Application of rational choice theory in the framework of regulation of relations arising in the sphere of entrepreneurial activity in financial markets

Egorov Yaroslav Konstantinovich Postgraduate student of the Department of Commercial Law of St. Petersburg State University 199106, Russia, Saint Petersburg, 22 Liniya V.O. str., 7 ya.egorov.law@yandex.ru

Many traditional legal scholars and practitioners who have studied the relationship between law and economics are steadily faced with the fact that their failures in the conclusions of a relatively new discipline consist in an approach based on the economic assertion that all human decisions (for example, in the case of illegal actions) are the result of a rational choice of the individual himself. Modern economic theory and related disciplines, including political science, decision theory, sociology, history and law, rely on rational choice theory as a decision-making model.

As a rule, there are two main definitions of the term "rational choice theory", although, at present, there is no unified terminological apparatus in the scientific community. Informally, it is said that a choice is rational if it is deliberate, consistent and does not cause hesitation about the objects of choice. However, this definition is not accurate, because almost all the actions of an individual may seem balanced and consistent. The second more formal meaning assumes that subjects have transitive preferences and they seek to maximize benefits, taking into account various restrictions ^[1].

In the theory of transitive preferences, if goods designated as "A" are preferable to goods "B", and goods "B" are preferable to goods "C", then goods "A" will be preferable to goods "C". If it follows from this that goods "A" are preferable to goods "B", goods "B" are preferable to goods "C", and goods "C" are preferable to goods "A", then transitive preferences become random and irrational. Economists agree with the assumption that the decision-maker seeks to maximize the benefits of the object under various restrictions on income, time, cognitive capabilities, etc., and consider this a more formal and obvious part of rational choice theory, which is never questioned ^[2].

Thus, the attempts of theorists to apply the theory of rational choice to describe the behavior of subjects outside of economic relations, including in legal science, cause considerable criticism. So, at first glance, the law does not come into contact with the so-called "market elections".

The main reason for attempts to apply rational choice theory to other areas of scientific knowledge, including law, is that this theory is the most complete and consistent description of the decision-making process in the social sciences. In addition, the successful application of economic principles in public policy over the past fifty years, which can be partly explained by a thorough study of rational behavior, may be an incentive for other disciplines that hope to repeat this success in their fields of study, achieving scientific and political recognition comparable to the success of economics. Of particular relevance is that part of it, which, within the framework of the theory of economics and law, explores the mechanisms of the emergence of various rules of behavior, offers explanations for the effectiveness of the application of law ^[3].

Meanwhile, it should be noted that there is quite a significant criticism of the application of rational choice theory outside the framework of economic relations ^{[4] [5]}.

So, standard and repetitive market choices give people the opportunity to learn from their mistakes and get advice from those who have already made similar transactions. However, rare transactions in life, such as marriage, cannot rely only on someone else's experience, because each person's circumstances are unique and require an individual approach.

Also, market choices are easier to compare because of the universality of the medium of exchange - money. However, elections that are not related to the market do not have such a unit of measurement, which makes their comparison with each other or with market elections difficult.

Out-of-market elections are often more difficult to understand because of the many possible consequences and difficulties with transparency of information. While there is often an optimal solution on the market, there is no single right answer outside of it.

The combination of these circumstances creates a number of significant problems for the application of the theory of rational choice in cases of elections in relation to subjects not related to economic and entrepreneurial activities.

A number of researchers tend to conclude that "the essence of the economic analysis of law is to maximize the economic well—being of individuals, in other words, to increase private benefits." From which it follows that the economic analysis of law and the theory of rational choice are applicable to those legal institutions that carry out legal regulation of actions aimed at obtaining material benefits by private entities. "It is inappropriate to apply the economic analysis of law to institutions that do not have property (material) content, as well as to institutions aimed at achieving public (general) rather than private goals" ^[6].

This criticism certainly raises a number of questions for researchers related to the application of the theory of rational choice and economic analysis in the field of legal regulation. Meanwhile, if we touch upon the question of the ultimate goals of law as a phenomenon, and omitting aspects about the nature of justice and morality of law (which certainly causes active criticism of the economic approach of economic analysis of law in the scientific community), the vast majority of authors are steadily inclined to believe that law is a tool that is used to ensure the most important tasks who face the state and society ^{[7, p. 35-38]}

It should be noted that one of the most significant problems of the concept of economic analysis of law is the correlation of conclusions drawn based on the value of economic efficiency with theses about the need for justice and morality of law. Thus, taking into account the gradual formation of the understanding of law as a means of increasing economic efficiency, there is a discussion about the relationship of these approaches ^{[8] [9]}.

Accordingly, the question arises about the possibility and expediency of using certain elements of specific tools of economic science in jurisprudence.

At the same time, in the areas of related economic and legal regulation, including the regulation of relations between financial market participants, it should be assumed that this "dilemma", if not leveled, then to a large extent appears less controversial.

In modern Russian legislation, as well as in legal science, there is currently no single definition of the concept of the financial market. Meanwhile, within the framework of economics, there is an extensive number of definitions of this institution. For the purposes of this article, the definition of the definition of the financial market was based on the definition derived by S.S. Tropskaya, which defines the financial market as a set of economic relations arising in connection with the movement of free cash and other financial instruments from their owners to other entities with the possible active participation of financial intermediaries to place these funds in in order to extract maximum profit, but accompanied by high risks.

Equally noteworthy is the definition of the financial market of the Russian Federation by the same author, made on the basis of a systematic analysis of Russian legislation (de lege ferenda), which defines it as the sphere of circulation of financial services provided by credit institutions in accordance with Article 5 of the Federal Law "On Banks and Banking Activities", as well as in the framework of non-credit financial organizations in accordance with Article 76.1 of the Federal Law "On the Central Bank of the Russian Federation (Bank of Russia)" ^[10].

Separately, we should focus on the concept of entrepreneurial activity in financial markets.

Russian legislation defines the concept of entrepreneurial activity as an independent activity carried out at its own risk, aimed at systematically making a profit from the use of property, the sale of goods, the performance of works or the provision of services. This activity is carried out at your own risk, i.e. with the probability of not receiving the planned or expected result due to circumstances that could not have been foreseen and prevented.

This activity is carried out on a professional basis, that is, by subjects who have certain qualifications or information necessary for making and implementing decisions in this area, who are able to comply with certain rules, requirements and aimed at a certain result, which is to maximize profits from the activities carried out ^[11]. So, even relatively elementary actions, trading operations cannot be carried out without awareness of how this activity is carried out.

Thus, the legal doctrine deduces the presumption of the availability of professional skills, competencies possessed by a professional participant in civil turnover engaged in entrepreneurial activity.

Based on the above, it is advisable to define the definition of entrepreneurship in financial markets as an independent economic activity carried out by business entities with sufficient professional knowledge and competencies at their own risk and aimed at systematically making a profit through the provision of financial services and/or trading in financial instruments.

The theory of maximizing rational behavior of subjects has three main variants, depending on the breadth of the implied target preferences of the individual. These options are described in detail by A.G. Karapetov ^{[12, p. 45-59]}:

The "strict" option should be considered first. The most rigorous version of rational choice theory implies that the main motive of human behavior is to maximize one's material well–being. Despite the vulnerability of such an approach, which consists in the fact that turnover subjects do not always realize goals that are not directly related to maximizing economic well-being, nevertheless, it should be recognized that capital maximization is the dominant behavioral strategy of the vast majority of business participants, who account for the bulk of economic turnover. In particular, this strategy is relevant in areas that are "exempt" from social factors and are initially aimed at making a profit, such as entrepreneurial activity in financial markets.

Thus, for a participant in business relations in financial markets, who appears to be a professional entity aimed at making a profit and having sufficient qualifications, events that are unpredictable for an entity that is not a participant in such relations become predictable and predictable on the scale of general statistics. Thus, it is assumed that behind each action of such a professional subject there is a specific analysis that assumes that the subject expects to make a profit.

Such a subject, conducting an analysis of possible economic costs and expected benefits, strives to avoid unjustified costs and increase material benefits. Accordingly, the model of strict rationality, although it is quite controversial in terms of its application to all participants in civil turnover, still seems to be quite correct in terms of determining the very essence of entrepreneurial activity in financial markets, as an activity initially aimed at obtaining material benefits, by subjects with professional knowledge.

The second option, called "Lite", states that the rationality of the subject's behavior is expressed as satisfaction of any, including non-material, interests.

This option assumes that the subjects of economic activity are steadily striving to satisfy their own interests, regardless of whether they are clothed in a material form or have an immaterial expression.

The idea that people's economic behavior is primarily rational and instrumental, but cannot in any case be reduced to maximizing wealth, is supported by most economists ^{[13, p. 184-185]}.

Accordingly, if a person, concluding a transaction or making another economic decision, is not aimed at increasing wealth or other material satisfaction, but seeks to directly satisfy his personal non-material interests, within the framework of such a model, he is recognized as behaving purely rationally. A.G. Karapetov points out that "the vast majority of transactions in the economy are carried out by people, if not to increase their material well-being, then at least for the sake of ensuring their other selfish interests." It seems that such a point of view is most consistent with reality.

At the same time, the question of the rationality of applying such a "lightweight option" to entrepreneurial activity in financial markets seems to be debatable. A business entity in financial markets, acting in purely personal interests (for example, in terms of irrational motives for harming other participants in financial markets, the regulator, undermining the institutions of exchange, commodity and other trades, by committing illegal actions of various directions, including with violation of antimonopoly legislation) ignoring, including the rational goal of maximizing its profits carry a risk to the stability of the financial market structure.

According to the Strategy for the Development of the Financial Market of the Russian Federation until 2030, the Government of the Russian Federation and the Bank of Russia jointly implement a policy for the development of the Russian financial market, relying, inter alia, on the principle of ensuring the economic, financial and technological sovereignty of the Russian economy and the Russian financial market, taking into account internal and external, including geopolitical, risks.

The Government of the Russian Federation and the Bank of Russia proceed from the fact that an important condition for the sustainable development of the Russian financial market is macroeconomic stability, which primarily consists of price stability, financial stability and the stability of public finances. Stable and predictable macroeconomic conditions are critical for the normal performance of all its functions by the Russian financial market.

Meanwhile, the sphere of financial markets assumes not only the interests of private parties, but also the interest of a public entity. In such conditions, the personal interest of a business entity in financial markets, divorced from the rational goal of maximizing well-being and profit, introduces a certain unpredictability and instability in the relationships of subjects in financial markets, which, of course, is a negative factor for the development of this institution as a whole.

The third, least "strict" option assumes that the rationality of behavior is expressed as the commission of any action, both in their own interests and in the interests of other subjects.

The "easy" option assumes that any behavior of the subject, including those based on altruistic premises, is rational. R. Posner pointed out that the happiness of another person can be part of a person's rational preferences ^{[6, p. 4]}.

At the same time, in the context of the phenomenon of entrepreneurial activity in financial markets under consideration, it is assumed that altruism and other forms of irrational behavior that are not related to obtaining benefits do not correspond to the essence of this institution and cannot be used as the basis for rational behavior of a business entity in financial markets.

Summarizing the above, within the framework of this work, it can be concluded that it is advisable to apply a model of strict rationality in assessing the behavior of entities engaged in entrepreneurial activity in financial markets. As a result of the application of this model of strict rationality, a new horizon of opportunities opens up for the law enforcement officer to create indicators for assessing the unfair behavior of business entities in financial markets.

Thus, ex ante analysis is already indirectly legitimized in the Russian legal system, which is confirmed, among other things, in the Resolution of the Constitutional Court of the Russian Federation No. 1-P of 23.01.2007, which defines its place among other principles of lawmaking.

Meanwhile, the ex ante analysis tools, which are actively used in economics, are not actually used in domestic legal science. The introduction of ex ante analysis tools when creating mechanisms for regulatory and contractual management of legal risks can act as a catalyst for the comprehensive improvement of the legal system and legal relations of subjects, in particular.

The ex ante analysis toolkit classically includes mathematical analysis and, accordingly, the tools of cooperative game theory, in particular, the Nash equilibrium method.

The Nash equilibrium is an ideal equilibrium when each participant in the game chooses a strategy that is optimal for him, provided that the other participants in the game adhere to a certain strategy.

By a certain strategy, we must understand the proper, from the point of view of good faith, behavior of participants in civil turnover ^[14].

The identification of various behavioral anomalies in the analysis of the relations of financial market participants will allow us to create a method of preventive detection of potential risks associated with the actions of business participants in financial markets, which may be recognized in advance as unfair.