Irrational fear of coronavirus triggers toilet paper panic buying
Is the recent run on toilet paper a canary in a coal mine?
Canary is a type of bird sensitive to carbon monoxide and toxic gases because they need a large quantity of oxygen to fly. These birds had been used in coal mines to indicate dangers so that miners could evacuate rather than suffocate. Therefore, a canary in a coal mine is a saying to indicate an advanced warning of some danger. Is the recent run on toilet paper a canary in a coal mine?
The run on toilet paper, driven by COVID-19 outbreak, in a few places in the world e.g. US, Hong Kong, Singapore, and Australia, clearly shows the ugly side of humanity and indicates irrational herd mentality is very much intact even in so called first world countries. It is worrying that such fear can potentially lead to self-fulfilling prophecy of worldwide economic flash crash.
Coronavirus does not cause diarrhea
Coronavirus COVID-19 does not cause diarrhea but why are people all over the world stockpiling toilet paper? According to WHO, symptoms of coronavirus infections include respiratory symptoms, fever, cough, shortness of breath and breathing difficulties, but no diarrhea.
In severe cases, patients could suffer from pneumonia, severe acute respiratory syndrome (SARS), kidney failure and even death. It makes sense to buy more hand wash, hand sanitizer, and face masks. But why do people hoard toilet paper? Why did they not consider the inconvenience to other people who also need it?
In a book titled ‘Irrational Exuberance’ by the former US Federal Reserve Board chairman, Alan Greenspan, he used the term irrational exuberance to describe behavior of market participants driving up asset prices in the period leading up to the dot-com bubble.
Logical thinking was thrown out of the window when investor euphoria drives up asset prices to unsustainable level. This was a case of irrational greed. Could the panic buying of toilet paper be a case of irrational fear? Let’s explore.
Supply chain disruption
Starting from 4 Feb, there have been reports of supply chain disruption such as Hyundai halting production due to the coronavirus outbreak. On 14 Feb, Bloomberg reports that Hong Kong and Singapore were running out of basic supplies including toilet paper. Not surprisingly, there have also been rumors on social media that toilet paper imported from China will run out due to supply chain disruption.
Three days later in Hong Kong, CNN reported there was a robbery of 600 toilet paper rolls and people had to queue 3 hours to buy surgical face masks. On 5 Mar, there was a report of a 50-year-old man tasered due to a fight over toilet paper in NSW, Australia.
Video [2:46]. Australians panic buy, toilet paper suppliers out of stock
Case study: Toilet paper panic buying in Australia
Supermarkets in Australia were well stocked with toilet paper until the news of their first coronavirus death on the 1st of March. The day before, Australia only had 25 confirmed coronavirus cases and 11 of them have recovered. According to a news report, Australia imports 40% of its toilet paper from China and the rest is manufactured locally. While the level of dependence on China for toilet paper is high, it seems that local production should be able to meet demands and there should be no issues with supply.
What about the demand side of the equation? According to Statista, Australians use ~88 toilet paper rolls per person in a year. This translates to approximately 3.4 rolls per person to satisfy their defecation need should a 14-day nationwide quarantine be imposed.
The panic buying of toilet paper is such a frenzy that local retailer, Woolsworth, said they will limit four packs of toilet paper per shopper. A pack of toilet paper has a range of two to 30 rolls. Therefore, even if we use a very conservative estimate, there should be four packs times two rolls available per person at the supermarkets. This equals to 8 rolls, which should be more than enough to satisfy every Australian citizen for two weeks.
But why are toilet paper shelves empty? Bear in mind that not everyone is panicking and stocking up, so the supply crisis is largely attributable to a mob of not so civic-minded individuals. Indeed, some of these individuals are creative and have been selling incredibly marked up price of toilet paper! This is despite the fact that government officials such as Australian’s Shadow Treasurer Jim Chalmers have been urging people not to engage in panic buying.