This is the popular libertarian opinion and it is half thought out and wrong, like most libertarian opinions.
Say you are not an insider. Most investors in the public markets are not insiders. If a company wanted to be owned by insiders only it would never need to enter the public market. So say you, like most investors are considering stock where you are not an insider. Would you buy stock from an insider? Even if he properly discloses he is an insider. Is he selling because he needs the money to buy a new house or because he knows that something happened and the company is doomed. It does not feel very comfortable does it. So most investors would not feel safe and comfortable buying most stocks. So, good job, you just removed 90% of demand of stocks.
What people do not understand is that the american public markets are very unique, unlikely, and downright amazing phenomenon that is a very important factor in the wealth of the USA and even the world for the second half of the 20th and 21st century. It is amazing that people have the confidence to pay a bunch of money to own a part of a company based only on published information. But that is what makes America rich. It is that ability to quickly move money from where it is not needed to where it is needed and to reward the person sending the not needed money.
Now here is another hypothetical. Say you are insider of a company with a lot of stock in that company. You have just learned that something secret has happened which has doomed your company. Your biggest client said they would stop buying from you or something like that. You want to sell your stock. If insider trading is legal would you inform the public of the bad news? Or would you make sure you sell all of your stock first. Now say the same thing is true but insider trading is banned. You are a big stockholder and you know the SEC is watching you. What do you do? Well you inform the public asap, so that you may sell your stock legally albeit at reduced prices. Which of these outcomes is better for society, and for the well being of the stock market?
I suppose insider trading is hard to enforce. Well actually it is not that hard to enforce for the important people -- the company leadership that have all the important insider information. But there are other crimes that are also hard to enforce but we keep them crimes, because they are terrible, cause a lot of damage and we as a society should do what we can to avoid them. Should we make bicycle theft legal because it is so hard to catch bike thieves? How about date rape?
> This is the popular libertarian opinion and it is half thought out and wrong, like most libertarian opinions.
I'm not a libertarian exactly, but it always boggles my mind how the philosophy that at least tries to remain consistent with the ideal of not aggressing on the life, liberty, or property of others receives some of the most derisive comments.
> Would you buy stock from an insider?
Yes, because I understand that corporate employees qualify as people too and need to pay bills now.
But it's important to recognize patterns. If 3 out 5,000 employees are selling their stock in the week before earnings, it's probably just normal bill shuffling. If 3,000 out of 5,000 employees are selling their stock in the week before earnings, that probably means something far more significant. Let the market figure out what the patterns mean.
> Now here is another hypothetical.
IMO, any hypothetical you can come up with can be answered by pointing out that financial speculators perform a useful social service. By trying to buy low and sell high as soon as possible, speculators speed up price adjustments to their optimal point and make stock prices less volatile than they otherwise would be. This ultimately means that price discovery should happen faster and resources should flow quicker to wherever they'd be more useful.
> Should we make bicycle theft legal because it is so hard to catch bike thieves? How about date rape?
A bike thief or a rapist unambiguously violates the right to life, liberty, or property of another human being.
Insider trading is different in that it's labeled as a crime where there's arguably no victim.
> I'm not a libertarian exactly, but it always boggles my mind how the philosophy that at least tries to remain consistent with the ideal of not aggressing on the life, liberty, or property of others receives some of the most derisive comments.
If you care to unboggled, it’s because a lot of libertarianism’s consistency is owed to it reducing a lot of real-world scenarios to very simple models where a specific freedom’s primacy is preordained by the choice of model.
For whatever that means to the libertarian, it leaves a lot of room for other people to see it as reductive — ignoring the difficulty of reconciling conflicting freedoms and often dismissive of higher-order freedoms.
It’s a philosophy that’s been championed by some very smart, very committed thinkers, but it’s also one that’s very easy to exercise naively and very inviting to criticize on those grounds.
Even when libertarian arguments are put forth in good faith it frequently falls victim to spherical cows reasoning.
And too frequently libertarian arguments appeal to first principles reasoning in order to take an ahistorical view towards specific issues, especially if the person making the argument currently benefits from the historical context.
> I'm not a libertarian exactly, but it always boggles my mind how the philosophy that at least tries to remain consistent with the ideal of not aggressing on the life, liberty, or property of others receives some of the most derisive comments.
Because every time you need to apply such a reductive philosophy to reality, it falls apart. This would be fine if they adopted it as a purely personal lifestyle but they try to push it as a feasible form of government.
They do this by mostly ignoring the real world complexity and real historical issues when aspects of their philosophy were actually applied.
Examples? I’ve seen arguments police should be entirely privately funded, insider trading should be legal.
> I’ve seen arguments police should be entirely privately funded
Not by an actual libertarian. Under actual libertarianism, using force against others is in the purview of government. I.e. the police are specially empowered to use force against people.
This cannot be privately funded, because then you have private armies running around oppressing anyone their employer doesn't like.
> But it's important to recognize patterns. If 3 out 5,000 employees are selling their stock in the week before earnings, it's probably just normal bill shuffling. If 3,000 out of 5,000 employees are selling their stock in the week before earnings, that probably means something far more significant. Let the market figure out what the patterns mean.
I'm not saying it's impossible, or doesn't happen, but IME it's incredibly unlikely that 3k of 5k employees would know about earnings before they were anounced to the public. Corporations just don't work that way. The C*Os and some of the finance team will know, but >95% of the employees will find out when the public finds out.
> The C*Os and some of the finance team will know, but >95% of the employees will find out when the public finds out.
That 3,000 number was just a hypothetical, but I'd say that even knowing that 1 key insider bought some massive dollar value of calls leading up to earnings or sold a large number of shares before earnings is a valuable data point that provides better information to the public.
>how the philosophy that at least tries to remain consistent with the ideal of not aggressing on the life, liberty, or property of others receives some of the most derisive comments.
If you combine the libertarian idea that a property owner can fully control what happens to their property along with the idea that the right to contract is absolute what happens when the entity that owns the road in front of my home says I can no longer use it unless I shop only at his stores?
A lot of libertarian ideas simply do not work when combined together due to human nature to enrich themselves at the expense of others.
> If you combine the libertarian idea that a property owner can fully control what happens to their property along with the idea that the right to contract is absolute what happens when the entity that owns the road in front of my home says I can no longer use it unless I shop only at his stores?
Of all of the hypothetical arguments against libertarianism you might have picked, this is one of the least questionable ones.
If you buy a property today where property access might be a theoretical issue with no direct street access, the real estate agent, lawyer, or title clerk is already recommending/ensuring that explicit easement rights are added into the contract or the deal usually falls apart. Additionally, even if access isn't explicit in a contract, as far as I understand it, courts generally recognize a common-law right to access your property and have a number of doctrines available to ensure that nobody is just boxed in and trapped in a property with no recourse available to access it.
The courts of today don't follow libertarian principles which changes the outcome of my little what if.
A decent amount of libertarian ideas run into issues like this where the assumption is that current non-libertarian systems will keep them in check but this sort of mixed system isn't what a large segment of libertarians appear to want.
Say you are not an insider. Most investors in the public markets are not insiders. If a company wanted to be owned by insiders only it would never need to enter the public market. So say you, like most investors are considering stock where you are not an insider. Would you buy stock from an insider? Even if he properly discloses he is an insider. Is he selling because he needs the money to buy a new house or because he knows that something happened and the company is doomed. It does not feel very comfortable does it. So most investors would not feel safe and comfortable buying most stocks. So, good job, you just removed 90% of demand of stocks.
What people do not understand is that the american public markets are very unique, unlikely, and downright amazing phenomenon that is a very important factor in the wealth of the USA and even the world for the second half of the 20th and 21st century. It is amazing that people have the confidence to pay a bunch of money to own a part of a company based only on published information. But that is what makes America rich. It is that ability to quickly move money from where it is not needed to where it is needed and to reward the person sending the not needed money.
Now here is another hypothetical. Say you are insider of a company with a lot of stock in that company. You have just learned that something secret has happened which has doomed your company. Your biggest client said they would stop buying from you or something like that. You want to sell your stock. If insider trading is legal would you inform the public of the bad news? Or would you make sure you sell all of your stock first. Now say the same thing is true but insider trading is banned. You are a big stockholder and you know the SEC is watching you. What do you do? Well you inform the public asap, so that you may sell your stock legally albeit at reduced prices. Which of these outcomes is better for society, and for the well being of the stock market?
I suppose insider trading is hard to enforce. Well actually it is not that hard to enforce for the important people -- the company leadership that have all the important insider information. But there are other crimes that are also hard to enforce but we keep them crimes, because they are terrible, cause a lot of damage and we as a society should do what we can to avoid them. Should we make bicycle theft legal because it is so hard to catch bike thieves? How about date rape?