Andrew Mitton

Con­ven­tional wis­dom holds that insider trad­ing laws are good.  These laws are meant to pro­tect the lit­tle guy and are sup­posed to make trad­ing fair.  But accord­ing to an arti­cle in the Wall Street Jour­nal (Don­ald Boudreaux) insider trad­ing is impos­si­ble to police and help­ful to mar­kets and investors.  Does this argu­ment have any merit?  I don’t know.  I do know that this is not the first time this argu­ment has been made.  Econ­o­mists such as Henry Manne, Mil­ton Fried­man, Thomas Sow­ell, Daniel Fishel, and Frank East­er­brook have all argued against insider trad­ing laws (Wikipedia).

There’s no need to rehash the argu­ments against insider trad­ing.  The main point I want to make is how to approach argu­ments that ques­tion con­ven­tional wis­dom.  I found this arti­cle from tweet from a respectable ethics expert.  My ques­tion is “why is it moronic?”  Before dis­miss­ing the argu­ment, tell me how the cur­rent law accom­plishes its goal of mak­ing the mar­ket more fair.  Does the law really pro­tect the lit­tle guy?  Or does it allow cor­po­ra­tions to manip­u­late bad infor­ma­tion.  Tell me why gov­ern­ment reg­u­la­tion does a bet­ter job than cor­po­rate self-governance on the mat­ter.  Are insider trad­ing laws out­dated in this day of imme­di­ate infor­ma­tion on the Internet?

My point is that argu­ments sur­round­ing eth­i­cal issues need to have a good dia­logue rather than ad homi­nen attacks against some­one as “moronic.”  I don’t think peo­ple like Mil­ton Fried­man are moronic.  Let’s dis­cuss the issue and see if there are bet­ter ways of han­dling dif­fi­cult mat­ters.  Dia­logue on eth­i­cal issues need to stay on a higher plane.