ROGER PARTRIDGE: The Rule of N: A short course in competitive arithmetic
- Administrator
- Sep 20
- 2 min read
The Saturday Satire
In New Zealand economics, numbers have personalities. Two supermarkets are a duopoly. Three would be perfection – except four banks are still an oligopoly. One airline is intolerable, even though two always seem to collapse.
The equation is precise: current number (N) plus one equals salvation. This is the Rule of N – count the competitors, declare the number insufficient, and pronounce the market broken. It is beautifully simple, and completely backwards.
No one ever asks why three supermarkets would be perfect when four banks remain inadequate. Or if four gentailers are too few, why are three telcos enough? The Rule of N never explains why the magic number varies by industry, or why it always happens to be exactly one more than we currently have. Perhaps the mathematics of competition is more mysterious than advertised.
Recent signals from the government suggest this mystical thinking may be fading. Politicians are slowly learning to get out of their own way. Ministers are discovering that if they want to attract a supermarket chain, removing the barriers they created – zoning mazes and planning consents that drag on for decades – is more useful than bashing incumbents.
A Parliamentary inquiry has gently suggested banking regulators might be guilty of keeping competitors at bay with requirements that would intimidate the bravest new bank. The revelation is dawning: competition comes from opening gates, not counting players.
The transformation matters because New Zealand’s realities make the Rule of N especially delusional. We are 5.3 million people scattered across two islands – the size of Japan with the population of Sydney. That scale will never support endless addition.
Markets are not arithmetic, where competition equals addition and the solution is always plus one. Competition is a process where the threat of a rival – real or imagined – can be almost as good for competition as the rival itself. Remove the barriers and competitors emerge naturally – or incumbents sharpen their pencils in fear that they might.
The Rule of N deserves recognition as policymaking’s most persistent counting error. It thrives in minds that mistake arithmetic for economics.
The real lesson is simple: competition is not a headcount. It is a process disciplined by the possibility of entry. Open the gates and the numbers will count themselves. Keep them shut, and no arithmetic will save you.
This piece was sourced from Roger Partridge's substack, Plain Thinking
No need to elaborate..... we are doomed
Isn't this another failure of socialism? Rules and theories made by academics who have never owned a successful business, then taken up by politicians with the same qualifications. Successive governments never understand that by protecting rather than obstructing people that are willing to put it all on the line and by winning improve the countries citizens lives, instead they use government departments to obstruct and persecute. As an example, the Greens and Labors continuing efforts to enact Capital Gains tax's, the envy tax to persecute those who work harder and take a risk most avoid. Our place on the worlds economic scale has been continually sliding downwards for decades, caused mainly by the lazy, low quality of most of o…
The best book on marketing was written by Trout and Ries. They described a law of duality: In the long run, every market becomes a two-horse race. To get better competition the govt might be better off to split wholesale and retail, an approach they seem to be thinking about for the power market.
You said we are the population of Sydney, spread over two islands the size of Japan. You missed a couple of important things. We are also geographically miles from major markets and will never have the scale or costs to be competitive against the developing countries the multinationals cycle their manufacturing through.
Douglas and the other neoliberal f#@k heads who began the decimation of this country are either stupid, self serving or downright traitors. The value we used to have was a safe egalitarian society where the basics were affordable and “luxury “ goods were available but had to have local content. We had a command economy and managed our own exchange rate rather than having it manipulated by organisations…
https://lawofmarkets.com/
The link above is self explanatory. Its economic law.... much like the law of gravity for factual existence. However unlike gravity there are those who walk the planet with authority to circumnavigate it..
I am sitting here seething in anger to think that all this knowledge exists yet we have a bunch of proverbial halfwits who make their way into positions of leadership whereby they are able to bend the rules.
There is hardly a politician on this earth who does not think he/she is gods gift to production and hence knows better than market law.
Tale a look at the link above.... the opening lead is from a speech in Davos.
You will recall Davos; its that place…