Gating speech

Being able to speak online freely, under a pseudonym, is an important backstop for freedom of speech.

If government turns repressive, or bans some kinds of speech, or locks you out of some kinds of employment for having used the wrong words, at least you can online under a pseudonym. 

Well, unless you're only allowed online after logging into a government app. Then it's game over. 

Nevertheless, some in Wellington are itching to follow Australia’s lead. 

While legislation is in its early stages in Parliament with Catherine Wedd’s Member’s Bill, Education Minister Erica Stanford is leading cross-agency work to explore viable legislative options and practical implementation.  

The Prime Minister has publicly supported moving ahead.  

Paul James, the Government chief digital officer, told me on The Business of Tech podcast last week that the digital identity verification system underpinning the upcoming all-of-government app and digital wallet could offer the age verification needed to support a ban – if the Government seeks to enforce one.

I've suggested before that a trilemma applies here, or something like one. Online age gating requires adults to prove that they're not kids. 

And that means at least one of three problems.  

A system could be easily worked around by kids.

It could be very cumbersome for those over the age limit.

Or it could be the end of online pseudonymity and privacy.

Suppose that the government-app runs a zero knowledge proof solution. You log into the app. It generates a key verifying that the person logged into the app is over some age. You use that key with your favourite social media app. It verifies the key's authenticity anonymously, so the app doesn't know which platform is checking. And you're set - privacy maintained. 

But that's easily worked around if a sixteen year old logs into the government app on his fifteen-year-old friend's phone. 

And enough kids doing that means the Before 16 lobby group will characterise it as a loophole that must be closed. And then the verification is no longer done through a ZKP, ending online privacy, or we have to do daily re-verification to impose a differential cost on under-16s, making things cumbersome for other users. 

I do not like where this is heading. 

Failure can be overdetermined

Last week, on The Platform, Auckland Uni's Prof of Macroeconomics blamed my shop for the government's not adopting his proposal to completely overhaul the health, welfare, and retirement system.

Robert MacCulloch debates Oliver Hartwich from the New Zealand Initiative following the Nicola Willis interview.

Watch the full video at https://t.co/cXDdwFy9gF pic.twitter.com/HjFK0G77W1

— The Platform NZ (@theplatform_nz) September 22, 2025

About a decade ago, Prof MacCulloch and Sir Roger pitched their proposal. 

It looked like it would take considerable effort to see whether the numbers added up. 

It also seemed like something that would be difficult to convince anyone to implement. 

We declined to weigh in. We've neither endorsed the policy nor recommended against it. 

No conspiracy is needed to explain successive governments' failure to pick up the Douglas-MacCulloch proposal. Just the usual inertia. 

The default path for a good policy proposal isn't implementation. The default path is failure. 

Most proposals fail. 

And especially for large changes that are complicated to work out and that the civil service isn't likely to support and that politicians are likely to see as risky. 

I don't think that proposal could have succeeded without enormous amounts of work being put into demonstrably ensuring the numbers stacked up, public comms on explaining it to voters, work with officials so that they'd understand what the thing involved and in hope that they wouldn't wreck it, and work with MPs so they'd see the merits. 

It probably would have required hiring an actual lobbying shop to help. 

Anyway. Bottom line here: we didn't do anything to help or hinder Robert's proposal. 

And it is weird to think that the thing could only have failed due to nefarious influence. 

That isn't how anything works. 

In the video, Robert notes having had a meeting in Bill English's office in which Matt Burgess argued against Robert's compulsory savings scheme - and suggests it's part of the Initiative's push to kill his policy. 

Matt didn't work with us until after his time working in Minister English's office. I was sad when Luxon's office later stole him from us.

Success happens through weird mixtures of luck and timing and work and skill. Failure is the norm, and is generally overdetermined.

We've been successful with a couple of our policy ideas. But we work on and pitch lots of policy ideas, and have for a long time. Failure is the norm, particularly in the short term. 

Think about the number of papers that turn up in NZ Economic Papers that have a policy recommendation and that aren't obviously crazy. What fraction of those turn into actual policy change? Half a percent? Less?

And who knows. Maybe MacCulloch and Douglas's proposal will get a re-airing with long-term superannuation costs again being salient.

But failure is the norm, even for meritorious proposals. No conspiracy is needed to explain failure. It's just what happens. 

The case for optimism

Kerry Howley has a superb piece in New York Magazine on the kids in San Francisco building the future.

Houses and motels turned into dorms for kids in their late teens through mid-20s, building everything from brain scanners through to an AI VC that evaluates funding pitches - with the AI having hired a person to be its real-world presence.

We head downstairs to a dark basement attached to a garage. A slight, long-haired man, a paid test subject solicited through Craigslist, sits before a computer screen, wearing a white cap that looks like a medieval linen coif threaded with wires. The screen flashes images — basil, a blazer, Parmesan cheese. With unsettling clarity, the computer will be able to resurrect the image from electrical signals in the subject’s brain. A subject considers a picture of jelly beans. AI offers a picture of similarly colored beads. A subject looks at a red station wagon; AI presents a red sedan. Until very recently, most people thought the data produced by EEGs, an 80-year-old technology, was noisy garbage. “They just didn’t understand the power of large language models,” Jonathan says. He is 24 years old.

Reading minds is what AI engineers mean when they talk about hard problems. Eventually, the tech will advance to interpret “evoked states.” “So we start with, you know, discrete smaller tasks like emotion, like positive, negative, maybe now ten, 20 emotions. And then we add more dimensionality so that eventually we can go into full sort of inner monologue,” a world of superior self-knowledge wherein we sift through our own memory banks rather than selectively recall events through a haze of misperception. “And,” he says, “we do it all in-house.”

Doing it all in-house looks like this: a server rack with LED-lit fans in the garage next to some exercise equipment and some bicycle helmets. Jonathan and his housemates built the rig themselves. “Just asking ChatGPT basically. You know, you can just ask and then order the parts you need and you learn and you debug.”

Kids partnering with AI to build things, no need to ask anyone's permission. 

Howley's kicker here... so very good. 

How do you make contact with the intelligence rising up from the machines around you? Do you build it a body? Do you offer it yours? It is perhaps tedious to point out that we are always operating under the shadow of destruction, deploying tools that might end us, convincing ourselves, not without reason, that if we don’t build the bomb, someone with worse intentions will. Not a single one of the AI kids had attempted to lecture me about a theory or suggested I read a paper; it was not me they were trying to program. Somewhere along the way, drawn into their swell, I had begun to think of large questions about the nature of AI as New York questions, millennial questions, distant from the center of things. Where it mattered, humans were not debating AI; they were merging with it. You order the parts you need, you learn, you debug. The kids carry on with the crisp clarity of engineers, integrating what is immediately useful, discarding or rewriting what is not. No one will ask your permission to build a world you do not understand.

It's like they're living in an 80s William Gibson novel. Working in spaces where policy and regulators can't really stop them. They don't care about policy papers. They're just building. 

Those spaces matter. Policy is so impossibly stupid. 

Here, Parliament's trying to figure out the best way of breaking the internet, with National wanting to copy Australia's insane social media age-gating bill, and Labour wanting to copy the UK's even worse version. News outlets cheer them on, having always figured that social media platforms are the enemy anyway. Both parties see it as crack cocaine for attracting pivotal female votes in the 35-55 age bracket. 

And I understand that Parliament's select committee looking into this is wondering whether it's possible to regulate VPNs. Because that's been the obvious workaround in the UK for adults who don't want to have to show ID to visit every darned website. So long as at least one country remains free, VPN to it and pretend to be from there. 

I'm cheering for the cyberpunks. They may be our best hope. 

Infrastructure roulette

In some respects it's reasonable to think about city council as being a kind of club.

Everyone who owns property in Wellington is a member of the Wellington Council club. The club levies itself to provide things that the club members want, and to cover off the cost of stuff that central government wants the club to provide that club members may or may not want. For some reason, renters were added as voting members of the club. But the debt that the club issues is ultimately backed by each of the club properties. We'll leave that messiness to one side for now.

The club finds that part of its infrastructure is in terrible shape - partially because of decisions of past club executives; partially because of a recent earthquake. 

The club can choose to rapidly replace all of that infrastructure. That would be very expensive. But it would sharply reduce the chances of very bad outcomes where infrastructure blows out.

Or it could choose to pace itself in that infrastructure replacement. That will be much less costly. So much less costly that you could, at least in principle, compensate anyone who suffers from those infrastructure blowouts if it's really the infrastructure that's to blame. 

The latter could be a very reasonable deal. Behind the veil, none of us know which of our properties is sitting on top of a water network pipe that will collapse catastrophically and destroy our home. But we'd all be bankrupted if we tried replacing all the pipes in a giant hurry - it's just impossible. So we're each better off if we all agree to take a more cost-effective path on the infrastructure refresh while compensating any club member who draws the short straw.

The alternative, with no compensation, is more like the club members agreeing to play a giant game of Russian Roulette. We don't know which of us will draw the short straw, but we hope to heck it won't be us because whoever it is will be ruined. 

It could be that the numbers don't actually work out this way. But it seems a reasonable stylised example. 

And in any particular case of blowout, you'd want to be sure that the club member hadn't contributed to the failure through their own negligence. 

But if it were clear-cut, it shouldn't be a legal battle. It should just be compensation. 

I mean, if a private company accidentally drove a bulldozer through your house and wrecked it, nobody would think it reasonable to force you to go to court to get them to compensate you. Everyone would pillory the company. There would be boycotts. Some Vic Uni quasi-academic might call for the company's chief executive to be hanged. 

Here's The Post.

Wellington City Council is refusing to pay for repairs after one of its own burst water pipes triggered two landslides that has left two families facing bills of up to $600,000.

A council-commissioned geotechnical report found the Wadestown slips were “most probably” destabilised by a failed drinking water main, owned by the Wellington City Council and maintained by council-controlled organisation Wellington Water.

The 50mm pipe ruptured on August 4, saturating the embankment, and the slips forced both households to evacuate. Residents are still living in temporary accommodation.

I Am Not A Lawyer. 

But it seems likely that the homeowners could sue council for nuisance, and win, and have costs awarded against council, but the costs won't likely be anything like what would be needed to make them whole as compared to council just providing compensation. 

Council is not a good club. 

Cementing allocations

Recall that New Zealand issues industrial allocations under the ETS to avoid inefficient carbon leakage. 

Basically, if emissions are charged here but aren't charged abroad, and production shifts from here to there because of our charges, net emissions can increase rather than decrease.

That is obviously counterproductive. So industrial emitters facing competition from places with unpriced carbon get allocations of NZU. Done right, it maintains the incentive to reduce your emissions because you can sell off your surplus NZU. But it has to be done right.

The obvious way of doing it right would be to scale industrial allocations not by the NZ plant's emissions but by emission intensity overseas. If a tonne of cement abroad has x tonnes of associated CO2 emissions, then allocate x NZU per tonne produced here. Basically. Then, if emissions intensity abroad reduces, the plant here gets fewer NZU for its own production. It maintains an incentive to reduce your own emissions intensity, and avoids getting into spots where it would actually be carbon-efficient for production to shift to plants abroad that have lower emissions than plants here.

It gets messier if the import mix has stuff from places that are cleaner than here and stuff from places that are dirtier from here. If you scale to the average emissions intensity of the import mix (weighted by proportion of imports), there's still a potential problem. Suppose average intensity overseas drops and so allocations here drop. The NZ producer reduces production. But if that hole is filled by product from the dirtier plants overseas rather than the cleaner ones, you've wound up having inefficient leakage again. 

Carbon border adjustments are an alternative. But it gets messy with trade agreements. And you have to find a way of scaling the adjustment to the emissions intensity of the product. 

New Zealand's industrial allocations seem to have a bit of a problem in cement. 

Here's Energy News:

In a presentation to investors in June, Fletcher Building said a carbon border adjustment mechanism would level the playing field.

Currently, only goods produced in New Zealand face liability under the emissions trading scheme.

As an energy-intensive, trade-exposed emitter, Golden Bay Cement is eligible for an annual allocation of free carbon credits.

Data released last week shows that for last year's production, the company received 488,575 New Zealand Units, worth almost $27 million at the current spot price of about $55.

But the company says that a 2023 law change means that as the country's only cement manufacturer, it is now effectively being "rebaselined" every five years against its own emissions - which means that every time it cuts emissions it reduces the rate at which its free allocation is calculated.

"Significant investment in decarbonising local manufacturing is not viable without certainty a carbon border adjustment mechanism will be in place in the medium-term," it said in the presentation.

"Given regulatory settings, we have reviewed our capital plans for Golden Bay.

"The current investment plan retains flexibility to remain a domestic manufacturer or transition to an import model."

That just doesn't make sense.  

The government is reviewing the settings. Scaling to international emissions intensity would seem obvious. A carbon border-adjustment could also work but I have no clue whether it can be squared with trade agreements.

The annual allocation of free carbon credits to trade-exposed, energy-intensive emitters like Golden Bay Cement was last adjusted in 2023.

The company says that, in the absence of a CBAM or an equivalent mechanism, it would likely need to consider transitioning to an import model by the early 2030s.

That could result in a non-cash impairment and write-down of assets of up to about $165 million, as well as potential make-good and cash redundancy costs of up to $180 million.

For last year's production, Fletcher received 488,575 New Zealand Units, worth almost $27 million at the current spot price of about $55.

The company says it is engaging "productively" with the Government on the issue.

If cement produced abroad is more carbon intensive than cement produced here, then shifting to imports is the kind of carbon leakage that we ought to be avoiding.  

A faster track to supermarkets

Minister Willis announced measures opening retail grocery to greater competition. 

She announced a fast-track process in which retail grocery that would pass a 'does this improve competition' test could get consents that override existing district plans, access to a single building approvals authority for sites across the country, easy ability to replicate builds in multiple places, and an easier path through the overseas investment office.

Back in May, Benno at our shop put up our proposal for achieving the same outcome. Ours differed a bit. It tweaked existing fast-track processes so that a plan change would be effected that could override parts of plans with which it were otherwise inconsistent. The path would only be open to new entrants or to minor current players looking to substantial expansion. And sites would be mixed-use by default so entrants could stick apartment towers above their stores. After 5 years, the pathway would open to current incumbents. The intention here was to give new entrants a head start and a good reason to move early. And, if no entry happened, to let the incumbents go more strongly head-to-head in spots where they previously haven't. 

I think the Minister's proposed process is decent. It seems obvious that Costco will use it for speeding up its own expansion. Whether anyone else will use it is anyone's guess. The point of lowering barriers isn't to guarantee some number of entrants. It's to discover whether new entry is warranted. Maybe there just aren't super-profits here worth chasing. It's hard to tell when entry is de facto illegal. Removing the barriers lets you find out.

There's always ways this could still go wrong. But I'm optimistic. 

A few previous bits.

• BusinessDesk / Spinoff , July 2021
• Submission on market study draft report, August 2021
• Cross-submission to ComCom, November 2021
• RNZ nights, December 2021
• Newsroom March 2022
• Herald Oct 2022
• Post November 2022
• Platform, Oct 2023
• Herald April 2025
• Benno's note
• Taxpayer Talk
• Hosking, May 2025
• Post, June 2025
• Post, June 2025
• Newsroom, July 2025

Banning racing

New Zealand will be banning greyhound racing. 

The Bill to formally end greyhound racing will be introduced to Parliament later this year. The public will be able to make submissions to the select committee as part of the process.

“It is important people get the opportunity to have their say. The decision to end greyhound racing was not one Cabinet took lightly. I acknowledge the impact that closing the industry will have on those involved.

“But globally the industry is winding down, with Tasmania recently announcing an end to greyhound racing. The bottom line is too many dogs continue to die and be seriously injured, and it is time to do the right thing,” says Mr Peters.

Ok. So the reason for banning greyhound racing is that too many dogs die and are seriously injured.

That is the basis for the ban, according to Minister Peters.

Let's go with that. 

I've asked my advisor about the rates of accident and death per racing start for greyhounds and horses.

Because we haven't banned horseracing. Indeed, we subsidise it. 

My advisor's answer, which presumably could be checked by someone with industry-knowledge:

Bottom line

Per start, a horse is more likely to die than a greyhound in racing, with the gap ranging from ~1.5× (NZ flat) to ~5× (Britain, all racing), and ~12× or more in jump racing. 

Greyhounds sustain more recorded race‑day “serious” injuries per 1,000 starts than Thoroughbreds in the datasets that exist, but those counts include categories (e.g., ≥22‑ or 43–90‑day stand‑downs) that don’t map cleanly onto how horse‑racing reports non‑fatal injuries. 

So on a first cut horses have a substantially higher risk of death per racing start than greyhounds have.

So if the government wanted to ban racing on basis of deaths, it should have started with horses.

Maybe there could be some CBA claiming a lot more benefits from horse racing per race as offset, or maybe people care more about dogs dying than about horses dying. 

But the simplest explanation here is probably the correct one.