If toilet paper was $20/roll, people would think twice before hoarding, and would probably also use less squares overall.

Hoarding isn't the (entire) problem, a bigger issue is the sudden shift in consumption from commercial to consumer. Nobody is pooping in office buildings, schools, or shopping centers anymore, everyone is doing it at home. Producers that uses to sell 50/50 consumer to commercial are now selling 90/10 in favor of consumer and they can't reconfigure their production lines fast enough.

https://marker.medium.com/what-everyones-getting-wrong-about...

And $20/roll would expedite the changeover pretty quickly.

Not if the producers believe that this is temporary and will go back to 50/50 again soon. It isn't worth the cost of making big changes just to have to change back again in a month.

It may incentivize them to invest in the ability to quickly change the ratio.

For a once every hundred years event? Probably not.

If they thought it might increase to $40 a roll soon, they will hoard. They might not be able to hoard as much of it, but they might still do it. Doubling your money on $1000 worth of rolls is still the same outcome whether that represents 50 rolls or 500 rolls, excepting only the logistics.

Anecdotally, this fits with my observations at the grocery store in Canada.

All the regularly priced milk, chicken, and eggs were sold out around March 25th but the "organic" milk and chicken at double the price was still in stock as was the AAA steak and the expensive Omega-3 eggs.

It appears there is still a fair amount of price elasticity of demand even in a pandemic.

And a lot of people would just have to go without, As opposed to everyone getting a little with price controlled rationing.

I think this is the biggest flaw in your argument. If toilet paper was $20/roll, that wouldn't deter someone who has none in the slightest bit. They'd buy one roll and pay $20 in a second. But that guy who was trying to buy a thousand? He's thinking twice.

"But that guy who was trying to buy a thousand? He's thinking twice."

Why wouldn't he just borrow the money to pay for it, hoard the supply and then flip it back onto the market when the price hits $40?

You're assuming a finite amount of money, but the monetary system is necessarily elastic.

Then the hoard, because it has gone up in value, becomes collateral for more loans.

Whereas rationing necessarily solves the distributional conflict instantly.

Price auctions only work when the demand is optional and the supply is elastic.

Because they are running an enormous risk of a 50 crates of toilet paper being driven up in a hastily hired farm truck direct from a commercial factory at $19 a roll. Then they lose money per roll and that has a crippling effect on their finances because debt magnifies gains and losses.

We know that the amount of toilet paper being produced matches how much is being consumed because it did pre-crisis and consumption/production aren't really changing. Any ramp up at all from the factories will quickly lead to a glut of the stuff. The problem is the commercial-private shift causing a mismatch between the orders for consumers and the supply for commercial toilets. If the price goes high enough someone will figure out how to match the two and it will happen really quickly. The price isn't going to climb after the initial spike; it is going to fall.

I think the issue here is that we are talking about toilet paper, which is not really vital. In this case, having people priced out for say 2 weeks before prices come down again is not the end of the world.

If we were talking about something really vital like food, those same 2 weeks become unacceptable.

It's a good thing that it did not happen at the same scale for food (supply is more elastic? demand is less elastic?) and that we can debate about an annoyance, not people starving.

You're not considering what I feel to be the most important point here.

The immediate result of price signals is huge amounts of money will become available to anyone who is producing a scarce good. If something in your scenario (government, public pressure, whatever) interferes with the market then the people who produce food will no longer be awash with money and will not produce more anywhere near as fast.

Even if people are starving the solution is not to ban disaster profiteers or implement price controls. The solution is for the government to start buying food at market prices and distributing it evenly. Working with the price signalling system, not against it. It isn't efficient but if people are starving then sure efficiency isn't the single biggest problem. At least it keeps the incentives where they need to be.

But you can't grow wheat or raise chicken in 2 weeks, no matter how much money you pour into it.

I think our divergence in opinion comes from how much extra incentives to produce there is between the normal margins and the supply-constrained margins and how helpful that incentives is.

My hunch is that as long as there is a profit to made, extra demand will be met as soon as possible. Massively increasing the profit would help only if it would go towards raising food faster, which I think is not something that can be meaningfully improved in the time-frame we are talking about. Yours seems to be that it would help us get food faster. I might be totally wrong, so any data is welcome.

Note that I am talking about a case where raising margin would be forbidden, not raising price if it is necessary to increase production. Also, this is only for the case where supply and demand did not change long term, and the current demand spike is caused by irrationality (panic buying or people trying to profiteer from panic buyers).

> But you can't grow wheat or raise chicken in 2 weeks, no matter how much money you pour into it.

I can get a lot more for sale though; at some point it becomes cost effective for people to start moving chickens over from other countries by air freight.

There is a price where people will start going out and hunting too. In Australia if the price of meat went up enough we'd start harvesting kangaroos, for example. The meat is a bit tougher than chicken but it is pretty good.

The argument in that sentence, and I don't mean this unpleasantly, is that you are a limited human who can't imagine a way of getting food on the table quickly that costs a lot of money. That is a fault in your imagination rather than a real limit. And if the situation is so dire that no food can be found at any price, people are going to starve whatever is tried so it isn't like it makes much difference in the big picture of this hypothetical. But anything up to that and more people working on the problem will help.

> Massively increasing the profit would help only...

There is a price point where Goldman Sachs employees stop trying to figure out how to screw over the little guy and start trying to get food to people. Until prices have reached that point, more profits will help increase production ASAP.

There is ample evidence that a shortage problem is better solved with subsidies rather than quotas. The main complaint is that subsidies are too effective at triggering oversupplies. There is no faster way of going from shortage to sufficient than throwing money at the problem - so the suggestion here is maybe at least try throwing money at the problem. People don't have to starve; governments can step in and buy them food - but if we need more food paying more to food producers for food is the single most effective way to get it.

> Why wouldn't he just borrow the money to pay for it, hoard the supply and then flip it back onto the market when the price hits $40?

Interesting data point: about three weeks ago a guy was selling single rolls for $5 a piece outside our development. He put his kids in gas masks and had them prance around with a big sign. I'm sure he wasn't doing it for the kindness of his heart.

Because at some point, TP will go back to $0.50/roll essentially permanently.

You can’t be sure that you’re buying on a sustained upswing in prices.

And yet this doesn't deter people from buying stocks.

It does serve as a limiting function for buying shares during hyperbolic up moves. Tesla had one earlier this year. It was the most comfortable short I’ve ever put on. My only concern was trading small enough to ensure I could fade the rest of the upward movement.

Because people don't buy stocks with the expectation that they'll remain flat in the long term. They expect them to increase in value over the long term.

Yes it is going to deter someone who has none. Is it impossible for you to imagine someone who couldn't afford that premium so they resort to using the shower or something? And do you really think a millionaire is going to be deterred from buying too much in that instance?

Someone who couldn't afford $20 for something that lasts more than a month? If this person exists it's because they place a below-average value on toilet paper, not because they don't have $20.

And there aren't enough millionaires for their toilet paper buying habits to have a meaningful effect on the market unless they each start buying millions of rolls, which is a ridiculous hypothetical with no chance of really happening.

Rolls of TP don't last a month in most households. They normally last 1 to 2 days. You either own a bidet or need to see a doctor.

Most households have more than one person, so in that case the $20 is no longer for a single person.

I'm buying toilet paper about once every five years. Not sure how others manage to go through the stuff so quickly. On the bright side, I bought some last year, so I'm covered for a few years.

> If toilet paper was $20/roll, people would think twice before hoarding,

The rational response to $20/roll is to buy as much as possible. It will be worth $40 soon.

In real life the problem isn't Scrooge McDuck buying the entire supply. It's everyone who buys a few extra just to be safe that makes demand rocket.

The more you have to exchange for something, the more you're foregoing other forms of consumption. If toilet paper cost you your entire budget, you wouldn't buy toilet paper at all. You'd buy food instead. In that way, prices redirect your consumption to higher priority things. That's what is meant by "more important."

Only if you have to think about money. What you point to is that poor and maybe middle-class people have to 'redirect' their consumption to 'higher priority things', which in some cases is equivalent to just going without.

Insulin, rent, or food? Ah, just prioritize, honey!

Defining "more important" this way seems limited to one actor. In your original post, you talk about multiple actors, namely hospitals and individual people. Different actors are going to have different budgets and preferences. Suppose you consider toilet paper to be an absolute necessity but at $20/roll, it is not affordable to you. I, on the other hand, don't value toilet paper as much but my budget is much bigger than yours so I can afford and am willing to pay $20/roll. When looking across both actors, could we still say that the "more important" need was met?

If many people can't afford TP, they will start flushing other things, which will block everyone else's toilets.

If I run out of TP and can't get any more at a reasonable price I will just use cloth towels and wash them right after use. Many people still use cloth diapers with their babies. Running out of TP is a first world problem.