Tuesday, March 17, 2020

COVID-19 Part 6: Toilet Paper, Gasoline, and the Calming Effect of Boredom

by Neil H. Buchanan

The crossover punk/pop band The Offspring's 2008 song "Stuff is Messed Up" (which uses different words for "stuff" and "messed" in the refrain) includes these memorably sarcastic lines:
Now thank God for the media
For saving the day,
Putting it all into perspective in a responsible way.
To look at photo after photo of empty grocery store shelves in newspapers, along with onsite "news" segments with pseudo-reporters standing with empty shelves behind them, one might think that there had been panic buying that left grocery stores across the country denuded of all items.  If one looks at some of those photos closely, however, it is possible to see in the background that other shelves are well stocked, with the scenes framed to appear to be post-apocalyptic.

Most readers will have seen this for themselves by now, I suspect, but I can report from personal experience that my local markets have run out of toilet paper and hand sanitizers and some soaps, but none of the other shelves are even close to empty.  Indeed, the last time I was at my local Publix (two days ago), everything was normal, and employees were methodically restocking various items.  But again, even a supposedly top-tier news sources like The Washington Post is now using a photo of empty shelves where toilet paper was once available as its default for even unrelated coronavirus articles.

So what is going on here?  And is the future to become what the media is already incorrectly portraying current reality to be, with stores turned into scenes from dystopian fiction?  Happily, there is a way to use some basic logic and knowledge of simple business economics to understand why there is no fundamental reason to worry and that Franklin Delano Roosevelt was right that the only thing we have to fear is fear itself.

I moved to Baltimore for what turned out to be a four-year stay in the early 1990's, and I had never lived that far south.  I had spent a winter break in Philadelphia, where snow was rare enough that no one knew how to drive on slippery roads, and because Baltimore is not far from there, I assumed that winter would merely be a matter of being extra careful when surrounded by drivers who lacked crucial skills.

When the first snow of the season was predicted, however, I was taken by surprise when every local news broadcast began with the anchor saying, "Snow in Baltimore tomorrow, so get out and buy your toilet paper and milk!"  What the heck?  The next day (before the snow started), I had forgotten about that strange mantra but needed to stop at the grocery store on my way home for what I thought would be a typical quick stop for a bag or two of what amounted to "Bachelor Chow."

What I found was something out of Mad Max.  People were running around as if the world was about to end.  This was, mind you, in response to predictions of at most an 8-inch snowfall the next day.  Toilet paper and milk filled every cart, and people looked frantic.

Is the disappearance of toilet paper from stores an indication that everything is going to hell on roller skates?  Hardly.  It is an interesting lesson in the usually boring details of inventory control.  Consider the gasoline shortages in the 1970's.  There, what was actually a reduction in supply of only a few percentage points led to massive lines, rationing, and social unrest.  But if the disruption was so minimal, why the huge impact?

Imagine that the average person fills her 15-gallon tank and then drives until roughly one-third of the tank remains.  This means that the average car at any given time has ten gallons in the tank.  If everyone suddenly decides that they need to keep their tank filled, however, everyone will run out and buy an average of five gallons of gas more than usual.  The chances are that filling stations do not have that much gasoline on hand, however, because they are used to meeting people's weekly needs, not to a sudden one-time need to fill every tank.

From that point onward, however, people -- even people who insist on "topping up" the tank with demonic frequency -- will end up using the same amount of gas (or less, to the extent that they can eliminate nonessential trips) as before.  The one-time disruption is truly a one-time thing, and oil companies would have no reason to think that the panic buying would (or could) continue.

Or, to put the point differently, people typically use stores as their de facto storage facilities.  (Hence the word "store.")  When I allow my gas tank to approach E, I do so thinking, "I have plenty of gas waiting for me as needed."  I am, in other words, not bothering to waste money on extra storage capacity (as one of my grandfathers did in the 1970's by installing a very dangerous and illegal 40-gallon supplemental gas tank in the trunk of his Cadillac) or to tie up money in unused gasoline, because it is there when I need it.

That is what grocery stores are, too.  Even though I could act like a survivalist and have canned goods filling my basement, garage, attic, and every closet, why would I?  The supermarket is effectively my extended pantry, and the company that owns the store is managing my inventory for me.  Thank you, supermarket company!

What makes the current situation different from the gasoline shortage is that toilet paper is neither perishable nor dangerous to store, and if one wants to be especially panicky about it, it is possible to overstock one's home with loads of it.  If the crisis is short-lived, there is nothing difficult about spending literally years using up the excess supply, so long as it is stored out of the way.

Even more than with gasoline, then, precautionary purchases of items like toilet paper (with, I am told, liquor now being another nonperishable that is disappearing quickly) can be subject to sudden buying surges far beyond normal needs.  But there is some limit, and most importantly, toilet paper is one of those things that people tend to waste in day-to-day usage.  When there is a need to be mindful about usage, people can cut down how much they take off the roll for each use, and so on.

So, paper companies know that the long-term overall demand for toilet paper will actually be unchanged or even possibly go down, not up.  They are rightly scrambling to deal with a sudden buying surge, and they surely are having great difficulty determining just how much more of their products to produce.  They know, however, that this is a temporary thing.

The same is true of the makers of hand sanitizers and soaps, except that the new normal is likely to see a somewhat higher ongoing use of such products.  Even so, once we are there, the stores can go back to being our collective bathroom cabinet.

John Maynard Keynes's most famous line is that "in the long run, we are all dead."  There, he was saying that reassurances that "prosperity is just around the corner," that is, that mass unemployment would be temporary and disappear in the long run, were cold comfort for those who were literally starving and homeless in the midst of the Great Depression.  The current situation is both like and unlike that tragedy.

After all, telling me that there will be a point at which the stores once again will not be sold out of toilet paper does nothing about today's needs.  On the other hand, this is not a matter of starvation or death but of adjusting our behavior.  I suspect that there are already web sites with names like "Make Your Own Bidet."  (By an odd coincidence, the house that my wife and I bought for our recent relocation has a bidet in the master bathroom.  We have joked about it for months, but neither of us has even once tried to use it.  That is likely to change.)

The transition to the long run can indeed be quite unpleasant.  Responsible discussions of the possible death toll from the current pandemic must take into account the short-term capacity of the health care system.  The best analogy is to a drainage pipe, through which any amount of fluid can flow over time, but which can become backed up if overloaded at any moment.

Similarly, any hospital can treat any arbitrarily large number of patients if given enough time.  For example, a small 100-bed hospital can care for one million people for one-night treatments over a 10,000-night period, but if one cannot wait for more than 27 years to be treated, that is a problem.  Even 110 people showing up on the same day means that some people will suffer.

The fact is that the companies that make the products that are stocked in grocery stores and pharmacies have a limited ability to ramp up production, so the system can be overwhelmed by short-term do-it-yourself inventory controllers.  And that can have a bad effect on everyone else.

But treating the emptying of some store shelves with sensationalism, acting as if there is chaos even where there is generally no chaos, has the effect of creating chaos where none needs to exist.  People acting out of fear do things that add up to overfilling the metaphorical drainage pipe.

The caveat here is that the production and distribution of all of these goods might possibly be disrupted by the effects of the virus itself on the workers; so even the most non-panicky response by consumers might not prevent a more serious problem from emerging.  Even so, anything that is anxiety-driven would make that bad situation worse, and a still-functioning supply chain will be able to function best without needless surges.

I am worried about a lot of things right now.  When it comes to the availability of consumer products, including food and basic staples, however, I am not worried about the underlying ability of companies to produce the same excesses that they have long produced but about the possibility that people acting rashly will make the short-run situation needlessly inconvenient and thus feed back into the panic that is causing it.

It is too bad that marketers over the last few years overused the "Keep Calm and Carry On" idea, because that advice from wartime Britain is as valuable as ever today.

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