Wednesday, March 10, 2004

More on "insider trading":

"I don't think the [Enron and Global Crossing] scandals would ever have erupted if we had allowed insider trading . . . because there would be plenty of people in those companies who would know exactly what was going on, and who couldn't resist the temptation to get rich by trading on the information, and the stock market would have reflected those problems months and months earlier than they did under this cockamamie regulatory system we have." -- Dean emeritus Henry Manne of the George Mason University School of Law

"Whether it's fair or not, it's the nature of markets that people benefit from specialized knowledge. I might know that there's oil on your land and you don't, and I buy it from you for a pittance and earn millions. Is that fair?

"Take the Enron and WorldCom cases. Long before their collapse, there were insiders who knew about the accounting fraud and other management sharp practices that inflated the worth of the companies. Had just a few of Enron's and WorldCom's many insiders, who knew of these practices, sold their shares or gave out well-placed tips, shareholders would have learned much earlier about the true value of the companies and might have been better able to protect themselves." -- Walter E. Williams

"What if the information was come by accidentally? I overhear some people talking in the lavatory or at a bar after they’ve had too much to drink and have loose tongues. Am I wrong to make use of it?

"Here again the issue is just what I owe others. Do I have a natural obligation to share my good fortune with other people? In emergency situations, when others are in dire need or have met with some natural disaster, virtues such as generosity and charity are usually binding on those who are able to assist. Yet these are not obligations in the sense of something the law must enforce. Indeed, enforcing generosity or charity is impossible--the moral significance of a virtue is destroyed if it is practiced at the point of a gun!" -- Tibor R. Machan

As I said before, insider trading laws are nothing more than misguided egalitarianism. They're based on a utopian notion that somehow everyone in every business transaction ought to have the same knowledge as everyone else. This assertion rests on dubious moral grounds, and is a practical impossibility. But such things never stop the utopians from trying...

Incidentally, it is instructive to note that in this "slam-dunk" insider trading case, the SEC had to drop that particular charge against Martha Stewart.

No comments: