Game theory is the branch of economics that deals with trust and decision-making in an uncertain environment. When students first encounter it, they often feel as if the clouds have parted, and they understand all of the dysfunction of modern politics in an instant.
It does explain a lot. Consider infrastructure. The dire state of the nation’s transport, energy, water, waste and environmental systems are well known – the cost, the inefficiency, and the deterioration of basically everything.
One of the loudest complaints from the sector is about the political uncertainty around large builds. Because the two major parties cancel each other’s grand projects nearly every time the government changes, it’s almost impossible for the companies delivering these things to anticipate their workstreams and scale up their talent and capital to meet them.
A report commissioned by Infrastructure NZ estimated that more certainty could deliver an additional $2.3-4.7 billion in productivity benefits a year. Over a 30-year period, this could close a significant proportion (if not all) of our current infrastructure deficit.
Infrastructure Minister Chris Bishop is aware of this. In a recent speech to the sector, he lamented, “If I had a dollar for every time someone said, ‘What we need is a long-term infrastructure plan for the country that can transcend political cycles,’ I’d be a very wealthy man.”
This notion seems to have inspired him, for he then released exactly such a plan: the establishment of a 30-year investment pipeline overseen by the Infrastructure Commission, which will act as independent advisers to the government. This will sit alongside a National Infrastructure Agency, which will manage funding and delivery of the projects. The National Infrastructure Plan will indicate what needs to be built in the next decade, what will probably be built in the 10 years beyond that, and what might be desirable in the distant future two decades out.
To obtain the crucial bipartisan support for schemes that will span multiple governments, the commission will brief opposition parties every six months and hold an annual debate in Parliament to discuss its plans.
Finally, some sensible consensus; politicians solving the nation’s problems by rising above the petty day-to-day squabbles in the House.
How many of the previous government’s infrastructure schemes – Auckland light rail, the iRex ferries, Lake Onslow, Kainga Ora housing builds, school relocations, Let’s Get Wellington Moving, Three Waters, all developed at such staggering cost to the taxpayer but cruelly scuttled by National upon their assumption of power – will be restored to the pipeline in this brave new spirit of bipartisanship? The answer is none because Bishop said they were “dumb projects”.
Roads, not cycleways
A week after Bishop’s announcement, Transport Minister Simeon Brown released the coalition’s land-transport plan. Out of the total spend of $32.9b there’s an $18b orgy of roadbuilding and maintenance and drastic cuts to investment in rail, footpaths and cycle lanes.
The new Roads of National Significance are eye-wateringly expensive, will take years and hundreds of millions in consultancy fees to plan, and would automatically be cancelled by any left-wing government fortunate enough to win power in 2026 or 2029.
This is where the game theory comes in: Bishop and Brown could have sat down with Labour and the Greens and worked out a more bipartisan transport pipeline: fewer roads, more bike lanes, maybe a little light rail to sweeten the deal.
But they would come under pressure from their own party, and they’d be taking an enormous risk: what if they built the stupid bike lanes but then the next left-wing government defected from the bipartisan agreement and cancelled their glorious four-lane roads? That would be the worst possible outcome. Better to abolish all of their opponent’s schemes pre-emptively. Because of the uncertainty built into adversarial politics, it is rational for each party to defect from a consensus, even though this leads to the worst outcome for the country.
Damage limitation
What Bishop really aims to do is limit the damage caused by this dynamic. Both major parties are prone to promising infrastructure projects of questionable value as reckless campaign stunts – Jacinda Ardern’s light rail, National and its medical school at Waikato University, Chris Hipkins and Michael Wood pledging a set of tunnels under Auckland’s Waitematā Harbour at a cost of up to $45b.
But if there’s a pipeline of potential builds, all with sound business cases and costings, proposed by an independent commission, parties will have a strong incentive to pick and choose from those rather than have their marketing teams improvise multi-billion-dollar nation-building schemes in response to a round of bad poll results.
And that would speed up the delivery of the projects: many of the delays and cost-blowouts are caused by political interference. A 2023 Auditor-General’s report into two of Labour’s infrastructure programmes, totalling $15b, was scathing about the chaos and expense caused by ministerial meddling. The schemes were easy for Bishop to cancel because they squandered a lot of money without building anything.
Compare this with Transmission Gully, one of the Key government’s Roads of National Significance that Bishop seems to rate as an engineering miracle somewhere between the Parthenon and the Moon landings. This was bitterly opposed by Labour during its years in opposition. It attacked the cost, the earthquake risk, the environmental impact – but when it came into government it was half-completed. It had no choice but to finish it and loudly congratulate itself for its success. Because of the constraints of the politics of infrastructure, shameless hypocritical bipartisanship is the best we can hope for.
