Why should insider trading not be considered a crime?
Because all profits that are made on wall street are made on the basis of someone having superior knowledge than someone else. People acting on this knowledge is actually what makes everything work well, and enables the distallation of distributed information into a 'price signal'. Prices enable us to make reasonable decisions about resources without having to know every piece of information about everything Therefore, it is important that people be allowed to act freely on information that they happen to have. Resticting action distorts prices.
By prohibiting people with a lot of information from acting (insiders), the price forming process is hampered. For example, if enron executives who knew of the corruption were not prohibited from acting as 'insiders', then the Enron price would have come down as a result, and people would not have been taken by surprise so much.
Finally, it is well known that 'insider trading' is prevalent on wall street. Any conversation in a bar could later be construed as 'insider trading'. This gives government the ability to selectively prosecute its enemies, and look the other way for its friends. While doing nothing to protect consumers and stockholders.
DomV pretty much hit it on the head. In terms of links...
Is Insider Trading Really a Crime?
What is Morally Right with Insider Trading
Murrary Rothbard on Insider Trading
^ skip ahead to 6:21 to watch the segment dealing specifically with insider trading.
If I had a cake and ate it, it can be concluded that I do not have it anymore. HHH
Why should it be considered a crime?
I don't think it should. I posted the question in the hope that I would get an answer or at least a link to some good Austrian material on the subject. If you can't answer it, I'll just crank out the elbow grease and research hardcore for a debate I'm doing.
Austen:I don't think it should. I posted the question in the hope that I would get an answer or at least a link to some good Austrian material on the subject. If you can't answer it, I'll just crank out the elbow grease and research hardcore for a debate I'm doing.
This is not a uniquely Austrian opinion, it is shared by most mainstream economists. Most econs have the same views about unions as well (they cause the market to work less efficiently). Any economist that defends these things is a major hack, and has sold out so he will be invited to liberal cocktail parties.
Austen:Why should insider trading not be considered a crime?
Because then everyone would be allowed to do it, not just Congressmen.
The keyboard is mightier than the gun.
Non parit potestas ipsius auctoritatem.
Crimes have victims. For there to be a crime there must be a damaged party. An insider acting on information noone else possesses and profiting from that information does not damage anyone else. If this is not the case, then acting on a hunch and placing a bet equivalent to the action of an insider would also damage another party. Also it would be a crime to make a different interpretation of the same commonly available data and placing a bet equivalent to the action of an insider. What is the difference between these three activities? And what if the behavior of the insider produced a loss to the insider, is that a crime?
Now from the position of the firm, the firm in an effort to sell itself to investors may be interested in restricting "insider" behavior. They could easily do this contractually without the need for government supervision.