Deathonomics

“An apple, an apple, and an apple, please,” said Fluttershy. “If you’re not busy. I don’t mean to impose.”

Applejack hesitated.

“You want three apples?”

“No. An apple, an apple and an apple, please. It’s, um, more rational. I think.”

“It’ll cost a bit extra for making me think,” Applejack said.

“That’s fine.” Fluttershy passed a bit over the counter. “But, um, I think you, uh, owe me a bit for charging me.”

Applejack pushed the bit back across the counter.  “Fine, now can I get you your three apples?”

“No! An apple, an apple, and an apple! Please.”

Fluttershy took her apple, apple, and apple and went out the door. While it was open, a distant high-pitched EEEEeeeeEEEEeeee filled the room. It muted again as the door slammed shut.

“The forest is getting worse,” Apple Bloom said. “Hope Pinkie Pie fixes it soon.”

“She’s doing her best.”

“That’ll be a bit for the observation, by the way.”

Applejack grudgingly fished out a bit and flipped it to Apple Bloom.

“I hate the price system,” she grumbled.

Twilight Sparkle’s morning began with an insistent rapping on the door. She called for Spike twice but received no answer. Muttering, Twilight dislodged herself from the bed and noticed a pile of letters sitting by the door. Spike must have left them there. Her heart leapt as she remembered the message she had sent out to the other banks.

There came another loud series of knocks at the door. Twilight didn’t mind having an excuse to put off reading the letters as she stumbled downstairs, running a magicomb clumsily through her mane. She peered through the peephole. It was the mayor.

Twilight didn’t know what the mayor actually did. She couldn’t be the mayor of Ponyville because she didn’t have any civil function beyond making unnecessary speeches at events. There were no taxes to collect, the utilities ran themselves, and Twilight considered herself the de facto ruler of Ponyville (or at least Princess Celestia’s representative). Twilight wasn’t even sure if she was the mayor or if Mayor was her name…but that couldn’t be, could it?

Twilight opened the door.

“Hello, mayor.”

The grey-haired pony was red with fury. “Twilight Sparkle, I have very cross words for you!”

Twilight sighed. “We can’t supply the amount of money the market demands, we have to supply the amount it needs, which is a lot harder than it sounds—“

“I am talking,” the mayor snapped, “About what you have taught your friends about the price system!”

Twilight groaned and rubbed at her face. “It’s too early in the morning for this.”

“It’s three in the afternoon!”

So Twilight listened as the (?) m/Mayor explained.

She had been out in the bright early morning, enjoying the feel of her hoofs on the dirt. The sun was shining, the birds were chirping, yada yada. Twilight rolled her eyes as the mayor went on. The Ponyvillites were so simple. In Canterlot ponies had been sophisticated. Even Rarity would have been outclassed by the court ponies.

Anyway, the mayor happened to spy Pinkie Pie on the road, carrying a basket of ingredients from the Everfree Forest. She stopped to say hello, and they chatted in the friendly, useless sort of way that drove Twilight up a wall.

“Oh, Pinkie, the anniversary of Ponyville’s founding is soon,” the mayor had said. “Can I count on you to remind ponies who visit a Sugarcube?”

“Sure,” Pinkie Pie said. “For a price.”

The mayor blinked. “What?”

“I’ll let ‘em know, but it’ll cost you a bit per pony.”

“Ah, yes, economics is very ‘hip’ now that we have a bank of our own,” the Mayor chuckled. “Very funny.”

“I’m not kidding. Shake on a bit per pony right now or I’m walking.”

“Pinkie, you can’t be serious.”

“I am. Oh, and I’ll need you to compensate me for initiating a conversation with me. Otherwise you’re stealing my time.”

The mayor stammered, flabbergasted. “Pinkie, I—I don’t know what to say. What has gotten into you?”

“Economics has. We’ve got to maximize the value of our scarce resources, and that means allocating them by a price system. Twilight Sparkle says so, and we’re friends so I believe her. Now make yourself scarce while I allocate myself to the Sugarcube Corner, which needs me to maximize the value of these ingredients.”

“She specifically cited you, Twilight Sparkle,” the mayor said. “What do you have to say about Pinkie Pie’s behavior?”

“Awesome.”

The mayor’s angry face loomed above Twilight’s. “And it wasn’t just Pinkie Pie. Applejack charged me for looking at her apple orchards! Fluttershy made me pay for listening to the sweet sounds of her songbirds, and Rarity said that I was imposing a cost on everypony wearing a mane in this style and shouldn’t go out unless I can make up for it with bits! Now what are you going to do about this…this pricing of things?”

Twilight beamed.

“Coasepony is best pony.”

She shut the door. There was an economics puzzle that required her attention.

There was a knock at the door. Twilight sighed and opened it. Rainbow Dash was hovering above the mayor, who seemed to have fallen somehow.

Rainbow Dash’s face was blue with rage.

“Twilight Sparkle, stop sleeping and get outside RIGHT NOW!”

It was pollen. At least, that’s what Rainbow Dash said, and Twilight believed her. A hoofful of the stuff made Twilight’s eyes water and her nose itch like a mosquito was acting out a Shakesponyian tragedy on her snout. In the distance a mass of the stuff hung in the sky ominously, a snot-summoning cloud of misery, scratchy throats, and a severe uptick in the demand for tissues. Even as they watched, a fat blob of pollen shot into the sky, adding to the cloud’s mass. It came from the direction of the Everfree Forest.

“It’s clogging up the skies and it’s coming our way!” Rainbow Dash shouted. “This is all your fault!”

“My fault? What did I do?”

“You freed the Everfree Forest! I flew as close as I could and saw it pumping the stuff out like a FlimFlam cider machine!”

“I was unconscious when Applejack and Pinkie made that deal with the forest!”

“You have to do something before it kills us all!”

“I control the money supply! What am I supposed to do about it? Besides, it’s only pollen. It can’t hurt us.” Twilight sneezed. “Probably.”

“Pinkie is on her way over right now to talk to the forest,” Rainbow Dash said. “But that cloud of pollen is going to play havoc with the weather. Enough of it in the sky and Ponyville won’t survive. Nothing will. We need sun and rain. I don’t think it’s regular pollen either. It’s magical Everfree Forest pollen. Probably it eats ponies somehow.”

“I’m sure Pinkie Pie is already figuring out how to bake it into a cake,” Twilight snapped. “Princess Celestia wouldn’t let the forest threaten Equestria.”

“She wasn’t supposed to let the money supply fall either,” Rainbow Dash countered.

Twilight had no snappy retort. An ear-splitting siren caught her attention and promptly punished her for it, like somepony shouting, “Hey, Twilight!” at a dodgeball game. It was high-pitched and excruciatingly painful to hear, rising and lowering in pitch and volume in a way that made it impossible to ignore. Twilight’s hoofs clapped over her ears. Thirty seconds later, the siren faded.

“Not a siren,” said Rainbow Dash, who seemed pale. “Pinkie Pie said it was the forest crying. Screaming, maybe; she’s not sure. She charged me a bit for that information. Can you believe it?”

“The mayor was saying something about that….”

Rainbow Dash looked sour. “Thanks to you and your ‘economics,’ and ’education,’ everypony thinks they ought to charge everypony for everything, and I mean everything. Saying hi to Rarity this morning ran me five bits!”

“She’s just letting you know how valuable her time and attention are—“

“She’s being a jerk!”

Twilight, who based on her personal encounters with the word thought it meant “somepony who thinks like an economist,” nodded.

“Even Fluttershy charged me!” Rainbow Dash continued. “I at least managed to get a Friendship Discount out of her, but she kept giving me this look like I was personally starving all her animals to death. Oh, and she fined me for saying ‘animals’ rather than ‘normally elongated whatevers!’”

“Coasepony is best pony,” Twilight repeated.

Rainbow Dash took to the air again, flitting about agitatedly like a bee.

“Twilight, I hate to say it, but you and I are the only sane ponies left in this town. I’m going to see what I can do up in the sky. You need to get this price system and the forest under control!”

Rainbow Dash left, a rainbow streak trailing behind her.

Twilight looked at the growing distant mass of pollen, her eyes watering at the very sight. For some reason she thought of the Snow. And bicycles.

Few records remained of the time of the humans and their crazy bicycles. Princess Celestia had all of them, and that meant Twilight Sparkle had read them too. Humans were handed, bipedal creatures from before the time of Alicorns.

Princess Celestia said the humans had been richer than the ponies were. A the height of their majesty and power they built bicycles because they did not have wings to move places quickly.

Twilight Sparkle had pointed out that if they were so rich, then they should have been able to beat the Snow like the Diarchs had.

Princess Celestia had nodded. Humans, she said, had been better at cooperating than ponies. That was why they were richer. They had also been worse at cooperating than ponies. That was why they were dead.

“Resources have alternative uses,” Twilight mumbled, only vaguely aware of the concussed mayor lying prone on the ground. “Resources are things that can be used, and in more than one way for more than one pony. Ponies own these resources, and they use them for themselves or give them to other ponies in exchange for some of those ponies’ resources. With money, ponies can express how much of their claim on resources they are willing to sacrifice to obtain some resources, and the ponies willing to sacrifice the most, to leave resources to other ponies, get the resources. Value is maximized. Giving-unto-others is maximized. Friendship is maximized.”

In the distance a green-yellow mass tumbled into the sky, adding to the bloat of powder cloud that sat in the sky with potent inertia. It seemed to be constantly rippling.

But it only worked—friendship only worked—when firms maximized profits, Twilight Sparkle realized. A firm maximized profit when it sold as little as possible for as much as possible. When it did that, it ensured that resources flowed to the ponies most willing to sacrifice their claim on alternative resources to obtain them. But if firms gave resources to ponies who weren’t willing to give as much to others in exchange for those resources, the incentive to be nice broke down….

Twilight was an economist. She believed in incentives.

Businesses maximized profits when they set the marginal revenue of their product equal to the marginal cost. That was Logic. The businesses of Ponyville didn’t. That was Not Logic. And that was a Big Deal.

Again Twilight felt her eyes being drawn to the thickening cloud of pollen in the sky.

Call it niceness bribes. Some ponies have to believe in selfishness. Fine. Sometimes Twilight was one herself. So call it niceness bribes. Businesses maximized profits by bribing ponies to leave as many resources for others as they could bear. The market system was cooperation enforced by kindness. Provide for others on pain of snuggles.

Twilight thought of the humans, who were better at cooperating than ponies, and who had died because they were couldn’t cooperate. Princess Celestia had once said in an unguarded moment that she thought that the humans might have created the Everfree Forest. That they had made, somehow, the original pollen. Too much of it, and some other things had happened—even now, thousands of years later, Princess Celestia was still piecing together the puzzle like the atmosphere she and her sister had stitched together from corpses, clues and energy buried in the frozen ground—and the Snow came, and the humans went, as it were. At the end they had used a lot of bicycles. It hadn’t helped.

Privately, Twilight thought humans sounded mean. Ponies were nice. They didn’t need all that much encouragement to be friendly.

“Listen hear, you darned ground!” somepony shouted in the distance. “If you want the right to be in the same place I’m going to put my hoofs on then you ought to pay me first!”

Such a tiny push. Was it possible to have too much friendship? Or…the wrong kind of friendship?

“If they were really your friends they wouldn’t call you names. If they were really your friends they wouldn’t pick on you. If they were really your friends they wouldn’t…they wouldn’t….”

The mayor groaned. “I need ice for my head.”

Twilight hesitated. Then she brought the mayor a bag of ice. Free of charge. She felt nervous about it.

There had to be a way of finding a balance, a harmony among every interest. You couldn’t assume knowledge of the solution into the heads of the problem-solvers. The humans had died at their richest. That was just…stupid. Twilight resolved to do better. She went inside. There was a pile of letters from all the banks of Equestria that needed her attention.

Miles away, a pink pony bearing a box of cupcakes skipped toward the Everfree Forest. The forest closed the entrance and ignored the small hoofs pounding on the trees. It…

…Not remembered. The forest didn’t have a brain, exactly. But there were things that had happened, and things that had happened because those things had happened, and all those causes could be seen, smelled, heard, touched, tasted and knorped in every inch and motion, every pattern of bark and the sway of a leaf, the bite of a thorn….

It was a time for a change. First, the castle. Vines surrounded it, rushing past a sea serpent who could only duck underneath the water with his children as the black tendrils wrapped around the castle. When they withdrew a moment later, it was rubble. In a clearing lit pale blue, a broken statue and its inscription were torn apart and smashed into dust.

The forest shaped itself. The guardian was gone, the promises all broken. The new masters, the sun-pony and the moon-pony were distracted. The old master was…inert. So the forest drew everything up from its roots, pulled stem and leaf and all spare mass together, molding it according to something that couldn’t be called memory but was remembered all the same. It made a pod. A bulb. A cannon, standing as high as half a dozen ponies and even fatter around, and it was pointed at the sky.

It hadn’t done this in a long time.

The pollen shot out with the force of a lightning bolt. It was felt as far away as the Crystal Empire, where the force of a lightning bolt was well-known and watched for. And the pollen in the sky continued to grow. It amassed, and when the winds blew, the spores spread…

…They spread to the city of Detrot, where brothers Flim and Flam were demonstrating a marvelous technique for using water to break the ground open, where thousands of years of pressure had turned dead things into fuel. They sniffed, and sneezed. Their eyes watering, they looked together toward the horizon in the direction where Ponyville lay.

…To a cave hidden deep within the the mountains of Equestria, where the drifting spores disturbed a sleeping dragon. Highly attuned to the conditions of the skies that the ponies had so artfully controlled for so long, the dragon snorted and wondered if there might be an opportunity to stretch its wings soon.

…The pollen even reached Canterlot, where the familiar stench distracted Princess Celestia from her sister’s location for the briefest instant. A month of work lost. Her mood worsened.

…It scared a baby sky serpent that weighed nearly half a ton, who began to have second thoughts about flying. It upset the pegasi who managed Ponyville’s weather. It gathered like dust on a statue that looked like a cross between a dragon and a horse. And other brief stories we have no time for. The forest would blot the sky and start again.

Wait. One promise left. A hundred dark vines rushed for the apple seeds planted at the entrance, for the false words, the lies.

A pink pony stood in the way. She held a cupcake like a cudgel.

Twilight opened the first letter.

Dear Twilight Sparkle,

You have got to be kidding me.

Signed

Twinkleshine, Chief Executive Economist of the Daughter of Manehattan

At first the letters were dismissive. Some ponies were kind, within their limited experience with that quality.

To my Beloved Sisters,

Sent surveys. Twilight Sparkle’s results confirmed. Have no explanation at present. Will wait for further corroboration.

With love,

Frida Gallup, Chief Executive Economist of the Daughter of Fillydelphia

But most were not, even given that hooficap.

Dear Sisters,

The surveys are rubbish. Firms profit-maximize. There is no other way to make sense of them in an economic context. To paraphrase dear Alberta, I feel sorry for the (poor) economist.  The theory is correct.

As for the rest of you girls, the Great Succession was not so long ago, and we of the Daughters face a significant opportunity cost when we turn away from restoring the world.

Don’t bother replying,

Joan Candymane, Chief Executive Economist of the Daughter of Longedon

Sisters,

Ponies are rational. It is called the budget constraint; look it up. Rationality is both a weak and a necessary assumption. Economics without rationality is like physics without atoms. It is what we study. As for profit maximization, it is simply a corollary.

Didn’t check, don’t care, busy saving world,

Jenny Stirrup, Chief Executive Economist of the Daughter of Fillydelphia

But even as their words fell like whips on Twilight’s brittle pride, the results poured in.

To Whom It May Concern (You girls),

Rational choice theory is just a theory. Open your eyes. When is the last time you saw anypony behave rationally? You were never supposed to take marginal cost pricing literally. Even if ponies were rational, which they are not, how would they determine the marginal cost of or the demand for their goods? Did Twilight Sparkle seriously think ponies sit in their chairs thinking, “Time to set the marginal revenue equal to the marginal cost of my products?” It is not a literal descriptor but a prediction and explanation: ponies behave as if they are rational businessponies who set MR = MC.

Duhhhhh,

Fanny Hoofbottom, Chief Executive Economist of the Daughter of Baltimare

P.S. Results corroborated. Paddock and Martingale send confirmation as well. Bizarre.

And the problem took shape.

Dearest Sisters,

Survey results interesting. Businessponies believe in “full-cost” pricing. Summary: take “full cost” of producing good, add markup. No measure of consumer demand is taken. Baffling. Am baffled. Thoughts? Surveys, examples coming with letter.

Please be decent. With love,

Frida

Explanations started flying thicker than the pollen spreading over the sky.

Come on, girls,

Read a textbook. The actual decision processes of ponies are not modeled or even mentioned. Therefore no amount of evidence showing that they think in certain ways can refute any of our knowledge. Ponies are not modeled, profit maximization is modeled, a model that is incredibly powerful (I hate to admit it, Joan, but that’s not flattery). If the model works, but ponies don’t, then ponies must behave as if the model is true. Twilight needs to go back to econ 101. The rest of you should consider joining her.

Groan,

Fanny

Dear Sisters,

Arriving with this letter is an an example deriving marginal cost pricing from these so-called full-cost pricing methods, based on the survey results. What ponies have chosen to think of as marking up a full or average cost is plainly marginal cost pricing in practice. There is no mystery here except how Twilight Sparkle could have ignored this possibility. Actually, considering the axe she has to grind with me, no mystery at all.

Back to work,

Joan

Spike returned, struggling up the stairs with a pile of letters that must have come out on the way. Twilight sent him out to Rainbow Dash’s house. He came back ten minutes later, huffing and puffing with a bemused tortoise in his hands. Twilight levitated the surveys, Joan’s work, and an economics textbook in front of Tank. Wordlessly she clambered onto the table and took a slow look at the numbers, pausing only to direct Spike to acquire some lettuce. He returned with a head of fresh lettuce just before he hiccuped, convulsing as a torrent of letters burst out of his mouth in a stream of green fire that burnt the floor. Twilight barely noticed as she summoned the letters to her.

The argument was in full swing. Joan’s argument was hotly disputed by Frida, or at least as hotly as Frida disputed anything, and Jenny considered the very idea of it utterly contemptible, which was par for the course with Jenny. Fanny’s argument that ponies implicitly obeyed the theory regardless of their own ideas about the matter was toyed with, rejected and accepted with all manner of modifications in caveats by everypony involved. Twinkleshine was being a…bright young pony.

Sisters,

The Coaseponyean creedo says that what you don’t understand is a constraint you don’t realize. What could be missing?

Jenny

Dear sisters,

Here’s a puzzle: MR = MC is dependent on the assumption of profit maximization. But what kind of an assumption is profit maximization anyway? IRL ponies face a great deal of uncertainty: each choice a set of overlapping possibilities. I mean, we know unemployment happen! Consider an example: a pony has a choice between a high-variance strategy with a higher mean profit or a low-variance strategy with a lower mean profit. Which is profit maximizing? How can a pony be said to be maximizing anything in that world?

Just a thought,

Trixie Lulamoon, Vice Chief Executive Economist of the Daughter of the Crystal Empire

Twilight’s eyes flashed.

“Spike!”

Spike groaned from where he lay on the floor. Every few seconds a letter would burst out of his mouth and land on the floor beside him.

“Whaaa?” he moaned.

Twilight didn’t answer.

They got it! By Celestia, they got it! Not the answer, of course, if it was easy she would have seen it, but the other ponies were taking it seriously. They weren’t confused by marginal cost pricing or dismissing it. They understood what was at stake. They understood that the very heart of economics had just skipped a beat, and its left arm was feeling awfully strange.

They understood what would happen if they failed here.

“What happens if it goes away?” Twilight Sparkle had asked when she was but a filly.

“Everypony dies,” Princess Celestia said, more harshly than she intended. “In the amount of time that it takes a pony doing absolutely nothing to die.”

Princess Celestia, Twilight realized much later, had thought she meant the price system.

Twilight had meant the science of economics.

Her…sisters, Twilight had never been comfortable with that, but now it felt very nearly right, were panicking. That was obvious. And something she would need to discuss with the princess once her own hoofs stopped shaking. She was in charge of one-tenth of the Equestria economy. Panic would be catastrophic.

But they were together in this. They understood. Twilight kept repeating that to herself over and over as she obliviously reread the same line of Joan’s latest tirade three times. She remembered, briefly, in a distant sort of way that this was what it felt like to have friends.

The methodical scratching of Tank’s pen across the paper and the occasional stream of fire from Spike were the only sounds in the room. Twilight was about to compose her own letter for Spike to send out when something happen.

Her sisters had solved the problem.

Salutations, Sisters,

We have all been overthinking this (though perhaps we cannot accuse Twilight Sparkle of this crime). Let’s check the, hah, microfoundations. What incentive do ponies have to respond honestly to surveys? None. Prediction: dishonest surveys. What incentive to ponies have to use marginal cost pricing? Simply…everything. Prediction: ponies use marginal cost pricing, they just don’t talk about it. Preferences are revealed through actions, not words.

Sincerely,

Paddock Pokey, Chief Executive Economist of the Daughter of Whinnysota

Dear Sisters,

The question is not which assumption may be incorrect but which predictions. Pauline is correct; we did not predict survey results but the actual behavior of the firm. If we erred in our predictions we can work backwards to troublesome assumptions. But there is no use in talking of true or false assumptions, only how useful they are in generating true but not false predictions.

Sincerely yours,

Martingale Farrier, Chief Executive Economist of the Daughter of Neigh Orleans

P.S. This was fun, a good if frivolous break from convincing the Neigh Orleanians that I’m not plotting to inflate their wealth away for the sake of my own sick amusement.  We should correspond more often about current economic problems and publish the results. I am sure it would be of interest. The public journals of the Daughters…d-logs? Dlogs for short? That just sounds silly!

Twilight’s leg trembled as she reached for the next letter. They hadn’t been there; they hadn’t seen. Even Frida was just looking at surveys. She hadn’t faced a pony who looked her in the eye and told her she priced randomly. Her heart skipped a beat as she unfurled the last letter and glanced at the name at the bottom.

To the Chief and Vice Chief Executive Economists of the Daughters of Equestria,

I think you’re all right! Don’t fight, or you’ll make Momma sad. What does everypony think of my new official stamp, made by the new court artist Paint X?

Love,

Princess Celestia

It was a good stamp, Twilight admitted grudgingly. She would have been the first to see it back when she was Princess Celestia's number one assistant. Now things were changing.

The controversy over "full-cost pricing" as Frida had put it, was ended. No more letters remained. Spike closed his eyes. In a few minutes he was asleep, snoring gently on the scorched wood floor.

Twilight tottered unsteadily down the stairs. She wanted so badly to believe that it had all been in her head. Nightmare Moon herself hadn’t been as scary as Applejack’s stubborn refusal to change her prices. At least recessions made sense. But Twilight couldn’t shake the feeling that the others had merely come up with a very clever way to assuage their own panic. Nervousness settled inside her gut like a third helping of cake.

Somepony knocked at the door. Twilight opened it in a daze. It took her a few moments to realize the ponies her eyes were looking at were Applejack, Rainbow Dash, Rarity and Fluttershy. Behind them the sun was setting, the pink glow barely visible through the haze of pollen.

“It’s been hours and Pinkie Pie isn’t back,” Rainbow Dash said worriedly. “And the pollen isn’t stopping. We have to do something about the forest.”

“What? Oh. F-Fine,” Twilight said.

“Should we get our Elements?” Applejack asked.

“No. We’d need Pinkie Pie. Besides, they only work if economics does.”

“How about my Cerberus? The sky serpent?”

“We’re not using force. We’re going to talk. I’m an economist, for Celestia’s sake! And you ponies are—“ Twilight cut herself off in time. There were worse things than ponies who misused the price system, she told herself. She couldn’t think of any at the moment, but surely there were.

Her eyes were already watering. “Go get all the tissues you can and meet me back here in fifteen minutes. This has been the worst forty-eight hours of my life.”

"Knock on wood, huh?" Applejack said, grinning. Her face turned serious. "That'll be three bits for the pun."