calisthenics.

“And one two three four one two three four!” Pinkie leaned up from one leg, bringing her front hoofs around in a tall arc and down until they were touching the other hind hoof. The worshipful ponies below followed in creepy unison. “And one two three four two three four one….”

Pinkie Pie blew on a whistle to signal the end of the Physical Perks.

“Who’s hungry?”

The crowd roared its cake-lust.

“But first we have to do one thing!”

Pinkie Pie pointed to a monitor that lowered down onto the west wall. The still image of a tired, harassed-looking stallion that Twilight didn’t recognize flickered onto the screen.

“Oh no, it’s Mr. Landbiscuit! He wants to compete for Sugarcube Corner’s market share!”

Ponies hissed. Others screamed. After just fifteen seconds of his image on the screen, expressions of rage erupted from the ponies. They hopped up and down, roared their fury and fright.

“Swine!” a pony screamed. “Swine! Swine!”

Twilight was suddenly glad Fluttershy wasn’t there. On second thought, Twilight fervently wished Fluttershy was there. She could use a bodyguard.

The ponies didn’t rest. The noise intensified, built to a crescendo, and as Twilight stuffed her hoofs over her ears and tried not to remember, a book bounced off of the monitor. The ponies threw spatulas, pans, spoons, anything they could get their hoofs on, but not cake, never cake.

They stopped.

Pinkie Pie had spoken.

“That was fun,” she said. The monitor withdrew, and, shakily, so did Twilight’s hoofs from her ears. She looked up at Pinkie Pie.

She was standing on two legs.

In her hoof she held a streamer.

“Let’s eat cake,” Pinkie Pie said.

Ponies crowded around the counter, but they didn’t push. They seemed to know exactly where to go and how to make maximum use of the space as if they had done this a thousand times in exactly the same way before.

“I’d like a Ultra Super Deluxe Choco-Plutium Butter Filled CupKooky,” a pony said.

“Plutium-95 or 97?” Pinkie Pie said, smiling with teeth so white Twilight could hear them gleam.

“Well—“

“97 has sprinkles!”

It was 97, then. The pony was funneled to the back and another flowed in to fill the space.

Pinkie hefted a board covered in bright pink marker onto the counter. “I’ve got a whole new line of products with ingredients from the Everfree Forest! Be sure to try one!”

Twilight blanched.

“I’ll have a JokeCream Cupcake,” the pony at the front said.

“You got it, mister! Two bits.”

Money and cake exchanged hoofs.

“I’ll take a JokeCream Cupcake!”

“Hmm…three bits!”

Twilight blinked.

More JokeCream Cupcake orders followed. Every time, Pinkie Pie charged a different price. Different items were ordered, but each time it was the same. Pinkie Pie didn’t name a consistent price for anything.

Twilight couldn’t take any more of it. Pushing, shoving and teleporting her way to the front, drawing angry mutters and barbed comments that cut off when they saw her cutie mark—she was the Chief Executive Economist of the Daughter of Ponyville, after all—Twilight stood in front of Pinkie Pie.

“Pinkie,” she said, and there was a little voice inside Twilight’s head telling her that she was about to pull the rug out from under the universe, but it wasn’t Princess Celestia which means it wasn’t as good at economics as she was, so she ignored it and said,

“You can’t charge a different price each time for the same good. You just can’t.”

One hour earlier:

There was a Cerberus lounging under and around the apple trees of Sweet Apple Acres, and a crowd of ponies gathered around her taking pictures.

“Apple Bloom’s idea,” said Applejack, meaning her absurdly cute yellow little sister. “That doggie ain’t much of a farmer, but ponies like to pay money just to see her.”

“But not enough, I take it?” Twilight said.

“Things’ve been tight around here ever since the Great Succession,” Applejack said. “Come to think of it, they were tight before then too.”

The brilliant red orchards than ran on as far as the eye could see seemed as healthy as ever. The trees were so thick with fruit they sagged, and even from a distance the leafs glistened with water. Stallions toiled the fields, pulling plows and gathering apples, which seemed to involve kicking the tree trunks until the apples fell off the branch.

“You should see it in bloom,” Applejack said. “Apple Bloom reckons we should start charging ponies for that too.”

“I’m sure it’s beautiful.”

“It’s been in my family for generations.”

“And you’re going to lose it.”

Twilight meant it to check—Applejack, like the stallions below, was beating around the bush. But her friend hung low like Twilight had kicked her in the ribs. Twilight didn’t know what to say, and Applejack didn’t give her any clues.

After a moment, Applejack took her inside.

“I never had much sense for business, I reckon,” she said. “Acres seemed to run herself. I just made sure everything kept happening. Maybe—maybe I was a bit stubborn.”

A yellow head poked out from under the stairwell.

“A little?” Apple Bloom cried, indignant. “Just a little? You never change nothing!”

Twilight winced at the assault on grammar, but Applejack didn’t back down.

“I brought the Cerberus here, didn’t I? And let the ponies pay to take pictures!”

“That was my idea! And I had to brush her teeth ‘cuz you were scared!”

“You try climbing inside the mouth of a monster that tried to eat you twice!”

“A thousand years of plaque! A thousand years!”

By this point they were both red-faced and huffing. Twilight watched in amazement as the sisters faced off.

“Anyway, you’re too young to understand business matters,” Applejack muttered. “Might as well be talking to a shrub.”

That was when Applejack found herself pinned to the wall, surrounded by the glow of lavender magic.

“Listen to your little sister,” Twilight said, her eyes boring holes in Applejack. “She—is concerned. About your choices.”

“Some choices!” Apple Bloom humphed. “Tain’t a choice if it’s just reading out of a book.”

“All right, all right,” Applejack said, waving her legs frantically. “You can put me down now. Don’t you know it’s rude to go hoisting ponies up in their own homes?”

Twilight let her down, and, wisely, Apple Bloom let her gather herself.

“We’re losing money, and that’s a fact,” Applejack said, looking somewhere to the left of Twilight’s ear. “And I don’t know what to do about it.”

“I have some ideas,” Apple Bloom began, but a look from Twilight hushed her.

“If you’re losing money, that just means your revenue is lower than your costs. How much money are you losing when you sell an apple?”

“Right now we lose a bit every bushel we sell.”

Right now?

“Why don’t you just raise the price of a bushel?”

Applejack had a look on her face like Twilight had just suggested that she learn to fly. After a moment’s silence, Twilight coughed.

“Applejack?”

“Huh?”

“I said, why don’t you raise the price?”

“The price is three bits.”

“Yes, but why?”

“Because that’s our low low bargain offer guarantee one time only buy now and get a free copy of Secret Recipes of the Apple Family—“

“You can’t ask her that!” Apple Bloom said scornfully. “She just starts reciting out of that d-d-durned book again.”

“Apple Bloom!” Applejack snapped. “Don’t talk about the Book that way! I’ll wash your mouth out with apple soap!”

“Yeah!” Twilight added. “Don’t talk about books that way! I mean, uh, wait a second, Applejack, does this mean you never change the price of your apples?”

“Never,” Applejack said proudly.

Twilight stared.

Talk about the law of one price.

“Applejack, you can’t charge the same price for a good no matter what. You just can’t.”

“Why not?”

“Why not?”

“Because,” Twilight said, forgetting about the hungry ponies pressing behind her as the familiar rush of economics swelled within her, “Prices have meaning.”

Pinkie Pie’s eyes swelled with the burning anticipation of a forthcoming economics lecture.

“Prices are a measurement.”

Twilight decided to be direct as possible. Applejack needed help.

“Just like height, weight or temperature, prices are a measurement. And it’s very important to get that measure right. Look, if you weigh fifty stone—“

“Less than that,” Applejack muttered.

“—But you say that you weight only forty-five, you’re going to get into trouble. And even if you do go around telling ponies you only weight forty-five stone, the reality is you weigh fifty.”

Applejack looked at her.

“What’s a price measure?”

“Relative scarcity,” Twilight said. “Prices convey information about the relative scarcity of the good being sold.”

Pinkie Pie screwed up her face, her strategy for handling novel information.

“What’s relative scarcity?”

“Scarcity is the extent to which ponies want more of some resource than they can have. Relative scarcity is how true this is of some resource relative to another.”

“Oh. So?”

“So prices aren’t simply an arbitrary choice or some meaningless number that goes along with a good,” Twilight said. “They have deep social significance because they determine how resources are allocated.”

“What does this have to do with me saving Sweet Apple Acres again?” Applejack asked.

Twilight ignored her. “Resources are…everything. They’re how ponies accomplish their goals. Allocating them correctly is maybe the most important task a society faces. Prices are how that gets done.

“It goes like this. Everypony has some money, some bits. Bits are what we use to bid on resources. Because bits can be used to buy everything, ponies are going to spend their bits on the things most important to them. Prices get bid up on the most important things. Less important things cost less.”

“Just a hot minute there,” Applejack said. “Only thing more important than food and water is a good night’s sleep, but one of Rarity’s dresses fetches a whole lot more.”

“The diamond-water paradox,” Twilight beamed. “What you have to understand is that ponies don’t face choices between Water and Ridiculously Fancy Dresses. They face a choice between some water and a dress, and prices are determined by choices. Prices represent the marginal value of a good, the value of just one more unit given the current amount, not the total or average value of the good or how much you would be willing to pay for it if you suddenly found yourself without any at all.

“But you’re skeptical. So consider this. If ponies value a good more highly than it’s currently priced at, they’ll bid up the price trying to get it. If they value a good less than its current price, they’ll take some of the bits they’re spending on that good and direct them elsewhere, essentially bidding the price of the good down. As long as ponies are free to spend their bits as they please, the most valued goods will be priced higher and the less valued goods will cost less.”

Pinkie Pie frowned. “That sounds…bad.”

Twilight shook her head. “You’ve got it exactly backwards. Prices are a measure, the effect, not the cause. Scarcity is the real problem, and prices help us solve it. When a price goes up, that tells ponies the good is more valuable. It tells them to make more of it or go find more of it, to direct less valuable resources towards producing more of that more valuable resource. When a price goes down, that sends a signal telling ponies the good is less valuable, to direct resources away from producing it and toward producing goods that have become relatively more valuable. On the consumer side, a high price tells ponies to use less of that resource because competition for it is fierce. Lower prices tell ponies they should make more use of that resource more since fewer ponies will mind. On the margin, of course.”

“Or think about it this way,” Twilight said, now slightly desperate at the looks of sheer confusion on the Apple sisters’ faces. “The cost of a good is what you give up to get it. That’s called opportunity cost, or just ‘cost’ for short. When a good costs more, that means we're devoting more resources to producing it. And doesn’t it make sense that we should devote more resources to producing important things and fewer resources to producing less important things? It’d be crazy if we were giving up more valuable things to get less valuable things! Just crazy!”

“Yeah…crazy,” Pinkie Pie said nervously, taking a step back. “Twilight, have you considered the fact that some ponies have more bits than others? Doesn’t it seem like they have an unfair say in how resources get allocated?”

“Oh, you mean Rainbow Dash?” Twilight shrugged. “Why shouldn’t some ponies have more of a say in how resources get allocated? They’re better at turning them into valuable things.”

“Now that’s about the most untrue thing I’ve ever heard,” Applejack said.

“The point is,” Twilight said loudly, “Prices aren’t something you can just ignore or treat flippantly. They are the only measure of critical information: relative scarcity.

“And another thing. Everything I said about directing resources away from producing one thing and toward producing another is true of your business as well. The cost of Sweet Apple Acres is the alternative uses all the resources you employ could be put to instead. If the best price you can charge for your apples is still losing you money, then that means Sweet Apple Acres isn’t as valuable as something else that could be done with these resources. It means it shouldn’t exist.”

Applejack’s eyes narrowed.

“I don’t think you’ve ever come into my house without managing to insult everything in it.”

Twilight stamped her hoof.

“Dammit, Applejack!”

Apple Bloom’s hoofs flew to her ears. She squeaked.

“I-I mean, darn it, Applejack.” Twilight took a deep breath. “I’m not the one saying Sweet Apple Acres isn’t worth it. You are. When you charge a price that isn’t enough to cover the costs of your business, you send a signal to everypony that Sweet Apple Acres isn’t worth the cost of its existing. If you want to change everypony’s mind, you need to charge a price that earns your business a profit. If such a price exists.”

“Of course it does!”

“Good. Then find it.”

“How?” Pinkie Pie asked.

“Just set the price equal to the marginal cost of producing the good in question like everypony already does.”

“Oh, okay.”

Twilight waited, nervous tension swirling in her stomach and lactic acid from standing in one place so long building up in her knees. Applejack was thinking.

“I reckon…I reckon I could allow as how you might have a point,” she said slowly. “Maybe…maybe the prices could…you know….”

“Change?”

Applejack winced. “Wouldn’t put it that way.”

Apple Bloom gasped. “Does this mean we can buy one of those fancy new tractors to pull a plow?”

“Over my dead body.”

“So what signals are my prices sending?” Pinkie Pie asked.

“No idea.”

“Oh,” Pinkie Pie said.

“You should talk to Pinkie Pie about this price system of yours,” Applejack said. “Her prices are shiftier than a rattlesnake.”

There was a lull in the conversation, which the hungry ponies interpreted as a cue to start shouting.

“Pinkie Pie is perfect! She doesn’t have to change anything!”

“What does an economist even know about the value of anything?”

“All hail the Queen of Cake!”

“Hey!”

Pinkie Pie jumped onto the counter, glaring down at the 20% of ponies who bought 80% of her cakes.

“Twilight is my friend!”

“She likes muffins!” screamed a terrified pony in the back.

“So what?” Pinkie Pie demanded. “I don’t even know why you ponies get so worked up about that stuff. There’s practically no difference between a muffin and a cupcake anyway! Friends don’t attack friends for liking different stuff from them. Differences are part of what makes friendship special.”

“What have we done?” the ponies sobbed, instantly changed by those simple words, at least when they came from Pinkie Pie.

Pinkie turned to Twilight.

“Seriously though, muffins over cupcakes? You are weird.”

“I reckon I’ve been awful suspicious of you,” Applejack admitted. “Never trusted city slickers much. Talking fast, everything changing all the time. But friends should be willing to listens to their friends’ ideas with an open mind.”

“Didn’t help that I keep insulting your business,” Twilight smiled.

“You’re not alone in that bucket. I was so busy trying to honor my family that I forgot to honor my family.”

“Well, economists are known for their ability to provide useful advice to businesses,” Twilight said with a straight face. “I’ll leave you two to it. Sweet Apple Acres looks like it’s in a pair of capable hoofs to me.”

Unable to look at the two sisters together any longer, Twilight left.

Twilight said goodbye to Pinkie and teleported past the mob of cake-eaters eager to resume their shopping. Outside, she walked the dirt road slowly, distracted by her own troubled thoughts.

It hadn’t just been Applejack. Pinkie Pie didn’t do it either.

Twilight had to know.

Her economics instinct said, no we don’t, the theory is right, of course it’s right. Her science instinct said, we have to check.

Then Twilight realized her economics instinct was going against her science instinct. This had never happened before.

Feeling ill, Twilight trotted up the path to the Carousel Boutique.

At nighttime Sweet Apple Acres was the dim glow of vivid colors in the darkness. Not that Applejack needed much light. She knew every inch of the expansive orchards. The rustling leaves in the gentle wind would’ve spooked any other pony, but to Applejack they were the trees talking to her.

“Change is coming,” she said to an apple tree that was sixty years old. “More than just a giant three-headed monster, I mean.”

Applejack turned at a noise that was very much like a pony spitting out a piece of apple, except it was dry and it clicked.

“Well, what did you expect?” Applejack cried, marching over and grabbing the rest of the apple. “Come back in the morning when we sell these, and you can get a good one. Look! This apple is so rotted it’s turned black!”

Closing up a Sugarcube Corner was a lot like putting a foal to bed, Pinkie Pie reflected. It was a lot of work, noisy and sometimes messy, and then, poof, silence.

In the darkness, something creaked.

Pinkie Pie’s ears twitched. There was a sound like something taking a bite out of a cake and chewing, except it was very dry.

Then it spat the cake out. There was a clicking sound as it did.

Pinkie Pie stilled her beating heart. Nothing that ate cake could be bad deep down.

“No good?”

She walked over and sniffed at the dessert.

“Oh no, this one got stale so fast! That’s why you didn’t like it. Come back in the morning and you can try something better, I promise. That’s funny. I don’t remember icing this cake black.”