The Price of Panic (A Case Against Hoarding)

 

I bought toilet paper on Sunday. It wasn’t because I was panicky; we were out. Well, we weren’t exactly out, we were down to six rolls. But in a house of nine, including three 14-year-olds and a potty-training toddler, six rolls is as low as I like to cut it. So we needed toilet paper. The only problem was, toilet paper is too cheap.

My wife and I once had a debate about “price gouging.” I’d always lived under the assumption that to raise the price of a product in a time of panic was a moral sin. But is it? She was reading a book by Thomas Sowell and went on to explain how the free market has a mechanism for correcting the kind of panic buying we are witnessing this week. It’s not price gouging — if that’s what you choose to call it — but rather, the fair market price based upon the supply versus the demand. In other words, capitalism.

We’re seeing this play out with products that on a normal week go largely unnoticed; toilet paper, soap, hand sanitizer, water (in America at least) — these are not commodities. The manufacturing plants of Kimberly-Clark, Scott, Georgia-Pacific, and a dozen others are still churning out toilet paper at a steady pace. The distribution centers for Costco Wholesale are massive, and stocked with hundreds of pallets that will find their way to your store just as soon as the trucks and barges can carry them there. You may have to wait a few days, that’s all.

In response to the panic that stripped their shelves, Kroger implemented a one-per-customer rule for a limited time. Electronics are similarly rationed at certain times of the year — like Black Friday — and it’s a practice which, from the stores’ perspective, equates to good customer service. In truth, it’s socialism minus the guns, for now.

Why ration how many iPhones a person can buy? Because we want everyone to buy one whether they can afford it or not. Why ration how many rolls of toilet paper a person can buy? Because your shelves are empty, which is bad for business, because customers get angry and shop at your competitors online, which is how I ended up purchasing the toilet paper I needed on Sunday morning.

I have a friend who recently bought way more toilet paper than he will ever need. He’s not the panicky type; no, he bought it because it’s cheap, and even though it might take years, he will use it eventually. Most of the people stripping their grocers bare are probably of the same frame of mind. But imagine if you were to walk into your grocery store and instead of seeing people in a panic, racing their shopping carts in a sort of demolition derby, searching for today’s pallet of rationed products, you saw half-full shelves, but with an inflated price.

Imagine if the toilet paper you used to buy for $15 was now $25. Would you pause and do a mental calculation about your needs? Would you have a little sober reflection and perhaps only buy it if you actually needed it?

Because there is an age-old mechanism for ensuring the population doesn’t panic and revert to its animalistic nature, to ensure people don’t get into fist-fights with strangers over a pack of Charmin or a PS3. There is a way to make sure people consider whether or not they really do want to spend their hard-earned money on the latest whim: Raise the price.

There are a lot of pantries full of inordinate quantities of toilet paper this morning. There are also parents shepherding their kids out of bed to be one of the lucky hundred people in line when the local Costco raises the door, hoping they will manage to get a pack of toilet paper because they need it more than ground beef, or milk.

They won’t, but maybe tomorrow they will. And that is a sad commentary on a nation as blessed as ours, a nation bursting with resources but hamstrung by antiquated economic policies that breed fear of nonexistent scarcity, instead of encouraging people to budget. Because the day may come when that hoarder down the road finds a few angry neighbors beating down the door, because they had the foresight to stock up on ammo instead of ridiculous amounts of toilet paper.

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  1. Bartholomew Xerxes Ogilvie, Jr. Coolidge
    Bartholomew Xerxes Ogilvie, Jr.
    @BartholomewXerxesOgilvieJr

    Anti-price-gouging laws cause shortages. If you allow prices to respond to market signals, items stay on the shelves, and are still available to those who really need them. The more you need it, the more you’re willing to pay for it. This is not rocket science.

    Some people will say, what about those who can’t afford to pay the higher prices? This is a red herring; those people are no better off if the prices are low and the shelves are empty.

    A friend once offered a brilliant example. Suppose you’re in an area that has been hit by a hurricane, and the power is out. People need flashlights, but there are none to be had. If prices were allowed to rise, that would make it worthwhile for sellers who live outside the affected area to travel there with truckloads of flashlights for sale. People respond to incentives, so why not allow the incentives for the things we need?

    Morality doesn’t enter into it. This is the way human populations behave. To make laws based on different assumptions is foolish.

    • #1
  2. Boss Mongo Member
    Boss Mongo
    @BossMongo

    Being that we’re now empty-nesters, our toilet paper consumption rate has slowed way down, but I feel your pain.

    We won’t be hoarding TP.  Since we live down south, Plan B is palm fronds.

    • #2
  3. The Reticulator Member
    The Reticulator
    @TheReticulator

    Boss Mongo (View Comment):

    Being that we’re now empty-nesters, our toilet paper consumption rate has slowed way down, but I feel your pain.

    We won’t be hoarding TP. Since we live down south, Plan B is palm fronds.

    No way am I going to feel your pain if you use palm fronds. You can feel it all yourself.

    • #3
  4. Boss Mongo Member
    Boss Mongo
    @BossMongo

    The Reticulator (View Comment):
    No way am I going to feel your pain if you use palm fronds. You can feel it all yourself.

    Nah.  Slick and smooth and, if you pick the right plant, some soothing aloevera to prevent chafing and chapping.

    • #4
  5. The Reticulator Member
    The Reticulator
    @TheReticulator

    Boss Mongo (View Comment):

    The Reticulator (View Comment):
    No way am I going to feel your pain if you use palm fronds. You can feel it all yourself.

    Nah. Slick and smooth and, if you pick the right plant, some soothing aloevera to prevent chafing and chapping.

    Yeah, well, your knife blade is slick and smooth, too. How about soft?  

    • #5
  6. Samuel Block Support
    Samuel Block
    @SamuelBlock

    Gotta give the busybodies some credit though, these people sure know how to make everything sound violent. 

    • #6
  7. Vince Guerra Inactive
    Vince Guerra
    @VinceGuerra

    Boss Mongo (View Comment):

    Since we live down south, Plan B is palm fronds.

    My mom sent me a stack of newspapers after the Chiefs won the Superbowl, they factored into my plan B but I don’t think I could do that to Pat. We live in Alaska, so I suppose a handful of snow might work. That’d wake you up.

    • #7
  8. Roderic Coolidge
    Roderic
    @rhfabian

    I don’t understand hording TP.  It’s got to be one of the easier things to replace.

    A stack of cloth wipes and a diaper pail, for example.  Some people use this because they think it’s nicer to the planet. 

    • #8
  9. GrannyDude Member
    GrannyDude
    @GrannyDude

    I thought it was weird that there was no toilet paper at the grocery store, but plenty of Kleenex and paper towels.  Why aren’t those items —adequate substitutes, at least, compared with palm fronds and snow—-flying off the shelves too? 

     

    • #9
  10. Ralphie Inactive
    Ralphie
    @Ralphie

    On Black Friday limits. My husband went to Home depot to get a shop vac. All sold out the first few minutes. And put on ebay.  

    • #10
  11. Hoyacon Member
    Hoyacon
    @Hoyacon

    Bartholomew Xerxes Ogilvie, Jr. (View Comment):

    Anti-price-gouging laws cause shortages. If you allow prices to respond to market signals, items stay on the shelves, and are still available to those who really need them. The more you need it, the more you’re willing to pay for it. This is not rocket science.

    Until it’s gone anyway.  I know I’ll lose cred with the free-market/libertarian types, but the original price is what a fair market has determined is appropriate.   The “black swan” event that created demand is a market distortion.

    Some people will say, what about those who can’t afford to pay the higher prices? This is a red herring; those people are no better off if the prices are low and the shelves are empty.

    Actually, some of those people would likely have obtained the goods at the original market price if price distortions had not occurred.  As opposed to none of them when they couldn’t afford it.

    BTW, I’m sitting here waiting for those entrepreneurs in the trucks from out of the area to sell me TP and hand sanitizer at an elevated price.  They’re nowhere to be found.  The “flashlight” example clearly doesn’t cover a situation where there is broad-based demand for a product in shortage.

    • #11
  12. Basil Fawlty Member
    Basil Fawlty
    @BasilFawlty

    Amazon was offering a discount on the WaPo this week.

    • #12
  13. The Reticulator Member
    The Reticulator
    @TheReticulator

    Hoyacon (View Comment):
    BTW, I’m sitting here waiting for those entrepreneurs in the trucks from out of the area to sell me TP and hand sanitizer at an elevated price. They’re nowhere to be found. The “flashlight example clearly doesn’t cover a situation where there is broad-based demand for a product in shortage.

    How much are you willing to pay? (I need to be sure it will cover my driving time and expenses.)

    • #13
  14. Mike Rapkoch Member
    Mike Rapkoch
    @MikeRapkoch

    Maybe I should have pouched the big five point buck in our yard the other day. But I’d have missed and been down a round I’ll need when the Zombie apocalypse starts.

    • #14
  15. Hoyacon Member
    Hoyacon
    @Hoyacon

    The Reticulator (View Comment):

    Hoyacon (View Comment):
    BTW, I’m sitting here waiting for those entrepreneurs in the trucks from out of the area to sell me TP and hand sanitizer at an elevated price. They’re nowhere to be found. The “flashlight example clearly doesn’t cover a situation where there is broad-based demand for a product in shortage.

    How much are you willing to pay? (I need to be sure it will cover my driving time and expenses.)

    Well, desperation hasn’t set in.  Better to wait until we’ve run out of wipes.

    Besides, I’d rather head for your area and go shopping.

    • #15
  16. Ontheleftcoast Inactive
    Ontheleftcoast
    @Ontheleftcoast

    GrannyDude (View Comment):
    GrannyDude

    I thought it was weird that there was no toilet paper at the grocery store, but plenty of Kleenex and paper towels. Why aren’t those items —adequate substitutes, at least, compared with palm fronds and snow—-flying off the shelves too

    We make TP in this country. We don’t make antibiotics or the active ingredients for 90% of the generics we use. That would be China.  No doubt the altruistic Chinese Communist Party will send us what we need before it fills China’s domestic channels.

    I live in earthquake country. If the big one hits, we may be a long time without electricity. That means no gas pumps. No refrigeration. Uncertain supply of meds. Water that needs purification if it’s running at all. No heat, and probably no natural gas. At least days, more likely weeks. Without power and before looting, there’s maybe three days worth of food in town.

    Forget toilet paper. How many calories/day for how many days would constitute “hoarding?” How many days supply of lifesaving meds? Would a generator? The snacks and treats that make your life nicer?

    That’s the beans and bandaids part. The bullets part depend on how you roll. But I’m pretty certain that people have scouted my neighborhood for future reference.

    OK, maybe not earthquakes where you are. But how about quarantine?

     

    Yes, there is panic buying. But there are also people paying money as the cost for procrastination and denial.

    • #16
  17. cirby Inactive
    cirby
    @cirby

    I have a lot of TP because there was a great sale at Target back in early January (buy 2, get one, plus a $5 card).

    I did stock up on food, mostly in case I get sick and have to quarantine for a few weeks, but also to avoid the stores during Panic Season.

    I have a new AR-15, because, um, okay-I-wanted-one-anyway. And a thousand rounds of 5.56, because it was on sale.

    And I have a nice fresh bottle of The Balvenie Doublewood.

    Because it’s Thursday.

    • #17
  18. Bob W Member
    Bob W
    @BobW

    I was at Costco this morning as they were opening. Not for TP, but RX.  But almost everyone else was. It was unreal. They had the back blocked off while they unloaded a semi of paper products and bottled water. The line waiting to get at the huge stacks was the length of the store and out the door, it was almost a mob outside with the line continuing to grow into the parking lot. There was a limit of two on paper towels, water and TP. There must have been another resupply the night before because as we walked in there was a steady stream of people leaving with two waters, two paper towels and two TPs. with maybe a 40 lb bag of rice and the lines at all the checkouts were backed up in to the store isles. There were a few shoppers doing regular shopping since their carts did not have stacks of paper and water. But I they would have to go through those lines.  We decided not to wade through the lines for the few things we wanted and so latter stopped at our Sam’s Club. It was a like a regular shopping day there. I found out why, they were all out of paper products and water because they open at 7:30 and were cleaned out in 15 min.

    Why all those people feel they need 60 bottles of water and rolls of TP and paper towels escapes me. I wonder how many times they are going back? Maybe I’ll be sorry when I need to resupply.

    • #18
  19. Hoyacon Member
    Hoyacon
    @Hoyacon

    cirby (View Comment):

    I have a lot of TP because there was a great sale at Target back in early January (buy 2, get one, plus a $5 card).

    I did stock up on food, mostly in case I get sick and have to quarantine for a few weeks, but also to avoid the stores during Panic Season.

    I have a new AR-15, because, um, okay-I-wanted-one-anyway. And a thousand rounds of 5.56, because it was on sale.

    And I have a nice fresh bottle of The Balvenie Doublewood.

    Because it’s Thursday.

    Doublewood, double like!

    An AR-15, 1000 rounds, and single malt.  Who needs hand sanitizer?

    • #19
  20. Bartholomew Xerxes Ogilvie, Jr. Coolidge
    Bartholomew Xerxes Ogilvie, Jr.
    @BartholomewXerxesOgilvieJr

    Hoyacon (View Comment):

    Until it’s gone anyway. I know I’ll lose cred with the free-market/libertarian types, but the original price is what a fair market has determined is appropriate.

    Circumstances change, and demand changes. That’s not a distortion, that’s just supply and demand at work. Surely a flashlight is more valuable to you if you’re in the dark, isn’t it?

    Actually, some of those people would likely have obtained the goods at the original market price if price distortions had not occurred.

    Sure, some lucky random few who happened to be in the right place at the right time. And they will all be inclined to buy more than they need, because they have the opportunity. Allowing the price to increase, on the other hand, goes at least some way toward rationing the products in a way where there is some correlation between who needs it most and who gets it.

    BTW, I’m sitting here waiting for those entrepreneurs in the trucks from out of the area to sell me TP and hand sanitizer at an elevated price. They’re nowhere to be found.

    I would be willing to bet that if you tried hard enough, you could find somebody who would be happy to sell you those items at an elevated price. But of course there aren’t people doing so openly; that’s my entire point. They can’t, because they would be vilified, and probably prosecuted under anti-gouging laws.

    • #20
  21. cirby Inactive
    cirby
    @cirby

    Hoyacon (View Comment):

    cirby (View Comment):

    I have a lot of TP because there was a great sale at Target back in early January (buy 2, get one, plus a $5 card).

    I did stock up on food, mostly in case I get sick and have to quarantine for a few weeks, but also to avoid the stores during Panic Season.

    I have a new AR-15, because, um, okay-I-wanted-one-anyway. And a thousand rounds of 5.56, because it was on sale.

    And I have a nice fresh bottle of The Balvenie Doublewood.

    Because it’s Thursday.

    Doublewood, double like!

    An AR-15, 1000 rounds, and single malt. Who needs hand sanitizer?

    Oddly enough, I have two 30 ounce bottles of hand sanitizer. I got them for free from a trade show I did a couple of weeks back.

    I actually got three, but I gave one to a friend who has two teenage daughters – apparently, it’s a necessity for them.

    • #21
  22. Vince Guerra Inactive
    Vince Guerra
    @VinceGuerra

    Hoyacon (View Comment):

    Bartholomew Xerxes Ogilvie, Jr. (View Comment):

    Anti-price-gouging laws cause shortages. If you allow prices to respond to market signals, items stay on the shelves, and are still available to those who really need them. The more you need it, the more you’re willing to pay for it. This is not rocket science.

    Until it’s gone anyway. I know I’ll lose cred with the free-market/libertarian types, but the original price is what a fair market has determined is appropriate. The “black swan” event that created demand is a market distortion.

    Some people will say, what about those who can’t afford to pay the higher prices? This is a red herring; those people are no better off if the prices are low and the shelves are empty.

    Actually, some of those people would likely have obtained the goods at the original market price if price distortions had not occurred. As opposed to none of them when they couldn’t afford it.

    BTW, I’m sitting here waiting for those entrepreneurs in the trucks from out of the area to sell me TP and hand sanitizer at an elevated price. They’re nowhere to be found. The “flashlight” example clearly doesn’t cover a situation where there is broad-based demand for a product in shortage.

    Fair market price is whatever one is willing to pay. It changes (or should) with the flavor of the day. That’s not market distortion, purchase limits are. Unless the manufacturing plants have closed their doors, or the natural resources have dried up then there is no shortage. There doesn’t even seem to be a distribution problem as shipments continue to come in every day. I was at the store yesterday. All of the good priced toilet paper was gone, but there were plenty of individually wrapped Scott rolls to be had, if you wanted to pay that much for a single roll of toilet paper. Nobody did apparently. That is how it should be.

    • #22
  23. Hoyacon Member
    Hoyacon
    @Hoyacon

    Bartholomew Xerxes Ogilvie, Jr. (View Comment):

    Hoyacon (View Comment):

    Until it’s gone anyway. I know I’ll lose cred with the free-market/libertarian types, but the original price is what a fair market has determined is appropriate.

    Circumstances change, and demand changes. That’s not a distortion, that’s just supply and demand at work. Surely a flashlight is more valuable to you if you’re in the dark, isn’t it?

    Actually, some of those people would likely have obtained the goods at the original market price if price distortions had not occurred.

    Sure, some lucky random few who happened to be in the right place at the right time. And they will all be inclined to buy more than they need, because they have the opportunity. Allowing the price to increase, on the other hand, goes at least some way toward rationing the products in a way where there is some correlation between who needs it most and who gets it.

    BTW, I’m sitting here waiting for those entrepreneurs in the trucks from out of the area to sell me TP and hand sanitizer at an elevated price. They’re nowhere to be found.

    I would be willing to bet that if you tried hard enough, you could find somebody who would be happy to sell you those items at an elevated price. But of course there aren’t people doing so openly; that’s my entire point. They can’t, because they would be vilified, and probably prosecuted under anti-gouging laws.

    Thanks for the responses. I’ve been on this topic before here, and have been pounded for “impure” thoughts (not this time).  I stand by my comments, and I know you stand by yours.

    I think the issue is worthy of a more in-depth analysis than we can get into here.

    • #23
  24. The Reticulator Member
    The Reticulator
    @TheReticulator

    Hoyacon (View Comment):
    An AR-15, 1000 rounds, and single malt. Who needs hand sanitizer?

    You sound like Joe Biden: “Why do you need 100 rounds?”  

    • #24
  25. Arthur Beare Member
    Arthur Beare
    @ArthurBeare

    Boss Mongo (View Comment):

    Being that we’re now empty-nesters, our toilet paper consumption rate has slowed way down, but I feel your pain.

    We won’t be hoarding TP. Since we live down south, Plan B is palm fronds.

    Boss, are you sure that the beautiful and talented Mrs. Mongo is on board with Plan B?  Could be some significant downsides if she isn’t.

     

     

    • #25
  26. ShaunaHunt Inactive
    ShaunaHunt
    @ShaunaHunt

    This is when you find out if any of your neighbors are Latter Day Saints! We generally have enough food stored for, at least, three months.

    • #26
  27. Pete EE Member
    Pete EE
    @PeteEE

    Though I usually pride myself on not succumbing to panicky reactions, I did buy TP last weekend.

    With all the talk of TP hoarding, I checked our stash and found one lonely roll left. So I bought a pack, not because we really needed it but because I don’t want to find empty shelves when I do need it. That’s right, I rationally looked at the irrational mob and joined it.

    Sure enough, at the store 3/4 of the shelves were empty. The irony is that TP was on sale! I know stores consider it bad PR to be caught “gouging” but can you at least try not to sell-out during a shortage?

    • #27
  28. Bartholomew Xerxes Ogilvie, Jr. Coolidge
    Bartholomew Xerxes Ogilvie, Jr.
    @BartholomewXerxesOgilvieJr

    Pete EE (View Comment):

    With all the talk of TP hoarding, I checked our stash and found one lonely roll left. So I bought a pack, not because we really needed it but because I don’t want to find empty shelves when I do need it. That’s right, I rationally looked at the irrational mob and joined it.

    That’s the insidious thing about this kind of situation. Your action was completely rational, because there is a toilet paper shortage. There wasn’t a toilet paper shortage until somebody falsely claimed that there was, but that was all it took to make it real.

    But if the toilet paper you found in the store had been higher than the normal price, your rational calculation might have produced a different result: you might have decided not to buy something you didn’t need enough to warrant the higher price.

    Pretending that people don’t act in their own best interest can never be part of a sound economic strategy.

    • #28
  29. Miffed White Male Member
    Miffed White Male
    @MiffedWhiteMale

    Bartholomew Xerxes Ogilvie, Jr. (View Comment):

    Pete EE (View Comment):

    With all the talk of TP hoarding, I checked our stash and found one lonely roll left. So I bought a pack, not because we really needed it but because I don’t want to find empty shelves when I do need it. That’s right, I rationally looked at the irrational mob and joined it.

    That’s the insidious thing about this kind of situation. Your action was completely rational, because there is a toilet paper shortage. There wasn’t a toilet paper shortage until somebody falsely claimed that there was, but that was all it took to make it real.

    But if the toilet paper you found in the store had been higher than the normal price, your rational calculation might have produced a different result: you might have decided not to buy something you didn’t need enough to warrant the higher price.

    Pretending that people don’t act in their own best interest can never be part of a sound economic strategy.

    • #29
  30. Hoyacon Member
    Hoyacon
    @Hoyacon

    ShaunaHunt (View Comment):

    This is when you find out if any of your neighbors are Latter Day Saints! We generally have enough food stored for, at least, three months.

    Potentially stupid question, but I’m curious if there’s been curtailment/cancellation in going on missions as a result of this.

    • #30
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