You are indeed conserving toilet paper. You have never had such an appreciation for it. It’s “white gold.”
There it is spooling off the role. You used to grab lots and use it with abandon. Now you pay attention to every sheet, knowing that you only have a few rolls left. They are hard to come by in the store, because people raided them weeks ago.
Panic buying works like this. Someone starts grabbing something. Others figure that the buyer knows what’s what. They are buying more. This is fueled by a sudden sense of: what happens to me if I suddenly don’t have it? Such a nightmare prompts you to join them. Next thing you know it is all gone. This is the story of the last month.
It’s not only toilet paper. I’ve spoken to store employees who see the same thing happening with random goods. One day everyone raids the chicken, so the store responds with shipping in and displaying a tremendous amount of chicken. Suddenly no one cares. They are on to juice, then rice, then paper towels, then something else, anything, so long as you are buying quickly and frantically. All stores can do is adapt to the waves of manic random buying.
All the while, stores all across the country know not to raise prices, for fear of the price-gouging police, even though doing so would signal exactly what people need to know: how much is available and how should I consume it and at what pace? We are living amidst an information death, an epistemic crisis. We don’t know death rates. We don’t know if I have the virus. I don’t know if you have it. We don’t know what will be available in the stores tomorrow. We don’t even know if our industries will survive this.
And that one crucial signaling system of prices has been disabled right when we need it most.
We should gain a greater appreciation for the role of prices in information dispersion. I’m reminded of a moment in my childhood when I was mystified about paper towels. I recall thinking that these things are amazing. Grow a tree, cut it down, pulp the wood, flatten it out, make a towel, put a design on it, perforate it, roll it up, package it, and put it on the shelves.
Surely these things are priceless, but no: mom and dad used them once and threw them away.
What governed their behavior? Why didn’t they hang them up to dry and reuse them? Well, I later came to learn, they were paying attention not to labor and intellectual inputs; they were watching prices. A roll cost $1 so they could afford to use them once and throw them out. They were responding to relative scarcities based not on technical knowledge or expertise but on this tiny digit that contained all this knowledge. Pretty wonderful.
Now we see how crucial this is. We’ve taken toilet paper for granted all our lives. Never given it a thought. Now we are profoundly aware of how much we are using, and we are rationing it, not based on prices but on the terrifying reality that we can’t get more. The empty shelves are serving as a rationing device.
So too do prices function throughout the whole global economy, for everything. And these prices are not only about signaling to all of us how we should manage our consumption habits; they also serve as essential accounting devices to reveal whether we are making or losing money, whether our present course is viable over the long term or not.
Allocating scarce resources and finding a way to produce more: that is the essence of the economic way of thinking. It is not something we can do without. We can’t wish it away. Without such price signaling, the world would fall apart in the long run; in the short run, we replace prices with long lines, hoarding, and social panic. Prices keep the peace, give us knowledge, and bring rationality to the world around us. Without them, we know next to nothing about anything of any relevance.
And look at how gloriously the market has responded! From a mix of profit opportunities and humanitarian concern (those are not contradictory!), the empty shelves are filling up again. Producers are manufacturing toilet paper like crazy. Tips are being given in toilet paper. Thousands of rolls are being produced by the minute to meet the seemingly unlimited demand for white gold. Try the alternative scenario in which government manufactured this stuff. There would be no hope at all! Glory be the private sector. We need more power in the private sector – the only thing that has really performed well – and certainly not less.
It’s been a passion of economists for centuries to teach basic economic lessons. Better that this occur through books or lectures. Still, people are getting, I hope, an economics lesson here. It’s the markets that are saving us. Curing us. Giving us information. Keeping some semblance of civilization alive. They are so adaptable, so inspiring, so selfless. Beautiful.
Never take toilet paper for granted again. Never take anything for granted again. Let’s come out of this with a new appreciation for the astonishingly productive power and humanitarianism of markets.
And one last point about the legal framework of markets: freedom. You want that now more than anything else. Billions of people are today deeply sad about their plight. Some are without income, without friends, without hope. But others have a fine home, high-speed internet, an “essential” job, a supply of groceries, toilet paper, wine, a loving family, and so on.
Are these fortunate people happy? No, they are not. They are lucky but not happy. Material provision is never enough to satisfy the human personality. This is because we cannot make choices under lockdown. Movies are great when we choose to watch them, not when they are our only option.
We need freedom to make us happy. We cannot and will not live in cages. Whatever situation you find yourself in right now, let’s keep focused on the future, a future of flourishing in health and prosperity through freedom above all else.