Twilight stepped outside and was instantly reminded of the cold of Second Winter.

Twilight hadn’t believed in First Winter since she and Shining Armor had proved a causal link between the number of gifts Santa Hoofs brought to fillies and their parents’ income.[1] But Second Winter she had believed in the way other fillies believed the sky was blue. She only named it when she realized they didn’t.

[1] She later criticized their approach in a followup paper, saying it was too reliant on self-reporting.

The way Twilight saw it, winter could be neatly divided into two parts: the period lasting the last week-and-a-half of December until January 1, and the period from January 2 until the first day of spring. First Winter was a magical time of snow and wishes and presents and candy and having to explain that no, she didn’t want to go outside and throw snowballs, books didn’t just stop working in winter.

Second Winter was reality settling over the world as surely as the snow. It was looking outside the window and realizing that though the earth and sky were inviting you to play, you still had to go to work. It was remembering that snow wasn’t just pretty, it was incredibly inconvenient. It was the feeling of wet socks.

Twilight and her cohort back at the Canterlot academy had taken a certain dark delight in proving the economic inefficiency of gift-giving and winter cheer in general. It hadn’t been since Shining Armor, and wasn’t until her friends in Ponyville that she had seen the joy in, well, joy.

There was nothing joyous about Twilight and Applejack struggling through the snow in the dark that Second Winter morning. Morning came late and night came early in Second Winter, probably because Princess Celestia just wanted to snuggle under the covers with a hot cup of cocoa and the latest Daring Do book[2]. Walking to and from the daughter bank every day had gotten Twilight used to heavy exposure to fresh air, which she had previously considered a carcinogen. But she seemed to be over her pneumonia, and the struggle was worth helping a friend.

[2] Freedom of speech was a protected right in Canterlot, except for one rule, which Princess Celestia enforced mercilessly[3]: No spoilers.

Was it worth five bits?

[3] Violators were spanked.[4]

No. She wasn’t going to think about this. It was stupid, stupid, and she wasn’t going to.

[4] Capital punishment was legal in Equestria, “capital punishment” being what Princess Celestia called market competition when she was feeling ironic. A collective of “business interests” had seized on this as a largely futile re-branding of the market process in the hopes of putting a stop to said process once they were on top of it. Princess Celestia tolerated this, as she tolerated most things, because, being an immortal Alicorn demigoddess, she was pleasantly free to ignore the stupid things in life.

Ten bits? Twelve? Wouldn’t you rather be sleeping in? Under the warm, heavy blanket, Spike downstairs making pancakes and hot chocolate….

Shut up, me!

Does Applejack know how much your time is worth to you? How much you hate slogging through the snow? You didn’t tell her, and she didn’t ask.

La la la, I can’t hear you!

You’ve done the math. You know right from wrong, even if they don’t. You’ll let them die unknowing? The mistake is thinking the fruit of the tree of knowledge brought death to us…death was already here…the fruit just let us see it. Also how would that even work you’re not hearing this with your ears!

Twilight struggled on as the wind whipped her scarf into her face.

To die unknowing, like an animal…ponies deserve better. You destroyed the tickets! Not only what could have been given to a friend, but also your own, just so they wouldn’t think you were being selfish! This isn’t even jumping off a bridge because everypony else did, this is like jumping off a bridge because you wouldn’t want anypony to think that you thought your life was worth something!

Hey, remember that awful paper about simulating optimal voluntary defense funds? Wasn’t it just the worst?

Ugh, so much—ha. Nice try. Go on, ask her if you’re so sure.

Twilight slid down a small hill of snow and bumped up against Applejack, who braced her.

“You all right, Twilight?” Applejack stretched her lips like a smile. “Almost there.”

“Yeah, thanks. Applejack, how much would you pay me to keep going with you and not, say, turn around and go home and eat pancakes?”

Applejack forced herself to chuckle. “I’d pay you anything in the world to help me save my farm.”

“Yeah but how about five bits?”

Applejack frowned as she started walking. “This about the ticket? I didn’t quite get all that stuff about scary resources.”

“Scarce…scarce resources. No, I was, uh, just wondering.”

See? See????

We don’t know that she won’t pay! She didn’t actually say no!

Uh huh. How much are you going to pay me when she refuses?

I can’t pay you! We’re the same pony!

If you win, I’ll give you an hour of silence. If I win, we get to read Foundations again instead of doing actual work.

I like doing that too!

Twilight used her magic to keep the scarf out of her face. “Applejack…if I asked you seriously to pay me five bits or I’m leaving…what would you do?”

Applejack stopped and turned to look at her, a strange expression on your face. “I reckon I’d stop and think a bit, being in no more need to rush than an apple is. I reckon I’d remember we’re your first friends, and maybe they did things different in Canterlot than we do here in Ponyville. I’d tell you that if you have to pay your friend to help you save your business, she ain’t your friend, she’s a consultant.”

Twilight wet her lips.

Say it.

Shut up!

Say it say it say it! Oh you know what’s going to happen if you do! We both know!

Twilight opened her mouth to say, “But what about me? Don’t you care about me?” and said, “Okay, sorry Applejack—let’s keep going. I was just wondering, you know, always thinking about economics.”

“I understand,” Applejack said as they started walking again. “I’m the same way about apples.”

Coward! Cowaaard! Haha, Foundations it is! Starting with the introductions, and the prefaces, for every edition! And the whole appendix, no skipping!

It’s just signaling, Twilight protested to herself, feeling she was both halves of a good cop, bad cop routine on her imprisoned mind. Paying money wipes away the information of friendship, so it’s just a transaction cost, nothing to freak out about. All this death stuff is exaggeration, it’s not like it’s going to cause a dragon to come swooping in out of nowhere and eat us alive. It’s like blood.

Blood, Twilight knew, was supplied to a large extent through voluntary donations, as opposed to sold on the marketplace. Economists had done studies about the effects of economic incentives on the quantity and quality of the blood supply—basically, what happens when you pay ponies for blood. And the studies showed that fewer ponies sold blood than freely gave, and the blood they sold wasn’t always the sort of blood you would want to stick in somepony else.

It didn’t make economic sense that ponies should have sold less blood than they gave. Selling blood was the same as giving blood, only the giver also benefited. But, Twilight had reasoned a few months into her new life with friends while reading the study in bed one night, when blood was a commodity to sell rather than a gift to give, the economic incentive overwhelmed the friendship motive. You don’t sell blood to your friends. And ponies who do sell blood aren’t friendly.

It showed that more economics could mean less friendship. It also showed that the tradeoff could be not worth it.

Ohhh yeah, likely story. Blah blah, paying means no friends, how about actually thinking for two seconds? Why can’t you just send a strong signal of friendship early on, like say by saving the world together from Nightmare Moon, and then use markets to negotiate among friends? You know, like if your explanation were actually true.

Twilight hated arguing with herself. She was too smart.

“Here we are,” Applejack said, and threw up.

“Applejack!” Twilight knelt down beside her. “Are you okay?”

Applejack’s legs were shaky and her face pale. “I’m going to lose it. I don’t—I don’t have anything left of—of—” She retched this time, and sagged. If not for the snow, she might have collapsed.

“Applejack!” Twilight looked around desperately. The farmhouse was maybe thirty yards away, but in the snow and with Applejack to drag it might as well have been ten miles.

“Hey!” she shouted. “Hello? Big, uh, Big Red?[5] Applejack needs help!”

[5] As far as Twilight was concerned, there were names worth knowing, names she needed to know, and names that other ponies also had.

The snow began to vibrate. The ground rumbled.

Twilight’s horn glowed. She had no idea what spell to cast. “Applejack, what—”

What Twilight had thought was a hill of snow burst apart. A giant, three-headed dog the size of a house sprinted toward them in an explosion of powder, apparently unfazed by the snow. Twilight barely had time to freeze up before she was assaulted by three long tongues bigger than she was covering every inch of her lavender coat in smelly dog drool.

“Okay, okay!” she gasped, trying to breathe without having to actually open her mouth or smell anything through her nose. “Good doggy! Help Applejack!”

The three tongues treated Applejack similarly, then a couple of giant noses sniffed at the steaming vomit, licked cautiously—

“No!” Twilight said, trying not to gag. “Bad doggie!”

The Cerberus drew up and looked at her reproachfully, except for the third head, which was sniffing the vomit now. “I am a thousand years old, you know.”

“Fine, I’ll swat your noses with a very old newspaper. Help me carry Applejack to the farmhouse, please.”

The Cerberus’s tail whipped up a small snowstorm while Twilight took Applejack in. Applejack slumped in a chair, groaning and rubbing her head.

“Are you okay?” Twilight said. “Should…should I get you some…applesauce?” She cringed, but Applejack just looked at her hat sitting in her lap.

“I never had much sense for business, I reckon. Acres seemed to run herself. I just made sure everything kept happening. Maybe—maybe I was a little 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 rose to the challenge.

“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!”

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

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

“Anyway, you’re too young to understand business matters,” Applejack muttered. She put her hat on the table and turned away. “Ain’t even got your cutie mark.”

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

“Listen to your little sister,” Twilight said. “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 waved 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 you’re not bringing in as much as you’re spending. 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 said. “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?”

Wait.

I should warn you.

What follows is a conversation in which Twilight Sparkle, a Unicorn economist, attempts to convince Applejack, her pony friend, of a thesis in economics.

There is no magic. No fights with monsters. And certainly no wider application to the practice of friendship.

Only economics.

Just thought you should know.

Twilight took a moment. It wasn’t that she didn’t know the answer. But now she needed to tell it to a pony who communicated primarily through rattlesnake aphorisms.

Reach across the void…she doesn’t need to pass a test, she needs to save her farm.

Reach across the void…show her that she doesn't need to know what to do.

Shout across the void...show her that ponies will TELL HER WHAT TO DO!

“Remember,” she said slowly, “in the treehouse, when I wanted you all to bid on the ticket?”

Applejack nodded.

“I didn’t know how to decide who should get the ticket. But there was a way for you all to decide together. Not by talking, not directly, at least. With money.”

“Money!” Apple Bloom tugged on Applejack. “We need that. Listen up!”

“Settle down, sugar cube.”

Twilight went on. “I realized that even though I was the one selling the ticket, I didn't have to be an active participant. So long as the highest bidder had to pay what she offered, I could let you all decide amongst yourselves who should get it and how much she should pay for it.”

“We’d never agree,” Applejack said. “That’s why we kept arguing.”

“You all came to me with your different points of view. But I was the wrong pony to talk to! If you all had been talking to each other, one of you would have eventually realized the winning bid. The only thing I had to do actively was grant the ticket to the highest bidder. Otherwise I could kick back, sneeze a lot, and relax while you all competed.

“Do you know why Princess Celestia doesn’t call herself a queen? Because the customer is sovereign, Applejack. The customer decides. All you have to do is hear their royal decree.”

“So the royal customers decreed my farm is going out of business? Sounds like it's time for this mare to revolt and declare a republic. The first rule is that if you ain't got property, you can't vote.”

“They had their reasons. You just need to understand that in order to sell your apples, ponies need to buy them. But the things ponies buy from you are things they don’t buy from other ponies.”

Twilight was concentrating fiercely; she didn’t want to get technical with somepony who kicked trees for a living.

“I don’t just mean that they don’t buy apples from other places if they get them from you. I mean anything you can spend bits on. If a pony buys some of your apples, she has to buy less of something.”

“’S always worth it for a Sweet Apple Acres apple,” Apple Bloom piped up loyally.

“Could be. But how can anypony know that?”

“By trying one, of course!”

“No…no, that’s not enough. They also need to know what they’re giving up. They need to know what they’re not buying when they buy your apples.”

“But you said it could be anything,” Applejack said.

“Exactly! But they probably know what other kinds of things they’d like to do with their bits. What they need to know from you is how many bits they’d have to spend on your apples.”

“That’s the price!” Apple Bloom said, while Applejack looked confused. “We tell ‘em up front, and they try and negotiate and we don’t let ‘em!”

Twilight nodded. “The price of something tells ponies what they’d have to give up to buy it.”

“Then it’s a good thing it don’t change,” Applejack said.

“Not…exactly. Because…they don’t just sort out who wants to buy your apples. They also sort out whether they want your farm to exist.”

“It ain’t up to them!”

“No? Then why are you going out of business? Do you want to?”

“‘Course not!”

“Then it’s not your choice! Listen, listen, listen.” Twilight forced herself to breathe. “Whether a pony wants to buy your apples or not depends on what they have to give up to get it. Only ponies who value your apples more highly than other things they can do with their bits will buy them. That’s true for all resources…even the resources that go into making your farm run. The work you do, the tools you buy, the carts and workers for shipping…all of it could be spent on other things. It could be spent on other ponies and the things they want instead of the things you want.

“That day in the treehouse I said to get the ticket any of you would have to convince the others to let you have it. Your farm is in the same situation. You have to convince everypony in the world to let you have it.”

“They can’t take it from me. I mean it. They really can’t.”

Twilight shook her head. “You only have it because they let you. I mean it when I say Sweet Apple Acres is a reflection of their wishes, not yours. Now listen! Really, please.”

“You can talk, sugar cube, Celestia knows I need your help. But no pony’s taking my farm.”

Twilight nodded, licked her lips. “The money you spend to run the farm comes from selling apples. So the only way you can keep running the farm is if you make more money selling apples than you spend making apples. All the labor and tools could be going to other ponies, so it’s just like asking for the extra ticket. And just like the ticket, the way our economy decides who gets those resources is if everypony talks it out honestly and sincerely and decides they’d rather let you have them because they want other things more.”

Snow was visible through the window falling slowly. Little flakes of reality...

...reality, flaking....

“And when ponies buy your apples at some price, it’s because they want them more than other things. So in order to make your farm work, you need to take things ponies don’t want so much relative to other things and transform them into things ponies do want relative to other things. You have to be able to sell something at a higher price that ponies weren’t willing to buy at a lower price!

“And that price isn’t really something you can decide. You can set it, sure, but ponies don’t have to buy it. Because the price you’re looking for is the price at which everypony else decides your farm is worth keeping, the price at which you make more selling apples than you spend creating them. The price when you’re giving more than you take….”

Somewhere outside a Cerberus’s tail wagged up a snowstorm.

“And that’s the scary thing, Applejack, because maybe that price doesn’t exist. Maybe ponies have looked at your farm and decided they’d rather do other things with the resources than put them into the Applejack Mixer. Because it’s not your choice. And they’ll take it all away. Because it’s not up to you.

“But if that price exists…you must find it. You don’t have a choice. Change or die. It’s that simple. That’s your choice.”

Apple Bloom looked up at Applejack, then at Twilight. “How do we find that price?”

“Oh, just set marginal revenue equal to marginal cost.”

“Oh, right. Uh…what’s that mean?”

Twilight was about to answer when Applejack spoke.

“The Apple Book don’t say nothing about the price we oughta pay for Sweet Apple Acres,” the farmer said slowly.

Twilight needed a moment to understand. “What you ought to anything is up to you. But whatever that ought is, the fact remains that everything that goes into Sweet Apple Acres is a kind of buying, since you could do other things with the land, your money, and yourselves. Is it worth buying? If it’s not…then the continued existence of Sweet Apple Acres is like buying an apple for three bits when you only value it at two.”

“Now stop it!” Apple Bloom said.

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.

“Damn it, 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.”

Twilight left Applejack in the questionable care of Apple Bloom. Both sisters had a major mental adjustment to make. And she never liked to spend much time around the two of them together.

Shivering in the wind, Twilight trudged through the snowy Ponyville roads. So wrapped up was she in her own world of cold and thought that at first she didn’t notice the lines of agitated ponies standing outside, restless and clamoring.

“Excuse me,” she said tiredly to a mare with a candy-wrapper cutie mark and a pink-and-navy mane. “What are you all lining up for?”

“You didn’t hear?” the mare said. “Sugarcube Corner is going out of business![6] It’s their final clearance sale!”

[6] Or “busin,” as the civil rights organization, Stallions for Equestrian Equality[7] insisted on calling them. The word “business,” they insisted, implied the inherent female dominance of economic society. Twilight thought this sort of thing was nonsense, although she knew Fluttershy took it seriously.

[7] “We SEE equality! We SEE opportunity! Join up now and you can SEE!”

Twilight looked down the row of buildings. At each corner was a Sugarcube Corner, Pinkie Pie’s giant face gazing out from the transparent glass window, and down the line the speech bubbles read, in bubbly pink letters:

“Our final sale in snow and hail!”

“Everything must go! So everypony should come!”

“Bitterness is Sweetness!”

First Applejack, now Pinkie Pie? What is happening to this town?

“Which one is Pinkie Pie in?” she said to the mare.

She pointed. “The one with all the ponies weeping and crying and trying to break through the glass windows.”

“Thank you…” Name. Candy. Alliterative. “…Peppermint Patty.”

The mare looked surprised, probably impressed that somepony as important as Twilight remembered her name. Twilight waved goodbye and trotted off to save the Sugarcube Corner.