__________________________________________________________________ Leonel Regalado Uncertainty and Politics Introduction Economics has dedicated itself to studying individual means to their ends . Mainly , it has studied man in a market context , where the exchange is voluntary . Some people tried to introduce individual actions in a political setting to the field , but it was not until the second half of the 20 th century that it became relevant . A school of thought was created with the same basic principles of market interactions but applied to a political context , where coercion is usually the means to an end . James M . Buchanan was one of the leading exponents of the Public Choice Theory . He dedicated himself to extensively analyzing individuals ’ incentives when the state is involved . Buchanan and the Public Choice School make a descriptive analysis of these government interactions , but for the most part , they do not propose any government or constitutional arrangement as the “ best one .” This other normative part of the study of state interactions , explain – Leonel Regalado es Licenciado en Economía por la Universidad Francisco Marroquín ( Guatemala ), y también posee un Post-graduate Certificate en Money , Banking and Central Banking de la Universidad de Bucking-ham ( Reino Unido ). Una versión preliminar de este trabajo fue presentada en la “ Under-graduate Research Competition ”, durante la reunión anual de la Association of Private Enterprise Education ( APEE , abril de 2022 ), y obtuvo el Members ’ Choice Award en esa competencia . ing why certain types of government are good or bad , has been the subject of political philosophy for centuries . Historically , numerous ideas and discussions have existed about the shape and scope of government , institutions such as private property , and what is and should be called justice . In the following pages , this work will analyze political interactions when deciding rules ( using Italian Fascism as an example ) and when individuals must act within established rules . Game Theory is the primary tool to analyze these “ games .” Uncertainty is proposed as a driving factor when players must maintain “ good ” and “ fair ” behavior in Political Games . Uncertainty and “ Fairness ” Uncertainty , understood as not being able to classify potential results of an action , 1 has many essential roles when talking about human action , some more apparent than others . For example , uncertainty is vital for entrepreneurship in a market setting with voluntary exchange : when undertaking an enterprise , individuals do not know the possible results of their actions ; they could be successful or fail 1 Frank Knight , Risk , Uncertainty and Profit ( Cambridge , MA : Riverside Press , 1921 ), p . 232 . Laissez-Faire , No . 58-59 ( Marzo-Sept 2023 ): 37-47

__________________________________________________________________ horribly . According to Knight , the entrepreneur ’ s role is tackling uncertainty , assuming the costs and the benefits of their actions . Figure 1 . Types of games . Categories Private Public Why is it important to talk about uncertainty in this way ? James Buchanan , one of Knight ’ s students at the University of Chicago , would later use this concept of uncertainty to explain incentives in the political setting . The Political Game According to Tremblay and Tremblay , “ a game is a description of a strategic setting that identifies a set of rules that describe player motives , actions , and payoffs ” 2 ( italics added ). There is a potentially infinite number of “ games ,” but in this case , we will categorize games by making two simple distinctions , the first one being if a game is private ( market ) or public ( state ) sector . The second distinction is whether the game happens when players decide the rules of their future actions or act within them . There is only one private game ; even though private contracts can establish rules , the focus is on those rules made and enforced by the state . In the private game , players can only act within the already-established set of rules , and they cannot modify them . On the other hand , this theory divides the Political Game into two : acting within the alreadyestablished set of rules and deciding the rules . The first is Political Game 1 , and the second is Political Game 2 . 3 2 Victor J . Tremblay and Carol H . Tremblay , New Perspectives on Industrial Organization ( New York : Springer , 2012 ), p . 57 . Alreadyestablished rules Deciding over rules Private game Political Game 1 3 It is important to make the distinction between these two scenarios for political actors , because they find themselves in both games from time to time . For example , congressmen , who legislate and make decisions , are in edition [ Springer , 2011 ]). __________________________________________________________________ 38 NA Political Game 2 Political Game 1 works , in a way , like the private game : the law limits the possible means to ends players can use , and the player cannot deviate from these rules without consequences . Political Game 2 is when individuals write and create laws in a society . This game happens before and directly affects the private games and Political Games 1 . From a contractarian point of view , 4 when deciding what rules will be written , players participating in the process will seek their interests and try to get written rules that benefit them . Un-ironically , this Political Game 2 has rules itself : decision-making rules . These rules could be the percentage voting rule under which a proposal becomes law . This rule can sometimes be low or high , reaching total unanimity . both positions at the same time , most of the time . Dividing the two games allows us to sketch out how the incentives work in each case . ( James M . Buchanan and Geoffrey Brennan , The Reason of Rules [ Cambridge University Press , 1985 ], pp . 18-19 . 4 Contractarianism is a current of thought similar to contractualism , with the difference that it is based on individualistic assumptions , such as self-interest , to explain why decisions are taken when deciding over the rules of society ( Win-chiat Lee , “ Contractarianism ” Encyclopedia of Global Justice , 11th

__________________________________________________________________ Why Choose “ Fair ” rules in Political Game 2 ? If each player tries to impose his / her selfinterest when deciding the rules that will govern society , what incentive is there to stop them from choosing the rules that will only benefit them ? Buchanan and Brennan propose a “ Veil of Uncertainty ”: Figure 2 . Game Tree for the Political Game 2 . The -100 value is symbolic , denoting a negative payoff to A . Faced with genuine uncertainty about how his position will be affected by the operation of a particular rule , the individual is led by his self-interest calculus to concentrate on choice options that eliminate or minimize prospects for potentially disastrous results . 5 In Political Game 2 , faced with the uncertainty surrounding a player ’ s role in society in future actions , the player minimizes their potential costs by not imposing arbitrary rules . This action , in turn , leads to the first game tree ( Figure 2 ). There are two players . A faces the decision of whether to create an arbitrary rule or not . The framework assumes that A has enough power to pass such a law , and B will replace A as the decisionmaker during the second period . The focus is on A ’ s decision-making , so the payoff for B will be a random number , α . If A passes the rule , he cannot apply it because he will leave his position before such a thing can happen . On the other hand , if A writes an arbitrary rule into law when B gets the turn in power , B can decide whether to apply the rule to A . For A , if they write an arbitrary rule into law , their average payoff is -50 . On the other hand , if they decide not to do so , their expected payoff is 0 , in which case B would not have a turn because there is no rule to enforce and apply . This … 5 Buchanan and Brennan , The Reason of Rules , possible negative outcome for A will hold him from writing “ unfair ” rules into law . The possibility that they will be in a position where they could have a negative payoff will hold them from taking such a path . We will apply the theory to a historical case in the next section . As political players become more certain about their position , they will tend to make more arbitrary decisions , making them prone to becoming an authoritarian government . Different Political Ideologies of the 20 th Century The contemporary reader is aware of the fact that the most prominent political ideologies during the last century were Communism , Fascism , and a democratic idea , where democracy became an end instead of a means to choose a government . All these had different expressions in different places and times , but they were all characterized by an expansion of pp . 42-44 . power and scope of government . Fascism , __________________________________________________________________ 39

__________________________________________________________________ out of these different ideas , is the one most prone to becoming a dictatorship , usually relying on a single person or a small group of people ; communism , even if it does become a dictatorship , is not supposed to become one from the point of view of their political philosophy . That is why this work selects Fascism to explain the importance of uncertainty when deciding the rules of society : here , decisionmaking over rules is even more centralized than in the other ideologies . Fascism Fascism has appeared throughout history in many ways , and it first appeared in Italy after the First World War as a political movement . 6 In 1919 , the Fascio di 6 The popularization and creation of the Fascist movement , as other movements such as Communism and Socialism , was a consequence of the social sentiment that evolved during the Belle Époque : there was a high degree of inequality , in wealth , and before the law . In 1848 , the Statuto Albertino was established , which would work as a constitution for Italy . This document , which was not approved by any assembly or referendum , was established in an arbitrary way by the King back then . In this document there were two government branches : the king , with executive powers , and a parliament , which , even though it was the “ democratic part ” of the government , was only chosen by a low percentage of the people . The requisites to vote were very restrictive . The government during this age was characterized by a heavy amount of cronyism , which held back the peninsula ’ s economic growth . When the First World War arrived , Italy was a poor , divided nation . There was a general discontent with the country ’ s political institutions , and even though the voting base was expanded by reducing requisites through the years , the stage was set for radical change . ( John Pollard , The Fascist Experience in Italy Combattimento was born ( Fascism ’ s political “ Combat Group ”), with Benito Mussolini as the leader . Initially , the Fascist movement had three basic ideas : anticapitalism , anti-clericalism , and republicanism . 7 However , with ideas similar to those of the Socialist Party , which was extremely popular , the Fascists failed to get enough votes in their first election . As a result , they did not get even one seat in parliament , with the Socialist Party having the majority in said branch of government . Even though the Socialist Party was very popular , a general disgust towards the Party existed among the public . As a result , the Fascist movement quickly had a shift in its ideals . They took the side of those opposing socialism : small business owners , independent farmers , and landowners . This niche was the new part of the “ political market ” that the Fascists decided to take on . Rapidly , more people started to join the Fascist movement . These new followers , characterized by not being afraid of using violence to achieve their ideals , started taking control of local governments they failed to get through the democratic way . This modus operandi set the stage for a possible civil war , and amid all the tension created , Mussolini took power over the whole nation in October 1922 . Cleverly , when Mussolini took power , he presented himself as a nationalistic leader , seeking to preserve the culture and identity of the Italian regions , and would be willing to fight the influence of the socialists over the territory . This way , he gained the favor of the King , who , even after losing a big part of his influence , was still played a big role in Italian poli- 7 [ Routledge . 1998 ] pp . 1-17 , 24-25 .) Ibid ., pp . 25-26 . __________________________________________________________________ 40