During August 2011, I moved to Beijing. The transition was difficult, no doubt about that. I’m going to highlight a very specific issue I experienced during that transition – don’t worry, I won’t go into too much detail.

During my first week at university, I was extremely irritated by the fact that every time I went to the bathroom there wasn’t any toilet paper! This really bothered me. How could a university not provide toilet paper? As students we pay a large tuition fee, and in return, we should be provided with these basic (and cheap) goods. However, the Chinese students don’t expect to get free toilet paper, so they come prepared. I made sure the bathroom never cause me off-guard again. I armed myself with a small roll of tissues which I kept in my bag. Let’s take a look at exactly what happened…

But first, let’s take a look at this from another perspective. Growing up, remember parents and teachers telling you to use toilet paper more sparingly? Remember reading those ‘Go-Green’ signs encouraging us to use less toilet paper? Did that ever work? I’m pretty sure you know the answer.

Due to the fact that I purchased the tissues myself (although its very cheap), I suddenly became aware of its value, and as a result, I used it very efficiently. Contrasting this scenario to that of having toilet paper as a free resource: I just yank on it, using way more than I could possibly need! (Yes, I know you’re guilty of this, too.) As a free resource, its definitely not efficient: worse for the environment and the total expenditure on toilet paper increase. Unless you produce a toilet paper for a living you would realise that there is a simple solution to a problem that is difficult to tackle.

This is the beauty of free markets. As initially explained by economist Adam Smith, free markets are self-regulated and efficient. This phenomenon is referred to as ‘The Invisible Hand’.

So, no free toilet paper? Bam, suddenly there is a high demand for toilet paper! (Who doesn’t need toilet paper?) Entrepreneurs see a chance to capitalise on this demand and small stalls and shops around the university start selling toilet paper. (Who doesn’t want to maximise profits?) There are many competitors within a small radius, all of whom want to sell more toilet paper, and as a result the price we pay as consumers is just enough to keep these entrepreneurs in business. (Thanks you, Invisible Hand!)

Let’s take a look at the whole picture. Here are the two major outcomes: The total amount of money spent of toilet paper dramatically decreased, making us better off. Private businesses flourished, also making us better off. As you have probably realised by now, I’m an advocate of the power of free-markets!

Why did I decide to write about toilet paper? This toilet paper model can be applied to solve many issues we face in our daily lives.

For example, in Saudi Arabia, we suffer from a chronic over-supply of toilet paper. Literally, this may be true. However, figuratively speaking, the government is giving everyone way too much toilet paper. They employ the majority of the workforce, provide free resources (housing), subsidise assets (money, offices), run large SOEs (State Owned Enterprises), etc. By providing so much toilet paper, entrepreneurs won’t be able to successfully sell to their customers, and the Invisible Hand is paralysed. As we discussed, efficiency dramatically decreases. Having lots of free toilet paper seems great, especially once you get used to it. Take a step back and change your perspective. With a small adjustment (buying toilet paper, instead of getting it for free), we all become better off.

It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our necessities but of their advantages.

Adam Smith, explaining the ‘Invisible Hand’ –  Excerpt from The Wealth Of Nations, Book I, Chapter II, pp. 26-7, para 12.

Am I still annoyed that my university doesn’t supply toilet paper? Nope 🙂