Toilet Paper, Beauty Contests, and the Stock Market

by | Mar 13, 2020


Why Are People Hoarding Toilet Paper?

We humans are interesting creatures. You’ve probably heard tale that toilet paper is selling out in stores all over the place. What’s going on? Why is there a run on toilet paper?

Who knows exactly how it was triggered. But once a few people start buying a lot of toilet paper it can turn into a panic of toilet paper buying. Why? Because if we see people buying a lot of toilet paper we’re worried that that will spark even more people to buy toilet paper. That, in turn, could lead to a toilet paper shortage. So, what to do? Go stock up on toilet paper. Overall, at the system level, it’s completely irrational, but at the individual level it may be rational to hoard toilet paper because you don’t want to be left behind (pun intended) without any toilet paper.

Keynesian Beauty Contest

What’s happening with toilet paper is explained by what’s known as a “Keynesian Beauty Contest.”


John Maynard Keynes was a celebrated British economist. In the 1930s he described a newspaper game in which participants submitted their picks of the six prettiest faces from 100 photographs. The winner was the player who picked the most popular choice overall.

According to Keynes, the winning strategy was for each competitor to pick “not those faces that he himself finds prettiest, but those that he thinks likeliest to catch the fancy of the other competitors, all of whom are looking at the problem from the same point of view . . . [Thus], it is not a case of choosing those [faces] which, to the best of one’s judgment, are really the prettiest, nor even those which average opinion genuinely thinks the prettiest. We have reached the third degree where we devote our intelligences to anticipating what average opinion expects the average opinion to be. And there are some, I believe, who practise the fourth, fifth and higher degrees.”

The Stock Market

Keynes’s beauty contest analogy remains a spot-on description of how the financial markets work. It’s me watching you, you watching me, me watching you. Each player in the market is trying to guess what other market participants are guessing that everyone else is guessing. Same thing with toilet paper: I don’t really need 48 rolls unless I think that other people think that people on average are going to hoard toilet paper.

This goes a long way to explaining how the stock market works. We are all watching each other and guessing what everyone else is guessing everyone else will do. Millions of actions by tens of millions of individuals roll up to cause stocks to rise or fall and then that rise or fall causes changes to everyone’s assessments of what their actions should be going forward. This means that small actions that are rational by individuals can cause big effects that are irrational on a system-wide basis. Fascinating. It’s why it’s so hard to predict what the stock market is going to do in the future.

What Was Used Before Toilet Paper?

For most of humanity’s existence we didn’t have paper at all, let alone paper specifically designed for cleaning our backsides. So, what did our ancestors use?

In a fascinating paper titled Toilet Hygiene in the Classical Era published in the British Medical Journal researchers answered just this question.

During ancient Greek and Roman times, a sponge on a stick was used by some. Also common was the use of small pieces of ceramic called “pessoi.” These small bits of ceramic have been found in great quantities in ancient latrines. Where pessoi couldn’t be found small stones were used. Here’s an example of what they look like:

Not exactly Charmin!

From the BMJ article: “Other cultures do not use toilet paper, partly because paper is often not easily available. Anal cleaning can be carried out in various ways according to local customs and climate, including with water (using a bidet, for example), leaves, grass, stones, corn cobs, animal furs, sticks, snow, seashells, and, lastly, hands.” These various things were used prior to toilet paper depending on availability and the culture. Corncobs were used in colonial America. Just using water is quite effective and the use of buckets of water and hands was common in India (and still is). In Japan, they used flat wooden sticks that looked like tongue depressors. Plus, after paper was invented, random pieces of paper — such as from books or newspapers — were used by people if they could access it.

Toilet paper wasn’t widely used in America until the mid-19th century. It makes sense to look upon our toilet paper as a luxury!


  1. Great article! Thanks.
    Do you have any thoughts on why specifically toilet paper became the subject of a Keynesian Beauty Contest? It could have been a range of other items, like milk, eggs, just to name a few.
    Why did we hone in on toilet paper?

    • Great question. I have no idea. Seems strange that it would be toilet paper or all things.

  2. Good one John

  3. One of the best IFOD’s.

    It takes a particularly wise person to avoid over-watching and being swept away by the triggers that launch stampedes. The masses that lurch when they think others are about to do the same usually reverse their course to return to the very spot from which they departed–only with much of their energies spent in unnecessary emotional navigation.

  4. hanks John, very informative as always. The definitive treatise on how to cleanse one’s rear (imo), was written in the early 16th century by the Franciscan monk Rabelais. If you are not familiar with it, in Rableais’ satirical pentalogy of novels, Gargantua and Pantagruel, Gargantua describes to his father the dozens of methods he has tried including “with mercury, with parsley, with nettles, with comfrey, …the sheets, in the coverlet, in the curtains, with a cushion, with arras hangings, with a green carpet, with a table-cloth, with a napkin, with a handkerchief, with a combing-cloth”, finally settling on the neck of a (live) goose as being the best. You can read it here:

  5. John-
    Wonderful article about the TP, which is a fascinating psychological phenomenon. Not sure I am a big fan of the rocks….

  6. J–no doubt, this IFOD is a keeper for it combines something very topical (!) with some great investment advice–bravo for providing a mental refuge from the news cycle! Lov2Nap

  7. When a child, my mother used the Montgomery Ward catalog in an outhouse.

  8. John’s mom and I are one of the families who stocked up on toilet paper and we did it over a week ago. As John knows I had 7 siblings and my dad had a low income job. So toilet paper was a luxury that we couldn’t always afford. Personally, I am glad that I grew up poor. I have a lot of things now that I think I appreciate more because of my background.

  9. One of your best.


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