Wednesday, January 2, 2013

Gem of the Week: The Free Market

Or:  They had Opportunity, in their very Community

Dear Princess Celestia,

Recently there was a severe shortage of apple cider here in Ponyville, which we had the opportunity to remedy, but because of short-sidedness on the part of some of your subjects and your apparent policy to grant monopolies in too many areas of the market, we chased that opportunity out of town.

In Ponyville, the cider franchise is granted to the Apple family of Sweet Apple Acres. Their orchard is a relatively small business and is incapable of supplying the demand. Cider prices are also too low, due to your policies of price control on cider, so the Apples are losing out as well. As a consequence, hundreds of ponies, a good fraction of the citizens of Ponyville, are deprived of cider, and those that do get it are forced to pay for cider with their time rather than with bits, by camping out at the gate. The time that they are granted, all those moments that will never exist again, they were forced to spend waiting rather than doing what they wanted.

If it seems cruel and heartless to give priority to ponies just because they have more bits, consider that your current policies are cruel and heartless as well to those who don't get any cider because they don't have as much time to waste in line. Even those ponies who do choose to spend those moments that will never exist again, pay for cider with both bits and time. Those customers spent that time to no benefit to anyone -- not themselves, and not the Apple family. If time were bits, it is as if those bits of time were carefully collected, from both the ponies who got cider and those that didn't, and dropped into Tartarus, never to be recovered, and never doing any pony any good. Even worse, those ponies who don't end up getting any cider pay time for cider they don't get.

A pair of entrepreneur ponies, the Flim Flam brothers, tried to remedy this, but because of the cider monopoly, they were unable to simply purchase the Apple family apples as a raw material and make the additional cider the market demands. The new business attempted to enter into collusion with the established players, but were unable to negotiate a cartel, which may have been even worse than the monopoly. By denying market competition, they were forced to compete in other ways, in this case a single-elimination to-the-out-of-business contest of pure quantity of production, rather than the ability to satisfy customer demand. In this competition, the Apple family was forced to work far beyond its sustainable capacity to near-exhaustion, and the Flim Flam brothers were forced to compromise their quality control, leading to inferior cider and tired, thirsty ponies.

If your policy of granting monopoly franchises was rescinded, the Flim Flam brothers could have just purchased apples from the Apple family or other suppliers at the market rate, and the Apples and Flim Flam could have worked together without having to collude. If your policy of cider price control was rescinded, the Apples could have raised the price of their cider to the point that some ponies would have decided that the cider wasn't worth it. The same number of ponies would have been served, the Apples would have made more money, and those ponies at the back of the line but more willing to pay would have been able to get their cider. With another supplier, more ponies would have been able to be served, and even if Apple family cider is better than Flim Flam cider, something is better than nothing, and the market would have decided that Apple family cider was worth more, and would have paid more. Those unwilling to pay that much would have been able to pay less to get Flim Flam cider.

They call it capitalism, but it isn't really an -ism of any kind, just the invisible hoof at work, ponies working towards their own benifit but supplying the needs of all ponies.

Please consider changing your economic policies to allow freedom to your subjects to pursue the interests that seem best to them.

It's a new world with tons of cider, fresh squeezed and ready for drinking -- and also plenty of quills, sofas, anemometers, and maybe even things nopony has even thought of inventing yet, but would if they had time to think and invent instead of waiting in line for cider.

Your Fellow Citizen,
St. Kwan the Just

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