by Sandy Ikeda
Congratulations to Don Boudreaux for his article debunking insider-trading regulations, “Learning to love insider trading,” which covers the entire front page of the Weekend Journal section of this morning’s paper.
Prohibitions on insider trading prevent the market from adjusting as quickly as possible to changes in the demand for, and supply of, corporate assets. The result is prices that lie. And when prices lie, market participants are misled into behaving in ways that harm not only themselves but also the economy writ large.
With last week’s arrest of Galleon hedge-fund founder Raj Rajaratnam, insider trading has been very much in the news. And now Don has done an excellent job of using and extending arguments originating with Henry Manne to help us understand just what is and isn’t at stake.