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.