Why Does Anyone Need 2,000 Toothpastes?
A smart friend asked me a fair question recently. She walked into a supermarket, counted the toothpaste options, and felt overwhelmed. “Why do we need two thousand different kinds of toothpaste?” she said. “One would be fine.”
The question sounds like common sense. But it is the kind of common sense that leads to bad policy, because it misunderstands what markets actually do.
The friend in question also believes that governments can spend whatever they want on whatever they want with no consequences. She does not see these two beliefs as connected. They are. The same error — that more choice is wasteful and central planning is efficient — drives both.
Let us start with the toothpaste.
The Visible Waste of Choice
It looks wasteful. A supermarket aisle with forty varieties of toothpaste, twelve sizes, seven flavors, three formulations for sensitivity, two for whitening, one for enamel repair, one for “natural” toothpaste that costs twice as much and works the same, and a travel size that costs more per gram than the large tube.
Think of all the factories making different tubes. All the packaging designs. All the advertising. All the shelf space. Surely we could save money by agreeing on one decent toothpaste and producing it at scale?
This is exactly the argument that central planners make about every industry. And it is just as reasonable — and just as wrong — for toothpaste as it is for housing, healthcare, or energy.
What Choice Actually Does
The reason there are 2,000 toothpastes is not that toothpaste companies are wasteful. It is that 8 billion people have different mouths, different budgets, different priorities, and different preferences.
Some people have sensitive teeth and need potassium nitrate. Some people care most about whitening for a wedding next month. Some people want fluoride-free because they have read something alarming on the internet. Some people want the cheapest thing that does the job. Some people want the most expensive thing because it makes them feel like they are taking care of themselves. Some people hate mint and want bubblegum flavor. Some people want a toothpaste that does not test on animals. Some people want a toothpaste made by a company whose politics they agree with.
These are not trivial differences. They are real preferences that real people have. And the only way to discover what those preferences are — and at what price — is to let people choose.
A central planner deciding there should be one toothpaste would have to guess which of these preferences matter most. They would guess wrong. Some people would get a toothpaste they hate. Some people would get a toothpaste that does not work for their teeth. Some people would simply not buy toothpaste and let their teeth rot.
The 2,000 toothpastes look wasteful from the outside. But the cost of producing those 2,000 toothpastes is smaller than the cost of forcing everyone to use one they do not want.
Quote
“I, Pencil — simple though I appear to be — merit your wonder and awe, as a testimony to the creative power of the millions of tiny agents who cooperate to bring me into being.”
- Leonard Read
The Invisible Efficiency
What the friend cannot see is that the system is not centrally planned at all. No committee decides there should be 2,000 toothpastes. Each toothpaste exists because someone believed there were enough customers who wanted it to make production worthwhile. If they were wrong, the toothpaste disappears from the shelf and the company tries something else. If they were right, the toothpaste stays and competitors try to make a better version.
This is discovery in action. The market runs millions of experiments simultaneously, at a scale no central planner could match. Most fail. The ones that succeed make life better for the people who choose them.
The cost of the failed experiments is borne by the entrepreneurs who took the risk, not by the taxpayer. And the knowledge gained — what works, what does not, what people actually want — is available to everyone.
The Friend’s Other Belief
Now let us connect this to the friend’s view on government spending. She believes governments can spend whatever they like on whatever they like with no consequences. The reasoning is something like: “It is just numbers on a screen. The government can create money. It is not like a household budget.”
This is the same error in reverse. The toothpaste argument overestimates the value of central planning. The government spending argument underestimates the consequences of ignoring scarcity.
When a government spends money, it does not just move numbers around. It consumes real resources — labor, materials, energy, land — that could have been used for something else. The factory that builds a government office building could have built apartments. The engineer who writes code for a government database could have started a company. The doctor who processes government paperwork could have treated patients.
These costs are invisible. They do not appear in any budget. But they are real.
The economic term for this is opportunity cost. Every dollar the government spends is a dollar that is not spent by someone else. Every worker the government employs is a worker who is not building something somewhere else. Every regulation that mandates one type of toothpaste is a regulation that prevents someone from making the toothpaste they actually want.
The friend sees the 2,000 toothpastes as wasteful because she sees the shelf space. She does not see the 2,000 toothpastes that failed and disappeared — the ones the entrepreneurs paid for, not the taxpayers. And she does not see the waste of having one toothpaste that millions of people hate.
The Tradeoff She Misses
There is a deeper point here. The friend who wants one toothpaste and the friend who thinks government spending has no consequences are making the same mistake. Both assume that central decisions are free and individual choices are costly.
The truth is the opposite. Individual choices are how we discover what people want. Central decisions override those discoveries. And when the central decision is wrong — which it often is, because no committee can know what millions of individuals want — the waste is far larger than the waste of having too many toothpastes.
Consider the US Postal Service versus private package delivery. The Postal Service is a monopoly on first-class mail. It has one way of doing things. Private carriers like FedEx and UPS compete on price, speed, reliability, and tracking. The result is that private carriers innovate constantly — overnight shipping, real-time tracking, Saturday delivery, weekend delivery to remote areas. The Postal Service does not need to innovate because it has no competition. And the result is a service that is slower, more expensive relative to quality, and less responsive to what customers actually want.
The same pattern repeats across every industry where competition is suppressed. Monopoly healthcare systems produce long wait times and rationing. Monopoly education systems produce declining standards. Monopoly housing regulators produce unaffordable cities. The cost of suppressing choice is not zero. It is the difference between what people actually want and what a central planner thinks they should have.
Quote
“The most important single central fact about a free market is that no exchange takes place unless both parties benefit.”
- Milton Friedman
What One Toothpaste Actually Costs
Let us return to toothpaste and do the math.
Suppose a central planner decides there will be one toothpaste. They pick a decent fluoride toothpaste at a reasonable price. Everyone gets the same thing. Production costs fall because there is only one factory making one product at massive scale.
How much do we save?
Not as much as you think. The variety in toothpaste is not primarily about different factories making different tubes. It is about different formulations, different packaging, different marketing to reach different customers, different supply chains for different retail channels, different quality standards for different price points. The savings from standardization are real but small.
And the costs are large. People who need sensitivity toothpaste either suffer or stop brushing properly. People who hate the flavor brush less. People who want fluoride-free buy from unregulated online sellers and get something worse. The one-size-fits-all toothpaste does not fit all. And the people it does not fit pay a cost that never appears on any government spreadsheet.
This is the fundamental problem with central planning in miniature. The visible savings are easy to measure. The invisible costs — the suffering, the lost satisfaction, the choices that can no longer be made — are invisible. And because they are invisible, they are ignored.
The Lesson
The toothpaste problem is not really about toothpaste. It is about how we think about choice, waste, and value.
When you see 2,000 toothpastes, you are not seeing waste. You are seeing the result of billions of individual decisions about what people want. Some of those decisions are wrong — products that should not exist. But the system corrects itself. The products that do not sell disappear. The products that do sell get better. No committee needs to meet. No law needs to pass. No politician needs to take credit.
When you see a government program that spends money with no visible consequence, you are not seeing efficiency. You are seeing a cost that has been hidden. That cost is paid in resources that could have been used for something better, in innovations that never happened, in choices that were never offered.
Both errors come from the same source: the belief that what you can see is all there is. The good economist — the honest one — looks for what is invisible. The 2,000 toothpastes that did not need to be made are visible. The 2,000 toothpastes that could have existed but never did, because someone decided one was enough — those are invisible. And they matter more.