Image Credit: Starecat.com
An Analogy by Iain Dooley
The Toilet Paper crisis provides an excellent example of why unregulated free markets are inadequate to deal with the complexity of human life.
The *only* thing markets can do in order to resolve problems is allow prices to fluctuate. That’s it. There is only one response.
So when you have a relatively inexpensive item that is non-perishable that everyone needs, and allow a very small number of people to buy it all simultaneously the only thing a free market can do in order to resolve the problem of supply is to increase the price.
This will encourage the hoarders to sell some of their stock back into the market at a higher price than what they originally paid, rewarding their idiotic behaviour.
Substitute in toilet paper for housing and you have the basis for the housing affordability crisis worldwide.
The funny thing is that everyone clearly points to the TP crisis and says “See how dumb everyone is” and “I’d never pay above market for a roll of toilet paper I’d rather use a leaf”, but when it comes to housing, people seem to have championed the exact same behaviour as a savvy investment strategy.
During the TP crisis it seems obvious to everyone that “The government won’t just let the situation get worse, everyone needs toilet paper”, it seems obvious that it’s okay for Woolies to impose restrictions on transactions to ensure everyone gets their fair share.
Hell, I’d hazard a guess that people would even gladly accept “social toilet paper”, that is, the federal government having 12 rolls delivered to your house weekly in exchange for a TP tax.
Why is it such a giant leap for everyone to realise that the same is true for any market failure, most obviously housing?
(Just imagine how messed up we’d all be if you could rent toilet paper!!)