Panic Buying at Australian Supermarkets due to Corona Virus Fears. Image source: Chris Putnam © 123RF.com
What Does the Economics of Toilet Paper Tell Us About Mass-Market Psychology?
Yesterday the US became the latest country to declare a national emergency in a bid to tackle the spread of the novel coronavirus.
Amidst the rising tensions within the general population, a curious trend can be observed - toilet paper is the first thing to go out of stock in supermarkets, alongside food and medication. But why toilet paper?
People in, say, the UK have heard that the demand for toilet paper in Italy was huge after the country was put on lockdown, so the British decided to stockpile themselves as well, just in case.
This phenomenon is not driven by typical supply and demand pressures, but rather by 'animal spirits' or what we call in our upcoming trading book - 'the herd mentality'.
The high demand for toilet paper in times of crisis can be explained away using Abraham Maslow's Hierarchy of Needs. After you have satisfied your physiological needs (food, water, warmth, etc.), you start yearning for safety.
The desire to feel safe can be satisfied in several ways. If you have a roof over your head; clothes to keep you warm; and maybe a hefty supply of medicine, then you need to feel as though nothing can impede your day-to-day life.
People need to feel as though nothing can distort their basic way of life, which is the penultimate expression of safety and security. In that sense, the toilet paper becomes a symbol of one of those most basic of needs and their satisfaction.
Hence, the demand for toilet paper at times of crisis can be explained away by people's innate desire to feel as though everything is going to be normal, as it always has. This need is especially pressing at times when a state of national emergency is announced.
The situation would eventually stabilise, and people would start wanting to satisfy their higher needs - for love and belonging; esteem and self-actualisation.
In other words, the markets would come back to normal once people realise that they have stacked themselves with enough toilet paper.
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