A recent New York Times article about the protests in Venezuela reported that "demonstrators condemn a wide range of perennial problems, including… shortages of basic goods like sugar and toilet paper." This has become a meme in coverage of the unrest, as just about every story mentions these "shortages" as a reason for the student demonstrations. The word has become a kind of shorthand for the chaos and decay of the Venezuelan economy, driven by bolivarian socialism's uniquely self-destructive mix of economic policies. But how, you might wonder, does government policy cause a toilet-paper crisis?

Any journey down the rabbit hole of chavista economic management has to start with Venezuela's deliriously dysfunctional currency exchange control system. Unlike a normal country, where you can trade U.S. dollars with local currency at whatever price the market will bear, the Venezuelan bolivar is fixed at 6.30 per dollar, and sold discretionally, only to those the government deems worthy. This worthiness is established on the basis of an enormously cumbersome and corruption-prone administrative process.

The real problem isn't the red tape, though. The real problem is that 6 bolivars and 30 cents is an insanely low price for a U.S. dollar. Venezuelans will gladly pay 85 bolivars for a dollar, even though doing so is technically a crime punishable by up to 6 years in prison.

Having two prices for the dollar makes figuring out what things cost in Caracas something of a philosophical imponderable. The Economist Intelligence Unit's 2014 Worldwide Cost of Living survey, released Tuesday, ranked Caracas the sixth-most expensive city in the world—tied with Geneva, Melbourne, and Tokyo. Of course, that's only if you figure it at the official exchange rate. At the more realistic black market rate, as EIU itself notes, Caracas is one the cheapest big cities on earth.

How price controls turn Venezuelan importers into financial arbitrageurs, who make basically all their money from currency manipulation, is complicated and perhaps best explained through an example. Let's take butter.